As filed with the Securities and Exchange Commission on
April 10, 1997
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
OPPENHEIMER DISCIPLINED VALUE FUND
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes
effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on May 12,
1997, pursuant to Rule 488.
No filing fee is due because the Registrant has previously
registered an indefinite number of shares under Rule 24f-2; a Rule
24f-2 notice for the year ended October 31, 1996 was filed on
December 26, 1996.
Pursuant to Rule 429, this Registration Statement relates to shares
previously registered by the Registrant on Form N-1A (Reg. No. 2-
75276; 811-3346).
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and
documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Oppenheimer Value Stock Fund
and
Prospectus for Oppenheimer Disciplined Value Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER DISCIPLINED VALUE FUND
Cross Reference Sheet
Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of
Document
- --------- -------------------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison
between Oppenheimer Disciplined Value Fund and
Oppenheimer Value Stock Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between Oppenheimer
Disciplined Value Fund and Oppenheimer Value
Stock Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of Oppenheimer Value Stock Fund; Annual Report
of Oppenheimer Disciplined Value Fund; Comparison Between
Oppenheimer Disciplined Value Fund and Oppenheimer Value
Stock Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about Value Stock
Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information;
Statement of Additional Information about Oppenheimer
Value Stock Fund; Annual Report of Oppenheimer Value
Stock Fund at 12/31/96; Registrant's Annual Report at
10/31/96
Part C of
Form N-14
Item No. Other Information Heading
- --------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
proxy\375n14
OPPENHEIMER VALUE STOCK FUND
6803 South Tucson Way, Englewood, CO 80112
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON July 21, 1997
To the Shareholders of Oppenheimer Value Stock Fund:
Notice is hereby given that a Special Meeting of the Shareholders
of Oppenheimer Value Stock Fund ("Value Stock Fund"), a series of
Oppenheimer Integrity Funds, a registered management investment
company, will be held at 6803 South Tucson Way, Englewood, Colorado
80112 at 10:00 A.M., Denver time, on July 21, 1997, or any
adjournments thereof (the "Meeting"), for the following purposes:
1. To approve or disapprove an Agreement and Plan of
Reorganization between Value Stock Fund and Oppenheimer Disciplined
Value Fund ("Disciplined Value Fund"), and the transactions
contemplated thereby, including the transfer of substantially all
the assets of Value Stock Fund in exchange for Class A, Class B and
Class C shares of Disciplined Value Fund, the distribution of such
shares to the Class A, Class B and Class C shareholders of Value
Stock Fund in complete liquidation of Value Stock Fund, the de-
registration of Value Stock Fund as an investment company under the
Investment Company Act of 1940, as amended, and the cancellation of
the outstanding shares of Value Stock Fund (the "Proposal").
2. To act upon such other matters as may properly come before the
Meeting.
Shareholders of record at the close of business on May 2, 1997 are
entitled to notice of, and to vote at, the Meeting. The Proposal
is more fully discussed in the Proxy Statement and Prospectus.
Please read it carefully before telling us, through your proxy or
in person, how you wish your shares to be voted. Value Stock
Fund's Board of Trustees recommends a vote in favor of the
Proposal. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 23, 1997
_________________________________________________________________
Shareholders who do not expect to attend the Meeting are requested
to indicate voting instructions on the enclosed proxy and to date,
sign and return it in the accompanying postage-paid envelope. To
avoid unnecessary duplicate mailings, we ask your cooperation in
promptly mailing your proxy no matter how large or small your
holdings may be.
375<PAGE>
OPPENHEIMER DISCIPLINED VALUE FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
This Proxy Statement of Value Stock Fund relates to the Agreement
and Plan of Reorganization (the Reorganization Agreement )and the
transactions contemplated thereby (the "Reorganization") between
Oppenheimer Integrity Funds on behalf of its series, Oppenheimer
Value Stock Fund ( Value Stock Fund ) and Oppenheimer Series Fund,
Inc. on behalf of its series, Oppenheimer Disciplined Value Fund
( Disciplined Value Fund ). This Proxy Statement also constitutes
a Prospectus of Disciplined Value Fund included in a Registration
Statement on Form N-14 filed by Disciplined Value Fund with the
Securities and Exchange Commission (the "SEC"). Such Registration
Statement relates to the registration of shares of Disciplined
Value Fund to be offered to the shareholders of Value Stock Fund
pursuant to the Reorganization Agreement. Value Stock Fund is
located at 6803 South Tucson Way, Englewood, CO 80112 (telephone 1-
800-525-7048).
This Proxy Statement and Prospectus sets forth concisely
information about Disciplined Value Fund that shareholders of Value
Stock Fund should know before voting on the Reorganization. A copy
of the Prospectus for Disciplined Value Fund, dated December 16,
1996, as supplemented January 1, 1997, is enclosed, and
incorporated herein by reference. The following documents have
been filed with the SEC and are available without charge upon
written request to OppenheimerFunds Services, the transfer and
shareholder servicing agent for Disciplined Value Fund and Value
Stock Fund, at P.O. Box 5270, Denver, Colorado 80217, or by calling
the toll-free number shown above: (i) a Prospectus for Value Stock
Fund, dated April 15, 1997, (ii) a Statement of Additional
Information about Value Stock Fund, dated April 15, 1997, and (iii)
a Statement of Additional Information about Disciplined Value Fund,
dated December 16, 1996 (the "Disciplined Value Fund Additional
Statement"). The Disciplined Value Fund Additional Statement,
which is incorporated herein by reference, contains more detailed
information about Disciplined Value Fund and its management. A
Statement of Additional Information relating to the Reorganization,
dated May 23, 1997, has been filed with the SEC as part of the
Disciplined Value Fund Registration Statement on Form N-14 and is
incorporated herein by reference, and is available by written
request to OppenheimerFunds Services at the same address
immediately above or by calling the toll-free number shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. <PAGE>
This Proxy Statement and Prospectus is dated May 23, 1997.
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction
General
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
Comparative Fee Table
Synopsis
Parties to the Reorganization
Shares to be Issued
The Reorganization
Reasons for the Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution and Service Plan Fees
Purchases, Exchanges and Redemptions
Principal Risk Factors
Approval of the Reorganization (The Proposal)
Reasons for the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
Comparison Between Value Stock Fund and Disciplined Value Fund
Investment Objectives and Policies
Permitted Investments by Oppenheimer Value Stock Fund and
Disciplined Value Fund
Investment Restrictions
Portfolio Turnover
Description of Brokerage Practices
Expense Ratios and Performance
Shareholder Services
Rights of Shareholders
Management and Distribution Arrangements
Purchase of Additional Shares
Method of Carrying Out the Reorganization
Miscellaneous
Additional Information
Financial Information
Public Information
Other Business
Exhibit A - Agreement and Plan of Reorganization by and between
Oppenheimer Value Stock Fund and
Oppenheimer Disciplined Value Fund A-1
<PAGE>
OPPENHEIMER VALUE STOCK FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Special Meeting of Shareholders
to be held July 21, 1997
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the
shareholders of Oppenheimer Value Stock Fund ("Value Stock Fund"),
a series of Oppenheimer Integrity Funds, a registered management
investment company, in connection with the solicitation by the
Board of Trustees (the "Board") of proxies to be used at the
Special Meeting of Shareholders of Value Stock Fund to be held at
6803 South Tucson Way, Englewood, Colorado 80112, at 10:00 A.M.,
New York time, on July 21, 1997, or any adjournments thereof (the
"Meeting"). It is expected that the mailing of this Proxy
Statement and Prospectus will commence on or about May 23, 1997.
At the Meeting, shareholders of Value Stock Fund will be asked to
approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Value Stock Fund and
Oppenheimer Disciplined Value Fund ("Disciplined Value Fund"), and
the transactions contemplated thereby (the "Reorganization"),
including the transfer of substantially all the assets of Value
Stock Fund in exchange for Class A, Class B and Class C shares of
Disciplined Value Fund, the distribution of such shares to the
Class A, Class B and Class C shareholders of Value Stock Fund in
complete liquidation of Value Stock Fund, the de-registration of
Value Stock Fund as an investment company, under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and
the cancellation of the outstanding shares of Value Stock Fund.
Disciplined Value Fund currently offers Class A shares with a sales
charge imposed at the time of purchase. There is no initial sales
charge on purchases of Class B or Class C shares; however, a
contingent deferred sales charge may be imposed, depending on when
the shares are sold. The Class A, Class B and Class C shares
issued pursuant to the Reorganization will be issued at net asset
value without a sales charge and without the imposition of the
contingent deferred sales charge. Additional information with
respect to these charges by Disciplined Value Fund is set forth
herein, in the Prospectus of Disciplined Value Fund accompanying
this Proxy Statement and Prospectus and in the Disciplined Value
Fund Statement of Additional Information ("Disciplined Value Fund
Additional Statement"), both of which are incorporated herein by
reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on May 2, 1997 as the
record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting.
An affirmative vote of the holders of a majority of the
outstanding voting securities (as defined in the Investment
Company Act) of all of the Class A, Class B and Class C shares in
the aggregate of Value Stock Fund is required to approve the
Reorganization. That level of vote is defined in the Investment
Company Act of 1940 as the vote of the holders of the lesser of:
(i) 67% or more of the voting securities present or represented by
proxy at the shareholders meeting, if the holders of more than 50%
of the outstanding voting securities are present or represented by
proxy, or (ii) more than 50% of the outstanding voting securities.
Each shareholder will be entitled to one vote for each share and a
fractional vote for each fractional share held of record at the
close of business on the Record Date. Only shareholders of Value
Stock Fund will vote on the Reorganization. The vote of
shareholders of Disciplined Value Fund is not being solicited.
At the close of business on the Record Date, there were
approximately ____________ shares of Value Stock Fund issued and
outstanding, consisting of ____________________ shares of Class A
shares, ________________ Class B shares and ______________ Class
C shares. At the close of business on the Record Date, there were
______________________ shares of Disciplined Value Fund issued and
outstanding, consisting of ________________ of Class A shares,
____________________ Class B shares and ______________ Class C
shares. The presence in person or by proxy of the holders of a
majority of the shares of all classes constitutes a quorum for the
transaction of business at the Meeting. To the knowledge of Value
Stock Fund, as of the Record Date, no person owned of record or
beneficially owned 5% or more of its outstanding shares. As of the
Record Date, to the knowledge of Disciplined Value Fund, no person
owned of record or beneficially owned 5% or more of its outstanding
shares except for _____________________________________ which owned
of record ____________ Class A shares of _________ Fund as of such
date (____% of the outstanding Class A shares of ________ Fund
which represented ____% of the outstanding shares of
________________ Fund) and _______________________, which of record
owned _____________________ shares of Class B shares of ________
Fund (____% of the outstanding Class B shares of ___________ Fund
as of such date which represented less than ___% of the outstanding
shares of __________Fund). In addition, as of the record date, the
Trustees and officers of Value Stock Fund and Disciplined Value
Fund owned less than ___% of the outstanding shares of either Value
Stock Fund or Disciplined Value Fund, respectively.
Proxies
The enclosed form of proxy, if properly executed and returned, will
be voted (or counted as an abstention or withheld from voting) in
accordance with the choices specified thereon, and will be included
in determining whether there is quorum to conduct the Meeting. The
proxy will be voted in favor of the Proposal unless a choice is
indicated to vote against or to abstain from voting on the
Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-
dealer based on instructions received from its customers. If no
instructions are received, the broker-dealer may (if permitted
under applicable stock exchange rules), as record holder, vote such
shares on the Proposal in the same proportion as that broker-dealer
votes street account shares for which voting instructions were
received in time to be voted. If a shareholder executes and
returns a proxy but fails to indicate how the votes should be cast,
the proxy will be voted in favor of the Proposal. The proxy may be
revoked at any time prior to the voting thereof by: (i) writing to
the Secretary of Value Stock Fund at 6803 South Tucson Way,
Englewood, Colorado 80112 (if received in time to be acted upon);
(ii) attending the Meeting and voting in person; or (iii) signing
and returning a new proxy (if returned and received in time to be
voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing
and mailing this Proxy Statement and Prospectus, will be borne by
Value Stock Fund. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of
the fund issuing the document. In addition to the solicitation of
proxies by mail, proxies may be solicited by officers of Value
Stock Fund or officers and employees of OppenheimerFunds Services,
personally or by telephone or telegraph; any expenses so incurred
will be borne by OppenheimerFunds Services. Proxies may also be
solicited by a proxy solicitation firm hired at Value Stock Fund's
expense for such purpose. Brokerage houses, banks and other
fiduciaries may be requested to forward soliciting material to the
beneficial owners of shares of Value Stock Fund and to obtain
authorization for the execution of proxies. For those services, if
any, they will be reimbursed by Value Stock Fund for their
reasonable out-of-pocket expenses.
With respect to the Reorganization, Value Stock Fund and
Disciplined Value Fund will bear the cost of their respective tax
opinions. Any other out-of-pocket expenses of Value Stock Fund and
Disciplined Value Fund associated with the Reorganization,
including legal, accounting and transfer agent expenses, will be
borne by Value Stock Fund and Disciplined Value Fund, respectively,
in the amounts so incurred by each.
COMPARATIVE FEE TABLE
Value Stock Fund and Disciplined Value Fund each pay a variety of
expenses for management of their assets, administration,
distribution of their shares and other services, and those expenses
are reflected in each fund's net asset value per share.
Shareholders pay other expenses directly, such as sales charges.
The following table is provided to help you compare the direct
expenses of investing in each class of Value Stock Fund with the
direct expenses of investing in each class of Disciplined Value
Fund and the pro forma expenses of the surviving fund after giving
effect to the reorganization.
<TABLE>
<CAPTION>
Value Stock Fund
Class A Class B Class C
Shares Shares Shares
Shareholder Transaction Expenses
<S> <C> <C> <C>
Maximum Sales Charge 5.75% None None
on Purchases (as a % of
offering price)
Maximum
Deferred Sales None(1) 5% in the 1% if
Charge (as a % first year shares
of the lower declining are
of the original to 1% in redeemed
purchase price the sixth within 12
or redemption year and months of
proceeds) eliminated purchase
thereafter thereafter
Maximum
Sales Charge on None None None
Reinvested Dividends
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Disciplined Value Fund
Class A Class B Class C Class Y
Shares Shares Shares Shares
Shareholder Transaction Expenses
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.75% None None None
on Purchases (as a % of
offering price)
Maximum
Deferred Sales None(1) 5% in the 1% if None
Charge (as a % first year shares
of the lower declining are
of the original to 1% in redeemed
purchase price the sixth within 12
or redemption year and months of
proceeds) eliminated purchase
thereafter thereafter
Maximum
Sales Charge on None None None None
Reinvested Dividends
Exchange Fee None None None None
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Surviving Disciplined Value Fund
Class A Class B Class C Class Y
Shares Shares Shares Shares
Shareholder Transaction Expenses
<S> <C> <C> <C> <C>
Maximum Sales Charge on 5.75% None None None
Purchases (as a %
of offering price)
Maximum
Deferred Sales Charge None(1) 5% in the 1% if None
(as a % of the lower first year, shares are
of the original declining redeemed
purchase price to 1% in within 12
or redemption the sixth months of
proceeds year and purchase
eliminated
thereafter
Maximum Sales Charge on None None None None
Reinvested Dividends
Exchange Fee None None None None
<FN>
(1) If you invest more than $1 million ($500,000 or more for purchases by "Retirement Plans," as
defined in "Class
A Contingent Deferred Sales Charge" in each fund's Prospectus) 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.
The following tables are the operating expenses of Class A, Class B and Class C shares of Value
Stock Fund and the
operating expenses of Class A, Class B and Class C shares of Disciplined Value Fund are based
on expenses for the
twelve month period ended December 31, 1996. The pro forma information is an estimate of the
business expenses of
the surviving Disciplined Value Fund after giving effect to the reorganization. All amounts shown
are a percentage
of net assets of each class of each of the funds.
</TABLE>
<TABLE>
<CAPTION>
Value Stock Fund Disciplined Value Fund
Class Class Class Class Class Class Class
A B C A B C Y
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74% 0.625% 0.625% 0.625% 0.625%
12b-1 Distribution &
Service Plan Fees 0.24% 1.00% 1.00% 0.25% 1.00% 1.00% n/a
Other Expenses 0.22% 0.23% 0.28% 0.235% 0.245% 0.258% 0.225%
Total Fund Operating
Expenses 1.20% 1.97% 2.02% 1.11% 1.87% 1.91% 0.85%
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Surviving Disciplined Value Fund
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Management Fees 0.615% 0.615% 0.615% 0.615%
12b-1 Distribution &
Service Plan Fees 0.25% 1.00% 1.00% n/a
Other Expenses 0.235% 0.245% 0.285% 0.225%
Total Fund Operating
Expenses 1.10% 1.86% 1.90% 0.84%
</TABLE>
The 12b-1 fees for Class A shares of Value Stock Fund and
Disciplined Value Fund are service plan fees. The service plan
fees are a maximum of 0.25% of average annual net assets of Class
A shares of each fund. The 12b-1 fees for Class B and Class C
shares of each of the funds are Distribution and Service Plan fees
which include a service fee of 0.25% and an asset-based sales
charge of 0.75%.
Examples
To try and show the effect of the expenses on an investment over
time, the Hypotheticals shown below have been created. Assume that
you make a $1,000 investment in Class A, Class B and Class C shares
of Value Stock Fund, or Class A, Class B, Class C and Class Y
shares of Disciplined Value Fund, or Class A, Class B, Class C and
Class Y of the pro forma surviving Disciplined Value Fund and that
the annual return is 5% and that the operating expenses for each
fund are the ones shown in the chart above. If you were to redeem
your shares at the end of each period shown below, your investment
would incur the following expenses by the end of each period shown.
1 year 3 years 5 years 10
years*
Oppenheimer Value Stock Fund
Class A Shares $69 $93 $120 $195
Class B Shares $70 $92 $126 $191
Class C Shares $31 $63 $109 $235
Oppenheimer Disciplined Value Fund
Class A Shares $68 $91 $115 $185
Class B Shares $70 $90 $124 $184
Class C Shares $30 $61 $104 $225
Class Y Shares $9 $28 $48 $107
Pro Forma Surviving
Oppenheimer Disciplined Value Fund
Class A Shares $68 $90 $115 $184
Class B Shares $69 $88 $121 $180
Class C Shares $29 $60 $103 $222
Class Y Shares $9 $27 $47 $104
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10
years*
Oppenheimer Value Stock Fund
Class A Shares $69 $93 $120 $195
Class B Shares $20 $62 $106 $191
Class C Shares $21 $63 $109 $235
Oppenheimer Disciplined Value Fund
Class A Shares $68 $91 $115 $185
Class B Shares $20 $60 $104 $184
Class C Shares $20 $61 $104 $225
Class Y Shares $9 $28 $48 $107
Pro Forma Surviving
Oppenheimer Disciplined Value Fund
Class A Shares $68 $90 $114 $184
Class B Shares $19 $55 $101 $181
Class C Shares $19 $60 $103 $222
Class Y Shares $9 $27 $47 $104
* 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 each of the funds automatically converts your Class B
shares into Class A shares after 6 years. Long term Class B and C
shareholders could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge
and contingent deferred sales charge. The automatic conversion of
Class B shares to Class A Shares is designed to minimize the
likelihood that this will occur.
The examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or
investment returns of the funds, all of which may be more or less
than the amounts shown.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus
and presents key considerations for shareholders of Value Stock
Fund to assist them in determining whether to approve the
Reorganization. This synopsis is only a summary and is qualified
in its entirety by the more detailed information contained in or
incorporated by reference in this Proxy Statement and Prospectus
and by the Reorganization Agreement, a copy of which is attached as
an Annex hereto. Shareholders should carefully review this Proxy
Statement and Prospectus and the Reorganization Agreement in their
entirety and, in particular, the current Prospectus of Disciplined
Value Fund which accompanies this Proxy Statement and Prospectus
and is incorporated herein by reference.
Parties to the Reorganization
Oppenheimer Integrity Funds was organized in 1982 as a multi-series
Massachusetts business trust and Oppenheimer Value Stock Fund is a
series of that Trust. Oppenheimer Integrity Funds is an open-end,
diversified management investment company, with an unlimited number
of authorized shares of beneficial interest. Disciplined Value Fund
is a diversified series of Oppenheimer Series Fund, Inc. which was
organized in 1981 as a Maryland corporation and is an open-end
management investment company. Organized as a series fund,
Oppenheimer Series Fund, Inc. presently has five series, including
the Disciplined Value Fund. Value Stock Fund is located at 6803
South Tucson Way, Englewood, Co 80112 and Disciplined Value Fund is
located at Two World Trade Center, New York, New York 10048-0203.
Oppenheimer Value Stock Fund is governed by the Denver Board of
Trustees (the "Board") and Oppenheimer Disciplined Value Fund is
governed by the New York Board of Directors. OppenheimerFunds, Inc.
(the "Manager") whose address is Two World Trade Center, New York,
New York 10048-0203, acts as investment adviser to Value Stock Fund
and Disciplined Value Fund (collectively referred to herein as the
"funds"). Additional information about the parties is set forth
below.
Shares to be Issued. All shareholders of Value Stock Fund who own
Class A shares will receive Class A shares of Disciplined Value
Fund in exchange for their Class A shares of Value Stock Fund.
Shareholders of Value Stock Fund who own Class B shares will
receive Class B shares of Disciplined Value Fund in exchange for
their Class B shares of Value Stock Fund. Shareholders of Value
Stock Fund who own Class C shares will receive Class C shares of
Disciplined Value Fund in exchange for their Class C shares of
Value Stock Fund. The voting rights of shares of each fund are
substantially the same. See Rights of Shareholders below for more
information.
The Reorganization
The Reorganization Agreement provides for the transfer of
substantially all the assets of Value Stock Fund to Disciplined
Value Fund in exchange for Class A, Class B and Class C shares of
Disciplined Value Fund. The net asset value of Disciplined Value
Fund Class A, Class B and Class C shares issued in the exchange
will equal the value of the assets of Value Stock Fund received by
Disciplined Value Fund. In conjunction with the Closing of the
Reorganization, presently scheduled for July 25, 1997, Value Stock
Fund will distribute the Class A, Class B and Class C shares of
Disciplined Value Fund received by Value Stock Fund on the Closing
Date to holders of Class A, Class B and Class C shares of Value
Stock Fund, respectively. As a result of the Reorganization, each
Class A, Class B and Class C Value Stock Fund shareholder will
receive the number of full and fractional Disciplined Value Fund
Class A, Class B and Class C shares that equals in value such
shareholder's pro rate interest in the assets transferred to
Disciplined Value Fund as of the Valuation Date. The Board has
determined that the interests of existing Value Stock Fund
shareholders will not be diluted as a result of the Reorganization.
For the reasons set forth below under "The Reorganization - Reasons
for the Reorganization," the Board, including the trustees who are
not "interested persons" of Oppenheimer Integrity Funds (the
"Independent Trustees'), as that term is defined in the Investment
Company Act, has concluded that the Reorganization is in the best
interests of Value Stock Fund and its shareholders and recommends
approval of the Reorganization by Value Stock Fund shareholders.
If the Reorganization is not approved, Value Stock Fund will
continue in existence and the Board will determine whether to
pursue alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board a reorganization into Disciplined
Value Fund so that shareholders of Value Stock Fund may become
shareholders of a larger fund, which after such reorganization
allows shareholders to experience a reduction in expenses. The
Board considered pro forma information which indicated the expense
ratio of a combined fund would be lower than that of Value Stock
Fund, as shown above under "Comparative Fee Table." In addition,
the Board also considered information with respect to the
historical performance of Value Stock Fund and Disciplined Value
Fund. For the five and ten year periods ended December 31, 1996,
the average annual returns were better for Disciplined Value Fund
than for Value Stock Fund.
The Board also considered that the Reorganization would be a tax
free reorganization, and there would be no sales charge imposed in
effecting the Reorganization. The Board concluded that the
Reorganization would not result in dilution to shareholders of
Value Stock Fund.
Tax Consequences of the Reorganization
In the opinion of Deloitte & Touche LLP, tax adviser to Value Stock
Fund, the Reorganization will qualify as a tax-free reorganization
for Federal income tax purposes. As a result, no gain or loss will
be recognized by either fund, or by the shareholders of either fund
for Federal income tax purposes as a result of the Reorganization.
For further information about the tax consequences of the
Reorganization, see "Approval of the Reorganization - Tax Aspects"
below.
Investment Objectives and Policies
Value Stock Fund
Value Stock Fund invests its assets to seek long-term growth of
capital and income primarily through investments in stocks of well
established companies. Under normal market conditions Value Stock
Fund primarily invests in a diversified portfolio of (i) common
stocks or preferred stocks that pay cash dividends, (ii) securities
convertible into common stocks, and (iii) other equity securities
issued by companies with a market capitalization of at least $500
million or with a history of at least five years of operations as
a public company, and which are listed on a national securities
exchange or traded in the over-the-counter markets. Value Stock
Fund will invest primarily in cash dividend-paying stocks. Value
Stock Fund may also invest in foreign equity and debt securities
and may write covered calls and use certain derivative investments
and hedging instruments to try to manage investment risks.
Disciplined Value Fund
Disciplined Value Fund invests its assets to seek long-term growth
of capital by investing primarily in common stocks with low
price-earnings ratios and better-than-anticipated earnings.
Realization of current income is a secondary consideration. Under
normal market conditions, Disciplined Value Fund expects to invest
primarily in common stocks. Disciplined Value Fund may also invest
in U.S. Government securities and corporate debt obligations,
including corporate bonds rated below investment grade securities
(commonly called "junk bonds") and may invest to a limited degree
in foreign securities. Disciplined Value Fund may write covered
calls and use certain types of "hedging instruments" and
"derivative instruments" to seek to reduce the risks of market
fluctuations that affect the value of the securities the
Disciplined Value Fund holds.
Investment Advisory and Distribution and Service Plan Fees
The terms and conditions of each investment advisory agreement are
similar. Both funds obtain investment management services from the
Manager. The management fee is computed on the net asset value of
each fund as of the close of business each day and payable monthly
at the following annual rates: Value Stock Fund pays 0.75% of the
first $100 million of average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million and 0.66% of net
assets in excess of $500 million. Disciplined Value Fund pays
0.625% of the first $300 million of average annual net assets,
0.50% of the next $100 million of average annual net assets and
0.45% of net assets in excess of $400 million. For Value Stock
Fund, the Manager employs a Sub-Adviser, David L. Babson & Co.,
Inc. (the "Sub-Adviser") and under the Sub-Advisory Agreement, the
Manager pays the Sub-Adviser the following annual fees, which
decline on additional assets as the fund grows: 0.40% of the first
$50 million of the fund's average annual net assets and 0.20% of
net assets in excess of $50 million.
Value Stock Fund and Disciplined Value Fund have both adopted
Service Plans for their respective Class A shares. Both Service
Plans provide for reimbursement to the Distributor for a portion of
its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Under each plan,
payment is made at an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of each of the funds.
Value Stock Fund and Disciplined Value Fund have adopted
Distribution and Service Plans (the "Plans") for Class B and Class
C shares under which each fund pays the Distributor for its
services in connection with distributing Class B and Class C
shares and servicing accounts. Under each Plan, the funds pay the
Distributor an asset-based sales charge of 0.75% per annum of Class
B shares outstanding for six years or less and on Class C shares.
The funds also pay the Distributor a service fee of 0.25% per
annum, each of which is computed on the average annual net assets
of Class B and Class C shares determined as of the close of each
regular business day of each fund. The Distribution and Service
Plan for Value Stock Class B shares is a reimbursement plan
whereby, the payments made under the plan are not to exceed the
lesser of the rates specified for service fee and asset-based sales
charge or the Distributor s costs incurred in connection with the
distribution of Value Stock Fund s shares. The Distribution and
Service Plans for Class C shares of Value Stock Fund and Class B
and Class C shares of Disciplined Value fund are compensation plans
whereby payments by the funds are made at a fixed rate as specified
above and the funds payments are not limited by the Distributor s
costs. Under a reimbursement plan, Value Stock Fund may have the
ability to carry forward certain unreimbursed expenses from a prior
year.
Purchases, Exchanges and Redemptions
Both Value Stock Fund and Disciplined Value Fund are part of the
OppenheimerFunds complex of mutual funds. The procedures for
purchases, exchanges and redemptions of shares of the funds are
substantially the same. Shares of either fund may be exchanged for
shares of the same class of other Oppenheimer funds offering such
shares.
Both Value Stock Fund and Disciplined Value Fund have a maximum
initial sales charge of 5.75% on Class A shares. Investors who
purchase more than $1 million ($500,000 or more for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales
Charge" in each fund's Prospectus) in Class A shares pay no initial
sales charge but may have to pay a sales charge of up to 1% if
shares are sold within 18 calendar months from the end of the
calendar month during which shares are purchased. Each of the
funds has a contingent deferred sales charge imposed on the
proceeds of Class B shares redeemed within six years of buying
them. The contingent deferred sales charge ("CDSC") varies
depending on how long you hold your shares. Each of the funds has
a contingent deferred sales charge of 1% imposed on the proceeds of
Class C shares if redeemed within twelve months of their purchase.
Class A, Class B and Class C shares of Disciplined Value Fund
received in the Reorganization will be issued at net asset value,
without a sales charge and no CDSC will be imposed as a result of
the Reorganization. Services available to shareholders of both
funds include purchase and redemption of shares through
OppenheimerFunds AccountLink and PhoneLink (an automated telephone
system), telephone redemptions, and exchanges by telephone to other
Oppenheimer funds which offer Class A, Class B and Class C shares,
and reinvestment privileges. Please see "Shareholder Services,"
below and each fund s Prospectus for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
Disciplined Value Fund, shareholders should carefully consider the
following risk factors, the information set forth in this Proxy
Statement and Prospectus and the more complete description of risk
factors set forth in the documents incorporated by reference
herein, including the Prospectuses of the funds and their
respective Statements of Additional Information.
Stock Investment Risk. 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 obligation under a fixed-income investment to pay interest and
repay principal (this is referred to as credit risk ). These
general investment risks affect the value of both funds
investments, their investment performance, and the prices of their
shares. Because both funds usually invest a substantial portion
(and from time to time may invest all) of their assets in stocks,
the value of each fund's portfolio will be affected by changes in
the stock markets. This market risk will affect each fund's net
asset values per share, which will fluctuate as the values of the
fund's portfolio securities change. Not all stock prices change
uniformly or at the same time, and other factors can affect a
particular stock's price (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, or changes in government regulations affecting an
industry). Not all of these factors can be predicted. Changes in
the overall market conditions and prices can occur at any time.
Because of the types of companies each fund invests in and the
investment techniques used, some of which may be speculative, both
funds are designed for those investors who are investing for the
long-term and who are willing to accept greater risks of loss of
their capital in the hope of achieving capital appreciation.
Investing for capital appreciation entails the risk of loss of all
or part of your principal.
Interest Rate Risks. Debt securities are subject to changes in
their values due to changes in prevailing interest rates. When
prevailing interest rates fall, the value of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. Changes in the value
of securities held by Disciplined Value Fund mean that the its
share prices can go up or down when interest rates change because
of the effect of the change on the value of the fund's portfolio of
debt securities. Value Stock Fund does not normally invest in debt
securities. Disciplined Value Fund has the ability to invest up to
10% of it assets in high-yield securities however, as of the fiscal
year ended October 31, 1996, Disciplined Value Fund held no high-
yield securities. If Disciplined Value Fund were to invest in
high-yield securities, those securities may be subject o greater
market fluctuation and risk of loss of income and principal than
lower yielding, investment grade securities. There are additional
risks of investing in lower grade securities that are described in
the prospectus for Disciplined Value Fund.
Foreign Securities
There are risks of foreign investing that increase the risk of
investing in both Value Stock Fund and in Disciplined Value Fund
and also increase the operating costs of both funds. For example,
foreign issuers are not required to use generally-accepted
accounting principles. If foreign securities are not registered
for sale in the U.S. under U.S. securities laws, the issuer does
not have to comply with the disclosure requirements of U.S. laws,
which are generally more stringent than foreign laws. The values
of foreign securities investments will be affected by other
factors, including exchange control regulations or currency
blockage and possible expropriation or nationalization of assets.
There are risks of changes in foreign currency values. Because
Value Stock Fund and Disciplined Value Fund may purchase securities
denominated in foreign currencies, a change in value of a foreign
currency against the U.S. dollar will result in a change in the
U.S. dollar value of securities of that Fund denominated in that
currency. There may also be changes in governmental administration
or economic or monetary policy in the U.S. or abroad that can
affect foreign investing. In addition, it is generally more
difficult to obtain court judgments outside the United States if
that Fund has to sue a foreign broker or issuer. Additional costs
may be incurred because foreign broker commissions are generally
higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad. If assets of Value
Stock Fund or Disciplined Value Fund are held abroad, the countries
in which they are held and the sub-custodians holding them must be
approved by that Fund's Board of Trustees if such approval is
required under SEC regulations. More information about the risks
and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information of both
funds.
Derivative Investments
Both funds may invest in a number of different kinds of
derivative investments. In general, a derivative investment is
a specially designed investment whose performance is linked to the
performance of another investment or security. 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, may not
perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by
stock market and interest rate 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 funds may trade in the over-the counter market and may
be illiquid.
Hedging Instruments
Each fund may use certain hedging instruments. 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. Losses could also be
experienced if the prices of its futures and options positions were
not correlated with its other investments or if it could not close
out a position because of an illiquid market for the future or
option. Options trading involves the payment of premiums and has
special tax effects on the funds. There are also special risks in
particular hedging strategies. If a covered call written by the
fund is exercised on a security that has increased in value, the
fund will be required to sell the security at the call price and
will not be able to realize any profit if the security has
increased in value above the call price. The use of forward
contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign
currency. To limit its exposure in foreign currency exchange
contracts, the funds limits their exposure to the amount of its
assets denominated in foreign currency.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Trustees of Oppenheimer Integrity
Funds(the "Board") held February 25, 1997, the Trustees reviewed
and discussed materials relevant to the proposed Reorganization.
The Board, including the Independent Trustees, unanimously approved
the Reorganization and recommended to shareholders of Value Stock
Fund that they approve the Reorganization. Both funds offer Class
A, Class B and Class C shares and the terms and conditions of their
offer, sale, redemption and exchange, distribution arrangements,
expenses borne separately by each class and other related matters
are essentially the same. The Board considered that this will
facilitate an exchange. In the reorganization, Class A, Class B
and Class C shareholders of Value Stock Fund will receive Class A,
Class B and Class C shares, respectively, of Disciplined Value
Fund.
In considering the proposed Reorganization, the Board reviewed
information which demonstrated that Value Stock Fund is a slightly
smaller fund, with $189.8 million in net assets as of December 31,
1996. In comparison, Disciplined Value Fund had $198.6 million of
net assets as of December 31, 1996. It is not anticipated that
Value Stock Fund will increase substantially in size in the near
future. After the reorganization, the shareholders of Value Stock
Fund will be shareholders of a larger fund and will incur lower
operating, transfer agency and other expenses. Thus economies of
scale may benefit shareholders of Value Stock Fund.
Among several other factors, the Board focused on the investment
objectives of the two funds. Oppenheimer Value Stock Fund seeks
long-term growth of capital and income primarily through
investments in stocks of well established companies. Disciplined
Value Fund seeks long-term growth of capital by investing primarily
in common stocks with low price-earnings ratios and
better-than-anticipated earnings. Realization of current income is
a secondary consideration for Disciplined Value Fund. Both funds
are expected to invest a substantial portion of their assets in
stocks. The investment techniques and strategies for the funds are
similar with respect to purchasing equity securities, debt
securities, derivatives, hedging instruments, illiquid securities,
foreign securities, convertible securities, warrants and rights and
lending of securities. The only major difference between the funds
regarding permitted investment is that Disciplined Value Fund may
invest in high-yield securities. For the fiscal year ended October
31, 1997, Disciplined Value Fund held no high-yield securities.
Accordingly, the Board determined that investment objectives and
techniques were comparable.
The Board, in reviewing financial information, considered the
investment advisory fee rate of both funds (also known as the
"management fee rate"). The management fee rates for Value Stock
Fund are 0.75% of the first $100 million of average annual net
assets; 0.72% of the next $200 million; 0.69% of the next $200
million and 0.66% of average annual net assets in excess of $500
million. Value Stock Fund also employs a Sub-Adviser and under a
Sub-Advisory Agreement, the Manager (not the fund) pays the Sub-
Adviser the following annual fees, which decline on additional
assets as the fund grows: 0.40% of the first $50 million of the
fund's average annual net assets and 0.20% of net assets in excess
of $50 million. Value Stock Fund's management fee for its fiscal
year ended December 31, 1996 was 0.74% of average annual net assets
for Class A, Class B and Class C shares. The management fee rates
of Disciplined Value Fund are 0.625% of the first $300 million of
average annual net assets; 0.50% of the next $100 million and 0.45%
of average annual net assets in excess of $400 million.
Disciplined Value Fund's management fee for the fiscal period of
January 1, 1996 to October 31, 1996 was 0.625% of the average
annual net assets for Class A, Class B and Class C shares (on an
annualized basis). Class C shares were offered commencing May 1,
1996. If the two funds were combined, shareholders of Disciplined
Value Fund would have a reduced management fee of approximately
0.62% for Class A, Class B and Class C shares. The Board
considered pro forma information which indicated that the expense
ratio of a combined fund would therefore be lower than that of
Value Stock Fund.
In addition to the above, the Board also considered information
with respect to the historical performance of Value Stock Fund and
Disciplined Value Fund, including the performance information
contained in Exhibit A to this Proxy Statement. The Board analyzed
that for the twelve months ended December 31, 1996, although the
average annual return for the one year period was better for Value
Stock Fund, the average annual total returns of Disciplined Value
Fund were better than those of Value Stock Fund for the five and
ten year periods ended December 31, 1996. Although past
performance is not predictive of future results, shareholders of
Value Stock Fund would have an opportunity to become shareholders
of a fund with a better long-term performance history.
The Board also considered that the Reorganization would be a tax
free reorganization, and there would be no sales charge imposed in
effecting the Reorganization. The Board concluded that the
Reorganization would not result in dilution to shareholders of
Value Stock Fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full
as Exhibit B to this Proxy Statement and Prospectus) contemplates
a reorganization under which (i) all of the assets of Value Stock
Fund (other than the cash reserve described below (the "Cash
Reserve")) will be transferred to Disciplined Value Fund in
exchange for Class A, Class B and Class C shares of Disciplined
Value Fund, (ii) these shares will be distributed among the
shareholders of Value Stock Fund in complete liquidation of Value
Stock Fund, (iii) the outstanding shares of Value Stock Fund will
be canceled. Disciplined Value Fund will not assume any of Value
Stock Fund's liabilities except for portfolio securities purchased
which have not settled and outstanding shareholder redemption and
dividend checks.
The result of effectuating the Reorganization would be that: (i)
Disciplined Value Fund will add to its gross assets all of the
assets (net of any liability for portfolio securities purchased but
not settled and outstanding shareholder redemption and dividend
checks) of Value Stock Fund other than its Cash Reserve; and (ii)
the shareholders of Value Stock Fund as of the close of business on
the Closing Date will become shareholders of either Class A, Class
B or Class C shares of Disciplined Value Fund.
The effect of the Reorganization will be that shareholders of Value
Stock Fund who vote their Class A, Class B and Class C shares in
favor of the Reorganization will be electing to redeem their shares
of Value Stock Fund (at net asset value on the Valuation Date
referred to below under "Method of Carrying Out the Reorganization
Plan," calculated after subtracting the Cash Reserve) and reinvest
the proceeds in Class A, Class B or Class C shares of Disciplined
Value Fund at net asset value without sales charge and without
recognition of taxable gain or loss for Federal income tax purposes
(see "Tax Aspects of the Reorganization" below). The Cash Reserve
is that amount retained by Value Stock Fund which is sufficient in
the discretion of the Board for the payment of: (a) Value Stock
Fund's expenses of liquidation, and (b) its liabilities, other than
those assumed by Disciplined Value Fund. Value Stock Fund and
Disciplined Value Fund will bear all of their respective expenses
associated with the Reorganization, as set forth under "Costs of
the Solicitation and the Reorganization" above. Management
estimates that such expenses associated with the Reorganization to
be borne by Value Stock Fund will not exceed $75,000. Liabilities
as of the date of the transfer of assets will consist primarily of
accrued but unpaid normal operating expenses of Value Stock Fund,
excluding the cost of any portfolio securities purchased but not
yet settled and outstanding shareholder redemption and dividend
checks. See "Method of Carrying Out the Reorganization Plan"
below.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, after the closing,
Disciplined Value Fund will be in compliance with all of its
investment policies and restrictions. Value Stock Fund will
recognize capital gain or loss on any sales made pursuant to this
paragraph.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the
Reorganization Agreement, Value Stock Fund will pay a dividend or
dividends which, together with all previous dividends, will have
the effect of distributing to Value Stock Fund's shareholders all
of Value Stock Fund's investment company taxable income for taxable
years ending on or prior to the Closing Date (computed without
regard to any deduction for dividends paid) and all of its net
capital gain, if any, realized in taxable years ending on or prior
to the Closing Date (after reduction for any available capital loss
carry-forward). Such dividends will be included in the taxable
income of Value Stock Fund's shareholders as ordinary income and
capital gain, respectively.
The exchange of the assets of Value Stock Fund for Class A, Class
B and Class C shares of Disciplined Value Fund and the assumption
by Disciplined Value Fund of certain liabilities of Value Stock
Fund is intended to qualify for Federal income tax purposes as a
tax-free reorganization under Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"). Value Stock Fund
has represented to Deloitte & Touche LLP, tax adviser to Value
Stock Fund, that there is no plan or intention by any Fund
shareholder who owns 5% or more of Value Stock Fund's outstanding
shares, and, to Value Stock Fund's best knowledge, there is no plan
or intention on the part of the remaining Value Stock Fund
shareholders, to redeem, sell, exchange or otherwise dispose of a
number of Disciplined Value Fund Class A, Class B or Class C shares
received in the transaction that would reduce Value Stock Fund
shareholders' ownership of Disciplined Value Fund shares to a
number of shares having a value, as of the Closing Date, of less
than 50% of the value of all the formerly outstanding Value Stock
Fund shares as of the same date. Disciplined Value Fund and Value
Stock Fund have each represented to Deloitte & Touche LLP, that, as
of the Closing Date, it will qualify as a regulated investment
company or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Disciplined
Value Fund and Value Stock Fund will receive the opinion of
Deloitte & Touche LLP to the effect that, based on the
Reorganization Agreement, the above representations, existing
provisions of the Code, Treasury Regulations issued thereunder,
current Revenue Rulings, Revenue Procedures and court decisions,
for Federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement
will qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code.
2. Value Stock Fund and Disciplined Value Fund will each qualify as
"a party to a reorganization" within the meaning of Section
368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Value
Stock Fund upon the distribution of Class A, Class B or Class C
shares of beneficial interest in Disciplined Value Fund to the
shareholders of Value Stock Fund pursuant to Section 354 of the
Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by Value Stock Fund by reason of the transfer of its
assets solely in exchange for Class A, Class B or Class C shares of
Disciplined Value Fund.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Disciplined Value Fund by reason of the transfer of
Value Stock Fund's assets solely in exchange for Class A, Class B
or Class C shares of Disciplined Value Fund.
6. The shareholders of Value Stock Fund will have the same tax
basis and holding period for the shares of beneficial interest in
Disciplined Value Fund that they receive as they had for Value
Stock Fund stock that they previously held, pursuant to Sections
358(a) and 1223(1) of the Code, respectively.
7. The securities transferred by Value Stock Fund to Disciplined
Value Fund will have the same tax basis and holding period in the
hands of Disciplined Value Fund as they had for Value Stock Fund,
pursuant to Sections 362(b) and 1223(1) of the Code, respectively.
Shareholders of Value Stock Fund should consult their tax advisors
regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Since the foregoing discussion
relates only to the Federal income tax consequences of the
Reorganization, shareholders of Value Stock Fund should also
consult their tax advisers as to state and local tax consequences,
if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Value Stock Fund
and Disciplined Value Fund and indicates the pro forma combined
capitalization as of December 31, 1996 as if the Reorganization had
occurred on that date.
December 31, 1996
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer Value Stock Fund
Class A $ 148,128,771 7,286,952 $ 20.33
Class B $ 40,142,493 1,988,433 $ 20.19
Class C $ 1,855,870 91,685 $ 20.24
Oppenheimer Disciplined Value Fund
Class A $ 190,234,571 9,799,816 $ 19.41
Class B $ 7,355,534 376,390 $ 19.54
Class C $ 953,716 49,329 $ 19.33
Class Y $ 950 49 $ 19.41
Oppenheimer Disciplined Value Fund
(Pro Forma Surviving Fund)
Class A $ 338,363,342 17,431,386 $ 19.41
Class B $ 47,498,027 2,430,765 $ 19.54
Class C $ 2,809,586 145,339 $ 19.33
Class Y $ 950 49 $ 19.41
Reflects issuance of 7,631,570 of Class A shares, 2,054,375 of
Class B shares and 96,010 of Class C shares of Disciplined Value
Fund in a tax-free exchange for the net assets of Value Stock Fund,
aggregating $190,127,134.
The pro forma ratio of expenses to average annual net assets of the
Class A shares at December 31, 1996 would have been 1.11%. The pro
forma ratio of expenses to average net assets of Class B shares at
December 31, 1996 would have been 1.92%. The pro forma ratio of
expenses to average net assets of Class C shares at December 31,
1996 would have been 1.93%. The pro forma ratio of expenses to
average net assets of Class Y shares at December 31, 1996 would
have been 0.87%.
COMPARISON BETWEEN
VALUE STOCK FUND
AND DISCIPLINED VALUE FUND
Information about Value Stock Fund and Disciplined Value Fund is
presented below. Additional information about Disciplined Value
Fund is set forth in its Prospectus, accompanying this Proxy
Statement and Prospectus, and additional information about both
funds is set forth in documents that may be obtained upon request
of the transfer agent or upon review at the offices of the SEC.
See "Miscellaneous - Public Information."
Investment Objectives and Policies
Disciplined Value Fund seeks long term growth of capital by
investing primarily in common stocks with low price-earnings ratios
and better-than-anticipated earnings. Realization of current income
is a secondary consideration. Under normal circumstances, most of
the fund's assets will be invested in stocks. The Manager chooses
stock investments for the fund using a quantitative value oriented
investment discipline in combination with fundamental securities
analysis. A stock may have a low price-earnings ratio (for example,
below the price-earnings ratio of the S&P 500 Index) because it is
out-of-favor in the market. When an out-of-favor company
demonstrates better earnings than what most analysts were
expecting, this is referred to as a favorable earnings surprise.
This may cause market analysts and investors to reevaluate the
issuer's earnings expectations and the price-earnings multiple,
which in turn may cause the company's stock price to increase in
value.
As stocks with low price-earnings ratios and favorable earnings
surprises are identified, the Manager uses fundamental securities
analysis to select individual stocks for the fund. When the
price-earnings ratio of a stock held by Disciplined Value Fund
moves significantly above the multiple of the overall stock market,
or the company reports a material earnings disappointment, the fund
will normally sell the stock.
Disciplined Value Fund may invest the remainder of its net assets
(up to 10% under normal circumstances) in U.S. Government
securities and corporate debt obligations, including convertible
bonds, which may be rated as low as B by Moody's Investors Service,
Inc. ("Moody's") or Standard and Poor's Corporation ("Standard &
Poor's"), Fitch Investors Service, Inc., Duff & Phelps, Inc. or
another nationally recognized statistical rating organization. The
Statement of Additional Information for Disciplined Value Fund
contains a more detailed discussion of the debt securities the fund
may invest in. Under normal market conditions, the fund may
maintain up to 15% of its net assets in cash and cash equivalent
investments. When market conditions are unstable, the fund may
invest without limit in high-quality short-term debt securities for
temporary defensive purposes, as described below.
Consistent with the foregoing policies, Disciplined Value Fund may
invest to a limited degree in securities of foreign issuers,
including issuers in developing countries.
Value Stock Fund
Value Stock Fund seeks its investment objective by investing, under
normal market conditions, primarily in a diversified portfolio of
(i) common stocks or preferred stocks that pay cash dividends, (ii)
securities convertible into common stocks, and (iii) other equity
securities issued by companies with a market capitalization of at
least $500 million or with a history of at least five years of
operations as a public company, and which are listed on a national
securities exchange or traded in the over-the-counter markets.
Value Stock Fund invests primarily in cash dividend-paying stocks.
To provide liquidity or for temporary defensive purposes, Value
Stock Fund may invest all or any portion of its assets in high-
quality, short-term money market instruments.
Value Stock Fund seeks to invest in the securities of companies
which, in the opinion of the Sub-Advisor, are of high quality,
offer above-average dividend growth potential and are attractively
valued in the marketplace. This would include stocks selling below
their historical price/earnings ranges relative to the Standard &
Poor's 500 Stock Index or below their historical price/book value
ranges. The Sub-Adviser will give strong consideration to
securities of companies whose current prices do not adequately
reflect, in its opinion, the ongoing business value of the
enterprise.
The securities in which Disciplined Value Fund and Value Stock Fund
may invest are summarized below. Both funds invest in
substantially the same types of securities and have similar
restrictions. When investing its assets Disciplined Value Fund may
not invest more than 5% of its total assets in securities other
than United States Government or Government agency securities in
any one issuer or more than 15% of the fund s total assets in any
one bank. Value Stock, on the other hand, may not buy securities
issued or guaranteed by any one issuer (except the U.S. Government
or its agencies or instrumentalities if with respect to 75% of its
total assets, (1) more than 5% would be invested in the securities
of such issuer or (2) it would own more than 10% of the issuer s
voting securities. This means that Value Stock Fund could invest
up to 25% of its total assets in any one issuer.
Permitted Investments by Both Value Stock Fund and Disciplined
Value Fund
Stock Investment Risks
Both Disciplined Value Fund and Value Stock Fund each normally
invest most, or a substantial portion, of their assets in stocks.
Therefore, the value of each fund's portfolio will be affected by
changes in the stock markets. At times, the stock markets can be
volatile, and stock prices can change substantially. This market
risk will affect each fund's net asset values per share, which will
fluctuate as the values of each fund's portfolio securities change.
The types of securities each fund purchases are described below.
Each fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of stock
of any one company and by not investing too great a percentage of
the fund's assets in any one industry or sector.
Because of the types of securities each fund invests in and the
investment techniques each fund uses, some of which may be
speculative, both Disciplined Value Fund and Value Stock Fund are
designed for investors who are investing for the long-term and who
are willing to accept greater risks of loss of their investment in
the hope of achieving capital appreciation. Neither fund is
intended for investors seeking assured income and preservation of
capital. Investing for capital appreciation entails the risk of
loss of all or part of your investment. Because changes in
securities market prices can occur at any time, there is no
assurance that either fund will achieve its investment objective,
and when you redeem your shares, they may be worth more or less
than what you paid for them.
Foreign Securities
Disciplined Value Fund may purchase equity securities issued by
foreign companies and debt securities issued or guaranteed by
foreign governments or their agencies. Disciplined Value Fund may
purchase securities of companies located in any country, developed
or underdeveloped. Investments in securities of issuers in
underdeveloped countries or countries that have emerging markets
generally may offer greater potential for gain but involve more
risk and may be considered highly speculative. As a matter of
fundamental policy, Disciplined Value Fund may not invest more than
10% of its total assets in foreign securities, except that the fund
may invest up to 25% of its total assets in foreign equity and debt
securities that are (i) issued, assumed or guaranteed by foreign
governments or their political subdivisions or instrumentalities,
(ii) assumed or guaranteed by domestic issuers, including
Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on
The New York Stock Exchange. Disciplined Value Fund will hold
foreign currency only in connection with the purchase or sale of
foreign securities.
Value Stock Fund may invest in debt and equity securities issued or
guaranteed by foreign companies, and debt securities of foreign
governments or their agencies. Foreign debt securities may include
government bonds, and debentures and notes issued by foreign
companies. Some of these debt securities may have variable
interest rates or "floating" interest rates that change as
prevailing levels of interest rates change. Those changes will
affect the income the fund receives. Value Stock Fund is not
restricted in the amount of its assets it may invest in foreign
countries or in which countries
There are special risks in investing in foreign securities. More
information about the risks and potential rewards of investing in
foreign securities is described above in the section entitled
Principal Risk Factors and is contained in each fund's respective
Statement of Additional Information.
Convertible Securities.
Both funds may invest in convertible securities. Convertible
securities are bonds, preferred stocks and other securities that
normally pay a fixed rate of interest or dividend and give the
owner the option to convert the security into common stock. While
the value of convertible securities depends in part on interest
rate changes and the credit quality of the issuer, the price will
also change based on the price of the underlying stock. While
convertible securities generally have less potential for gain than
common stock, their income provides a cushion against the stock
price's declines. They generally pay less income than
non-convertible bonds. The Manager generally analyzes these
investments from the perspective of the growth potential of the
underlying stock and treats them as "equity substitutes."
Portfolio Turnover
A change in the securities held by either fund is known as
"portfolio turnover." Neither Fund ordinarily engages in short-
term trading to try to achieve its objective. For each fund's
portfolio turnover rate, see "Financial Highlights" in each fund's
respective Prospectus or Annual Report.
Portfolio turnover affects brokerage costs, dealer markups and
other transaction costs, and results in Disciplined Value Fund and
Value Stock Fund's realization of capital gains or losses for tax
purposes. It may also affect either fund's ability to qualify as
a "regulated investment company" under the Internal Revenue Code
for tax deductions for dividends and capital gains distributions
either fund pays to shareholders. Both funds qualified in their
last fiscal year and intend to do so in the coming year, although
both funds reserve the right not to qualify.
Hedging
Both funds may purchase and sell certain kinds of futures
contracts, forward contracts, and options on futures and broadly-
based stock indices. Additionally, Value Stock Fund may purchase
and sell certain kinds of put and call options. Disciplined Value
Fund may write covered call options on securities, stock indices and
foreign currency. These are all referred to as "hedging
instruments." Neither Fund uses hedging instruments for
speculative purposes, and both have limits on the use of them,
described below. The hedging instruments the funds may use are
described below and in greater detail in "Other Investment
Techniques and Strategies" section in each fund's respective
Statement of Additional Information.
Both funds may use hedging instruments for a number of purposes.
Each fund 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. Each
fund may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying
puts and writing covered calls, hedge the fund's portfolio against
price fluctuations. Other hedging strategies, such as buying
futures and call options, tend to increase the funds' exposure to
the securities market.
Forward contracts are used by both funds to try to manage foreign
currency risks on foreign investments. Foreign currency options
are used to try to protect against declines in the dollar value of
foreign securities the funds own, or to protect against an increase
in the dollar cost of buying foreign securities. Writing covered
call options may also provide income to the funds for liquidity
purposes or to raise cash to distribute to shareholders.
Both funds may buy and sell futures contracts that relate to
broadly-based stock indices (these are referred to as Stock Index
Futures) or foreign currencies (these are called Forward Contracts
and are discussed below).
Value Stock Fund may buy and sell certain kinds of put options
(puts) and call options (calls). Calls the fund buys or sells must
be listed on a securities or commodities exchange, or quoted on the
Automated Quotation System ("NASDAQ") of The Nasdaq Stock Market,
Inc., or traded in the over-the-counter market. In the case of
puts and calls on a foreign currency, they must be traded on a
securities or commodities exchange or in the over-the-counter
market, or must be quoted by recognized dealers in those options.
A call or put option may not be purchased by Value Stock Fund if
the value of all of the fund's put and call options would exceed 5%
of the fund's total assets.
Value Stock Fund may buy calls only on securities, broadly-based
stock indices, foreign currencies or Stock Index Futures. The fund
may also buy calls to terminate its obligation on a call they
previously wrote.
Both funds may write (that is, sell) covered call options. Each
call the funds write must be "covered" while it is outstanding.
That means the funds must own the investment on which the call was
written or each fund must own other securities that are acceptable
for the escrow arrangements required for calls. The funds may
write calls on futures contracts each fund owns, but these calls
must be covered by securities or other liquid assets each fund owns
and segregated to enable it to satisfy each fund's obligations if
the call is exercised. After either fund writes a call, not more
than 20% of the assets of Disciplined Value fund or 255% of the
assets of Value Stock Fund may be subject to calls. When either
fund writes a call, it receives cash (called a premium). The call
gives the buyer the ability to buy the investment on which the call
was written from the respective fund at the call price during the
period in which the call may be exercised. If the value of the
investment does not rise above the call price, it is likely that
the call will lapse without being exercised, while the respective
fund keeps the cash premium (and the investment).
Value Stock Fund may purchase and sell put options. Buying a put
on an investment gives the fund the right to sell the investment at
a set price to a seller of a put on that investment. Value Stock
Fund can buy only those puts that relate to securities that it
owns, broadly-based stock indices, foreign currencies or Stock
Index Futures. Value Stock Fund can buy a put on a Stock Index
Future whether or not it owns the particular Stock Index Future in
its portfolio.
Value Stock Fund may write puts on securities, broadly-based stock
indices, foreign currencies or Stock Index Futures, but only if
those puts are covered by segregated liquid assets. Value Stock
Fund will not write a put if it will require more than 25% of the
fund's total assets to be segregated.
Forward contracts are foreign currency exchange contracts. They
are used to buy or sell foreign currency for future delivery at a
fixed price. Both funds may use them to try to "lock in" the U.S.
dollar price of a security denominated in a foreign currency that
the fund has bought or sold, or to protect against possible losses
from changes in the relative values of the U.S. dollar and foreign
currency. Both funds limit their exposure in foreign currency
exchange contracts in a particular foreign currency to the amount
of their respective assets denominated in that currency or in a
closely-correlated currency.
Hedging instruments can be volatile investments and may involve
special risks which are described above in the section entitled
Principal Risk Factors. Options trading involves the payment of
premiums and has special tax effects on either fund. There are also
special risks in particular hedging strategies. If a covered call
written by either fund is exercised on an investment that has
increased in value, either 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 a put, there is a risk that either 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. These risks are described in
greater detail in each fund's respective Statement of Additional
Information.
Loans of Portfolio Securities
To raise cash for liquidity purposes, both funds may lend their
portfolio securities to brokers, dealers and other financial
institutions. Both Disciplined Value Fund and Value Stock Fund
restrict loans of securities wherein the value of the securities
loaned exceeds 25% of the value of that fund's total assets. These
loans are subject to the conditions in each fund's Statements of
Additional Information. Neither fund presently intends to lend its
portfolio securities, but if they do the value of the securities
borrowed is not expected to exceed 5% of each fund's total assets.
Illiquid and Restricted Securities
Both of the funds may invest in illiquid and restricted securities.
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 funds will not invest more than 10% of their net assets
in illiquid or restricted securities (each fund's 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.
Derivative Investments
Value Stock Fund and Disciplined Value Fund can invest in a number
of different kinds of "derivative investments." Each fund may use
some types of derivatives for hedging purposes, and may invest in
others because they offer the potential for increased income. In
general, a "derivative investment" is a specially-designed
investment whose performance is linked to the performance of
another investment or security, such as an option, future, index,
currency or commodity. The funds may not purchase or sell physical
commodities; however, the funds may purchase and sell foreign
currency in hedging transactions. This policy also does not
prevent the funds from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities. In the broadest sense, derivative
investments include exchange-traded options and futures contracts
(please refer to "Hedging," above). Investing in derivative
investments involves certain risks which are described above in the
section entitled Principal Risk Factors.
Repurchase Agreements
Each of the funds may enter into repurchase agreements. Neither of
the funds will enter into repurchase agreements that will cause
more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days (that limit may be
increased to 15% by either fund s Board). However, if the vendor
fails to pay the resale price on the delivery date, the funds may
experience costs in disposing of the collateral and losses if there
is any delay in doing so.
Warrants and Rights
Warrants basically are options to purchase stock at set prices that
are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed
directly by the issuer to its shareholders. Both funds may invest
up to 5% of their total assets in warrants or rights. That 5%
limitation does not apply to warrants Disciplined Value Fund has
acquired as part of units with other securities or that are
attached to other securities. No more than 2% of either fund's
total assets may be invested in warrants that are not listed on
either The New York Stock Exchange or The American Stock Exchange.
For further details, see "Warrants and Rights" in each fund's
respective Statement of Additional Information.
"When-Issued" and Delayed Delivery Transactions
Both funds may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "delayed delivery" basis. These
terms refer to securities that have been created and for which a
market exists, but which are not available for immediate delivery.
There may be a risk of loss to the fund if the value of the
security declines prior to the settlement date.
Debt Instruments
Under normal market conditions, Disciplined Value Fund may invest
some of its assets (normally up to 10%) in debt securities. Value
Stock Fund may also invest in debt securities issued or guaranteed
by the U.S. Government. Some debt instruments Disciplined Value
Fund may invest include the following:
U.S. Government Securities
Both funds may invest in U.S. Government Securities which include
debt securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. Certain U.S. Government Securities,
including U.S. Treasury bills, notes and bonds, and mortgage
participation certificates guaranteed by the Government National
Mortgage Association are supported by the full faith and credit of
the U.S. Government, which in general terms means that the U.S.
Treasury stands behind the obligation to pay principal and
interest.
The value of U.S. Government Securities will fluctuate until they
mature depending on prevailing interest rates. Because the yields
on U.S. Government Securities are generally lower than on corporate
debt securities, when the funds hold U.S. Government Securities it
may attempt to increase the income it can earn from them by writing
covered call options against them, when market conditions are
appropriate. Writing covered calls is explained below, under
"Hedging."
Lower-Grade Debt Securities
Disciplined Value Fund may also invest in "Lower-grade" securities
which generally offer higher income potential than investment grade
securities. "Lower-grade" securities have a rating below "BBB" by
Standard & Poor's Ratings Group ("Standard & Poor's") or "Baa" by
Moody's Investors Services, Inc. ("Moody's") or similar ratings by
other domestic or foreign rating organizations, or they are not
rated by a nationally-recognized rating organization but the
Manager judges them to be comparable to lower-rated securities.
the funds will not purchase securities rated below B by Moody's or
Standard & Poor's. the funds may retain securities whose ratings
fall below B after purchase unless and until the Manager determines
that disposing of such securities is in the best interests of the
funds. These percentages are historical and do not necessarily
indicate the current or predict future debt holdings of the funds.
Temporary Defensive Investments
Each fund may invest substantial amounts of its assets in debt
securities when market conditions are unstable. Such debt
securities include rated or unrated bonds and debentures, cash
equivalents and preferred stocks, money market instruments,
commercial paper rated "A-1" or better by Standard & Poor's or "P-
1" or better by Moody's, or government securities.
Investment Restrictions
Value Stock Fund and Disciplined Value Fund have certain investment
restrictions that, together with their investment objectives, are
fundamental policies, changeable only by shareholder approval. Set
forth below is a summary of these investment restrictions which are
different for each fund. Other investment restrictions for each
fund are substantially the same:
Under these fundamental policies, the fund cannot do the following:
(1)Value Stock Fund cannot make short sales except for sales
"against the box"; (2) Value Stock Fund cannot borrow money or
enter into reverse repurchase agreements, except that Value Stock
Fund may borrow money from banks and enter into reverse repurchase
agreements as a temporary measure for extraordinary or emergency
purposes (but not for the purpose of making investments), provided
that the aggregate amount of all such borrowings and commitments
under such agreements does not, at the time of borrowing or of
entering into such an agreement, exceed 10% of Value Stock Fund's
total assets taken at current market value; Value Stock Fund will
not purchase additional portfolio securities at any time that the
aggregate amount of its borrowings and its commitments under
reverse repurchase agreements exceeds 5% of Value Stock Fund's net
assets (for purposes of this restriction, entering into portfolio
lending agreements shall not be deemed to constitute borrowing
money); (3)Disciplined Value Fund cannot borrow amounts in excess
of 10% of its total assets, taken at market value at the time of
the borrowing, and then only from banks as a temporary measure for
extraordinary or emergency purposes, or make investments in
portfolio securities while such outstanding borrowings exceed 5% of
its total assets; (4)Disciplined Value Fund cannot allow its
current obligations under reverse repurchase agreements, together
with borrowings, to exceed 1/3 of the value of its total assets
(less all its liabilities other than the obligations under
borrowings and such agreements); (5) Value Stock Fund cannot
concentrate its investments in any particular industry except that
it may invest up to 25% of the value of its total assets in the
securities of issuers of any one industry (of the utility
companies, gas, electric, water and telephone will each be
considered as a separate industry); (6)Disciplined Value Fund
cannot invest more than 25 percent of the value of its total assets
in the securities of issuers in any single industry, provided that
this limitation shall not apply to the purchase of obligations
issued or guaranteed by the United States Government, its agencies
or instrumentalities; (7) Value Stock Fund cannot 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 (1) more than 5% of Value Stock Fund's total
assets would be invested in the securities of such issuer, or (2)
Value Stock Fund would own more than 10% of that issuer's voting
securities; (8)Disciplined Value Fund cannot(a) Invest more than 5
percent of its total assets (taken at market value at the time of
each investment) in the securities (other than United States
Government or Government agency securities) of any one issuer
(including repurchase agreements with any one bank or dealer) or
more than 15 percent of its total assets in the obligations of any
one bank; and (b) Disciplined Value Fund cannot purchase more than
either (i) 10 percent in principal amount of the outstanding debt
securities of an issuer, or (ii) 10 percent of the outstanding
voting securities of an issuer, except that such restrictions shall
not apply to securities issued or guaranteed by the United States
Government or its agencies, bank money instruments or bank
repurchase agreements; (9) Value Stock Fund may not invest in oil,
gas or other mineral leases, rights, royalty contracts or
exploration or development programs, real estate or real estate
mortgage loans (this restriction does not prevent Value Stock Fund
from purchasing securities secured or issued by companies investing
or dealing in real estate and by companies that are not principally
engaged in the business of buying and selling such leases, rights,
contracts or programs); (10) Disciplined Value Fund cannot purchase
or sell interests in oil, gas or other mineral exploration or
development programs, commodities, commodity contracts or real
estate, except that such portfolio may: (1) purchase securities of
issuers which invest or deal an any of the above and (2) invest for
hedging purposes in futures contracts on securities, financial
instruments and indices, and foreign currency, as are approved for
trading on a registered exchange; (11) Value Stock Fund may not
make loans other than by investing in obligations in which Value
Stock Fund may invest consistent with its investment objective and
policies and other than repurchase agreements and loans of
portfolio securities and Value Stock Fund may not make loans to an
officer, trustee or employee of the Trust or to any officer,
director or employee of MassMutual, or to MassMutual; (12)
Disciplined Value Fund cannot make loans, except that it (1) may
lend portfolio securities in accordance with its investment
policies up to 33 1/3% of its total assets taken at market value,
(2) enter into repurchase agreements, and (3) purchase all or a
portion of an issue of publicly distributed debt securities, bank
loan participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether or
not the purchase is made upon the original issuance of the
securities; (13) Value Stock Fund may not pledge, mortgage or
hypothecate its assets, except that, to secure permitted
borrowings, it may pledge securities having a market value at the
time of the pledge not exceeding 15% of the cost of Value Stock
Fund's total assets and except in connection with permitted
transactions in options, futures contracts and options on futures
contracts, and except for reverse repurchase agreements and
securities lending; (14) Disciplined Value Fund cannot mortgage,
pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by it except as may be
necessary in connection with borrowings, and then such mortgaging,
pledging or hypothecating may not exceed 10 percent of its total
assets, taken at market value at the time thereof; (15) Value Stock
Fund may not purchase or retain securities of any issuer if, to the
knowledge of the Trust, more than 5% of such issuer's securities
are beneficially owned by officers and trustees of the Trust or
officers and directors of Massachusetts Mutual Life Insurance
Company ("MassMutual") who individually beneficially own more than
1/2 of 1% of the securities of such issuer; (16) Disciplined Value
Fund cannot issue senior securities, except as permitted below;
(17) Alone, or together with any other portfolio or portfolios,
Disciplined Value Fund cannot make investments for the purpose of
exercising control over, or management of, any issuer; (18)
Disciplined Value Fund cannot purchase securities of other
investment companies, except in connection with a merger,
consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where
no underwriter or dealer's commission or profit, other than the
customary broker's commission is involved and only if immediately
thereafter not more than 10 percent of Disciplined Value Fund's
total assets, taken at market value, would be invested in such
securities; (19) Disciplined Value Fund cannot purchase any
securities on margin (except that the Company may obtain such
short- term credits as may be necessary for the clearance of
purchases and sales of portfolio securities) or make short sales of
securities or maintain a short position;(20) Disciplined Value Fund
cannot underwrite securities of other issuers except insofar as the
Company may be deemed an underwriter under the 1933 Act in selling
portfolio securities; (21) Disciplined Value Fund cannot write,
purchase or sell puts, calls or combinations thereof, except that
covered call options may be written; (22) Disciplined Value Fund
cannot invest in securities of foreign issuers if at the time of
acquisition more than 10 percent of its total assets, taken at
market value at the time of the investment, would be invested in
such securities. However, up to 25 percent of the total assets of
such portfolio may be invested in the aggregate in such securities
(i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities thereof, (ii) assumed
or guaranteed by domestic issuers, including Eurodollar securities,
or (iii) issued, assumed or guaranteed by foreign issuers having a
class of securities listed for trading on the New York Stock
Exchange; and (23) Disciplined Value Fund cannot invest more than
10 percent in the aggregate of the value of its total assets in
repurchase agreements maturing in more than seven days, time
deposits maturing in more than 2 days, portfolio securities which
do not have readily available market quotations and all other
illiquid assets.
Unless the prospectus of the fund states that a percentage
restriction applies on an ongoing basis, it applies only at the
time that 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.
Description of Brokerage Practices
The brokerage practices of the funds are the same. Subject to the
provisions of each fund's advisory agreement, the procedures and
rules described above, allocations of brokerage are generally made
by the Manager's portfolio traders based upon new 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 each advisory
agreement and the procedures and rules described above. In either
case, brokerage is allocated under the supervision of the Manager's
executive officers and the Manager. Transactions in securities
other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed
securities or for certain fixed-income agency transactions in the
secondary market and are otherwise paid only if it appears likely
that a better price or execution can be obtained. When either fund
engages in an option transaction, ordinarily the same broker will
be used for the purchase or sale of the option and any transaction
in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more
than one of the accounts managed by the Manager or its affiliates
are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with
the purchase or sale orders actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of
those other accounts may be useful both to either 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 permits the Manager to use
concessions on fixed-price offerings to obtain research, in the
same manner as is permitted for agency transactions. The Board
also permits the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has
represented to Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was not executed by the
broker on an agency basis at the stated commission, and (iii) the
trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
enabling the Manager to obtain market information for the valuation
of securities held in the each fund's portfolio or being considered
for purchase.
During Value Stock Fund's fiscal years ended December 31, 1994,
1995 and 1996, total brokerage commissions paid by the fund (not
including spreads or concessions on principal transactions on a net
trade basis) were $18,630, $62,009 and $72,570, respectively. Of
that amount, during the fiscal year ended December 31, 1996,
$18,058 was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was
$11,618,184. The transactions giving rise to those commissions
were allocated in accordance with the Manager's internal allocation
procedures.
During Disciplined Value Fund's fiscal years ended October 31,
1994, 1995 and October 31, 1996, total brokerage commissions paid
by the fund (not including spreads or concessions on principal
transactions on a net trade basis) were $249,665, $233,480 and
$173,513, respectively. Of that amount, during the fiscal year
ended October 31, 1996, $166,527 was paid to brokers as commissions
in return for research services; the aggregate dollar amount of
those transactions was $107,956,581. The transactions giving rise
to those commissions were allocated in accordance with the
Manager's internal allocation procedures.
Please refer to the Statement of Additional Information for each
fund for further information on each fund's brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average annual net assets for Value Stock
Fund for the fiscal year ended December 31, 1996 was 1.20% for
Class A, 1.97% for Class B and 2.02% for Class C shares (on an
annualized basis). The ratio of expenses to average annual net
assets for Disciplined Value Fund for the fiscal year ended October
31, 1996, for its Class A, Class B, Class C and Class Y shares (on
an annualized basis) were 1.11%, 1.87%, 1.87% and 0.97%, -
respectively. Further details are set forth above under
"Comparative Fee Table", and in Value Stock Fund's Annual Report as
of December 31, 1996, and Disciplined Value Fund's Annual Report as
of October 31, 1996, which are included in the Statement of
Additional Information. The performance of the funds for the 1,3,5
and 10 year periods ended December 31, 1996 is set forth in Exhibit
B.
Shareholder Services
The policies of Value Stock Fund and Disciplined Value Fund with
respect to minimum initial investments and subsequent investments
by its shareholders are the same. Both Value Stock Fund and
Disciplined Value Fund offer the following privileges: (i) Right of
Accumulation, (ii) Letter of Intent, (iii) reinvestment of
dividends and distributions at net asset value, (iv) net asset
value purchases by certain individuals and entities, (v) Asset
Builder (automatic investment) Plans, (vi) Automatic Withdrawal and
Exchange Plans for shareholders who own shares of the fund valued
at $5,000 or more, (vii) reinvestment of net redemption proceeds at
net asset value within six months of a redemption, (viii)
AccountLink and PhoneLink arrangements, (ix) exchanges of shares
for shares of the same class of certain other funds at net asset
value, and (x) telephone redemption and exchange privileges.
Shareholders may purchase shares through OppenheimerFunds
AccountLink, which links a shareholder account to an account at a
bank or financial institution and enables shareholders to send
money electronically between those accounts to perform a number of
types of account transactions. This includes the purchase of
shares through the automated telephone system (PhoneLink).
Exchanges can also be made by telephone, or automatically through
PhoneLink. After AccountLink privileges have been established with
a bank account, shares may be purchased by telephone in an amount
up to $100,000. Shares of either Fund may be exchanged for shares
of certain OppenheimerFunds at net asset value per share; however,
shares of a particular class may be exchanged only for shares of
the same class of other OppenheimerFunds. Shareholders of the
funds may redeem their shares by written request or by telephone
request in an amount up to $50,000 in any seven-day period.
Shareholders may arrange to have share redemption proceeds wired to
a pre-designated account at a U.S. bank or other financial
institution that is an ACH member, through AccountLink. There is
no dollar limit on telephone redemption proceeds sent to a bank
account when AccountLink has been established. Shareholders may
also redeem shares automatically by telephone by using PhoneLink.
Shareholders of Disciplined Value Fund may also have the Transfer
Agent send redemption proceeds of $2,500 or more by Federal Funds
wire to a designated commercial bank which is a member of the
Federal Reserve wire system. Shareholders of the funds have up to
six months to reinvest redemption proceeds of their Class A shares
which they purchase subject to a sales charge or their Class B
shares on which they paid a contingent deferred sales charge in
Class A shares of the funds or other Oppenheimer funds without
paying a sales charge. Value Stock Fund may redeem accounts valued
at less than $1,000, if the account has fallen below such stated
amounts for reasons other than market value fluctuations.
Disciplined Value Fund may redeem accounts with less than 100
shares. Both funds offer Automatic Withdrawal and Automatic
Exchange Plans under certain conditions.
Rights of Shareholders
The shares of each such fund, including shares of each class,
entitle the holder to one vote per share on the election of
trustees and all other matters submitted to shareholders of the
fund. Each share of the fund represents an interest in the fund
proportionately equal to the interest of each other share of the
same class and entitle the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to
their vote at shareholders' meetings. Shareholders of each fund
vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees or Directors and
ratification of appointment of auditors for the funds.
Shareholders of a particular series or class vote separately on
proposals which affect that series or class, and shareholders of a
series or class which is not affected by that matter are not
entitled to vote on the proposal. For example, only shareholders
of a series, such as the Fund, vote exclusively on any material
amendment to the investment advisory agreement with respect to the
series. Only shareholders of a class of a series vote on certain
amendments to the Distribution and/or Service Plans if the
amendments affect only that class. The Board of each fund is
authorized to create new series and classes of series. The Boards
may reclassify unissued shares of the funds into additional series
or classes of shares. The Boards may also divide or combine the
shares of a class into a greater or lesser number of shares without
thereby changing the proportionate beneficial interest of a
shareholder in each fund. Shares do not have cumulative voting
rights or preemptive or subscription rights. Shares may be voted
in person or by proxy. Each share has one vote at shareholder
meetings, with fractional shares voting proportionately. Shares of
a particular class vote together on matters that affect that class.
Most amendments to the Declaration of Trust of Value Stock Fund or
the Articles of Incorporation of Disciplined Value Fund require the
approval of a "majority" (as defined in the Investment Company Act)
of the respective fund's shareholders. Under certain
circumstances, shareholders of Value Stock Fund may be held
personally liable as partners for the funds' obligations, and the
Declaration of Trust such a shareholder is entitled to
indemnification rights by the funds; the risk of a shareholder
incurring any such loss is limited to the remote circumstances in
which the fund is unable to meet its obligations.
Class A, Class B and Class C shares of Value Stock Fund and the
Class A, Class B and Class C shares of Disciplined Value Fund which
Value Stock Fund shareholders will receive in the Reorganization
and Class Y shares of Disciplined Value Fund participate equally in
the funds' dividends and distributions and in the funds' net assets
upon liquidation, after taking into account the different expenses
paid by each class. Distributions and dividends for each class
will be different and Class B and Class C dividends and
distributions will be lower than Class A and Class Y dividends.
It is not contemplated that Value Stock Fund or Disciplined Value
Fund will hold regular annual meetings of shareholders. Under the
Investment Company Act, shareholders of Value Stock Fund do not
have rights of appraisal as a result of the transactions
contemplated by the Reorganization Agreement. However, they have
the right at any time prior to the consummation of such transaction
to redeem their shares at net asset value. Shareholders of both of
the funds have the right, under certain circumstances, to remove a
Trustee and will be assisted in communicating with other
shareholders for such purpose.
Organization and History
Oppenheimer Integrity Funds was organized in 1982 as a multi-series
Massachusetts business trust and Oppenheimer Value Stock Fund is a
series of that Trust. Oppenheimer Integrity Funds is an open-end,
diversified management investment company, with an unlimited number
of authorized shares of beneficial interest. Disciplined Value Fund
is a diversified series of Oppenheimer Series Fund, Inc. which was
organized in 1981 as a Maryland corporation and is an open-end
management investment company. Organized as a series fund,
Oppenheimer Series Fund, Inc. presently has five series, including
the Disciplined Value Fund. Each fund has it own Board,
Oppenheimer Value Stock Fund is governed by the Denver Board of
Trustees (the "Board") and Oppenheimer Disciplined Value Fund is
governed by the New York Board of Directors.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York
10048-0203, acts as the investment adviser for Value Stock Fund and
also acts as the investment adviser to Disciplined Value Fund. The
terms and conditions of the investment advisory agreement for each
fund are substantially the same. The monthly management fee
payable to the Manager by each fund is set forth under "Synopsis -
Investment Advisory and Distribution and Service Plan Fees" along
with the fees paid by the Manger to the Sub-Adviser for Value Stock
Fund. The 12b-1 Distribution and Service Plan fees paid by fund
with respect to Class A, Class B and Class C shares are set forth
above under "Synopsis - Investment Advisory and Distribution and
Service Plan Fees." No Distribution and Service Plan fees are paid
by Disciplined Value Fund with respect to Class Y shares.
Pursuant to each investment advisory agreement, the Manager
supervises the investment operations of the funds and the
composition of their portfolios, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. Both investment advisory
agreements require the Manager to provide Value Stock Fund and
Disciplined Value 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
administration for the funds, including the compilation and
maintenance of records with respect to their operations, the
preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public
sale of shares of each fund.
David L. Babson & Co., Inc., (the Sub-Adviser ), acts as the Value
Stock Fund s sub-adviser. The Sub-Adviser is responsible for
choosing the fund s investments and its duties and responsibilities
are set forth in its contract with the Manager. The Manager, not
Value Stock Fund, pays the Sub-Adviser. The Sub-Adviser began
managing equity assets in 1968. It became a wholly-owned indirect
subsidiary of Massachusetts Mutual Life Insurance Company
( MassMutual ) in June 1995. It advises other mutual funds and
institutional clients.
Expenses not expressly assumed by the Manager under each fund's
advisory agreement or by OppenheimerFunds Distributor, Inc., the
funds' distributor (the "Distributor"), under the General
Distributor's Agreement are paid by the funds. The advisory
agreements list examples of expenses paid by the funds, the major
categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. The management fee paid by Value Stock
Fund for the fiscal year ended December 31, 1996 was $1,315,853.
For the fiscal year ended October 31, 1996, the management fee paid
by Disciplined Value Fund was $924,150.
The funds' investment advisory agreements contain no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the funds' total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the funds. 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 funds' last fiscal year, the funds' expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The Manager is controlled by Oppenheimer Acquisition Corp., a
holding company owned in part by senior management of the Manager
and ultimately controlled by Massachusetts Mutual Life Insurance
Company, a mutual life insurance company that also advises pension
plans and investment companies. The Manager has operated as an
investment company adviser since 1959. The Manager and its
affiliates currently advise investment companies with combined net
assets aggregating over $63 billion as of December 31, 1996, with
more than 3 million shareholder accounts. OppenheimerFunds
Services, a division of the Manager, acts as transfer and
shareholder servicing agent on an at-cost basis for Value Stock
Fund and Disciplined Value Fund and for certain other open-end
funds managed by the Manager and its affiliates.
The Distributor, under a General Distributor's Agreement for each
of the funds, acts as the principal underwriter in the continuous
public offering of Class A, Class B and Class C shares of each fund
and Class Y shares of Disciplined Value Fund. During Value Stock
Fund's fiscal year ended December 31, 1996, the aggregate sales
charges on sales of Value Stock Fund's Class A shares were
$345,153, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $192,834. During Value Stock Fund's
fiscal year ended December 31, 1996, the contingent deferred sales
charges collected on Value Stock Fund's Class B and Class C shares
totaled $49,374 and $0, respectively, all of which the Distributor
retained. For the fiscal year ended October 31, 1996, the
aggregate amount of sales charges on sales of Disciplined Value
Fund's Class A shares was $513,544, of which $341,543 was retained
by the Distributor and an affiliated broker-dealer. Contingent
deferred sales charges collected by the Distributor on the
redemption of Class B and Class C shares for the fiscal year ended
October 31, 1996 totaled $3,336 and $0, respectively, all of which
was retained by the Distributor. For additional information about
distribution of the funds' shares and the payments made by the
funds to the Distributor in connection with such activities, please
refer to "Distribution and Service Plans," in each fund's Statement
of Addition Information.
Purchase of Additional Shares
Class A shares of Value Stock Fund and Class A shares of
Disciplined Value Fund may be purchased with an initial sales
charge of 5.75% for purchases of less than $25,000. The sales
charge of 5.75% is reduced for purchases of either fund's Class A
shares of $25,000 or more. If shares of Class A of either fund are
redeemed within 18 months of the end of the calendar month of their
purchase, a contingent sales charge may be deducted from the
redemption proceeds. Class B shares of Value Stock Fund and
Disciplined Value Fund are sold at net asset value without an
initial sales charge, however, if Class B shares of either fund are
redeemed within six years of the end of the calendar month of their
purchase, a contingent deferred sales charge may be deducted of up
to 5%, depending upon how long such shares had been held. Class C
shares of either fund may be purchased without an initial sales
charge, but if you sell your shares within 12 months of buying
them, a contingent deferred sales charge of 1% may be deducted.
Class Y shares are sold without a sales charge and are only
available to certain qualified institutional purchasers.
The initial sales charge and contingent deferred sales charge on
Class A shares and Class B shares of Disciplined Value Fund will
only affect shareholders of Value Stock Fund to the extent that
they desire to make additional purchases of shares of Disciplined
Value Fund in addition to the shares which they will receive as a
result of the Reorganization. The Class A, Class B and Class C
shares to be issued under the Reorganization Agreement will be
issued by Disciplined Value Fund at net asset value. Future
dividends and capital gain distributions of Disciplined Value Fund,
if any, may be reinvested without sales charge. Any Value Stock
Fund shareholder who is entitled to a reduced sales charge on
additional purchases by reason of a Letter of Intent or Right of
Accumulation based upon holdings of shares of Value Stock Fund will
continue to be entitled to a reduced sales charge on any future
purchase of shares of Disciplined Value Fund.
Dividends and Distributions
Oppenheimer Value Stock Fund declares dividends from net investment
income and pays such dividends to shareholders quarterly. Value
Stock Fund may make distributions annually in December out of any
net short-term or long-term capital gains. Disciplined Value Fund
declares and pays dividends and capital gains distributions, if
any, annually. Dividends are paid separately for each class of
shares and normally, the dividends on Class A and Class Y shares
are generally expected to be higher than for Class B and Class C
shares because the expenses allocable to Class B and Class C shares
will generally be higher than for Class A and Class Y shares. There
is no fixed dividend rate for either fund and there can be no
assurance that the either fund will pay any dividends or
distributions.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the
Reorganization Agreement is contingent upon the approval of the
Reorganization by the shareholders of Value Stock Fund and the
receipt of the opinions and certificates set forth in Sections 10
and 11 of the Reorganization Agreement and the occurrence of the
events described in those Sections. Under the Reorganization
Agreement, all the assets of Value Stock Fund, excluding the Cash
Reserve, will be delivered to Disciplined Value Fund in exchange
for Class A, Class B and Class C shares of Disciplined Value Fund.
The Cash Reserve to be retained by Value Stock Fund will be
sufficient in the discretion of the Board for the payment of Value
Stock Fund's liabilities, and Value Stock Fund's expenses of
liquidation.
Assuming the shareholders of Value Stock Fund approve the
Reorganization, the actual exchange of assets is expected to take
place on July 25, 1997, or as soon thereafter as is practicable
(the "Closing Date") on the basis of net asset values as of the
close of business on the business day preceding the Closing Date
(the "Valuation Date"). Under the Reorganization Agreement, all
redemptions of shares of Value Stock Fund shall be permanently
suspended on the Valuation Date; only redemption requests received
in proper form on or prior to the close of business on that date
shall be fulfilled by it; redemption requests received by Value
Stock Fund after that date will be treated as requests for
redemptions of Class A, Class B or Class C shares of Disciplined
Value Fund to be distributed to the shareholders requesting
redemption. The exchange of assets for shares will be done on the
basis of the per share net asset value of the Class A, Class B and
Class C shares of Disciplined Value Fund, and the value of the
assets of Value Stock Fund to be transferred as of the close of
business on the Valuation Date, valued in the manner used by
Disciplined Value Fund in the valuation of assets. Disciplined
Value Fund is not assuming any of the liabilities of Value Stock
Fund, except for portfolio securities purchased which have not
settled and outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Disciplined Value
Fund to Value Stock Fund will be the same as the value of the
assets of the portfolio received by Disciplined Value Fund. For
example, if, on the Valuation Date, Value Stock Fund were to have
securities with a market value of $95,000 and cash in the amount of
$10,000 (of which $5,000 was to be retained by it as the Cash
Reserve), the value of the assets which would be transferred to
Disciplined Value Fund would be $100,000. If the net asset value
per share of Disciplined Value Fund were $10 per share at the close
of business on the Valuation Date, the number of shares to be
issued would be 10,000 ($100,000 divided by $10). These 10,000 shares of
Disciplined Value Fund would be distributed to the former
shareholders of Value Stock Fund. This example is given for
illustration purposes only and does not bear any relationship to
the dollar amounts or shares expected to be involved in the
Reorganization.
After the Closing Date, Value Stock Fund will distribute on a pro
rata basis to its shareholders of record on the Valuation Date the
Class A, Class B and Class C shares of Disciplined Value Fund
received by Value Stock Fund at the closing, in liquidation of the
outstanding shares of Value Stock Fund, and the outstanding shares
of Value Stock Fund will be canceled. To assist Value Stock Fund
in this distribution, Disciplined Value Fund will, in accordance
with a shareholder list supplied by Value Stock Fund, cause its
transfer agent to credit and confirm an appropriate number of
shares of Disciplined Value Fund to each shareholder of Value Stock
Fund. Certificates for Class A, Class B and Class C shares of
Disciplined Value Fund will be issued upon written request of a
former shareholder of Value Stock Fund but only for whole shares
with fractional shares credited to the name of the shareholder on
the books of Disciplined Value Fund. Former shareholders of Value
Stock Fund who wish certificates representing their shares of
Disciplined Value Fund must, after receipt of their confirmations,
make a written request to OppenheimerFunds Services, P.O. Box 5270,
Denver, Colorado 80217. Shareholders of Value Stock Fund holding
certificates representing their shares will not be required to
surrender their certificates to anyone in connection with the
Reorganization. After the Reorganization, however, it will be
necessary for such shareholders to surrender such certificates in
order to redeem, transfer, pledge or exchange any shares of
Disciplined Value Fund.
Under the Reorganization Agreement, within one year after the
Closing Date, Value Stock Fund shall: (a) either pay or make
provision for all of its debts and taxes; and (b) either (i)
transfer any remaining amount of the Cash Reserve to Disciplined
Value Fund, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders
of Value Stock Fund who were such on the Valuation Date. Such
remaining amount shall be deemed to be material if the amount to be
distributed, after deducting the estimated expenses of the
distribution, equals or exceeds one cent per share of the number of
Value Stock Fund shares outstanding on the Valuation Date. Within
one year after the Closing Date, Value Stock Fund will complete its
liquidation.
Under the Reorganization Agreement, either Value Stock Fund or
Disciplined Value Fund may abandon and terminate the Reorganization
Agreement without liability if the other party breaches any
material provision of the Reorganization Agreement or, if prior to
the closing, any legal, administrative or other proceeding shall be
instituted or threatened (i) seeking to restrain or otherwise
prohibit the transactions contemplated by the Reorganization
Agreement and/or (ii) asserting a material liability of either
party, which proceeding or liability has not been terminated or the
threat thereto removed prior to the Closing Date.
In the event that the Reorganization Agreement is not consummated
for any reason, the Board will consider and may submit to the
shareholders other alternatives.
MISCELLANEOUS
Additional Information
Financial Information
The Reorganization will be accounted for by the surviving fund in
its financial statements similar to a pooling without restatement.
Further financial information as to Value Stock Fund is contained
in its current Prospectus, which is available without charge from
OppenheimerFunds Services, the Transfer Agent, P.O. Box 5270,
Denver, Colorado 80217, and is incorporated herein by reference,
and in its Annual Report as of December 31, 1996, which are
included in the Additional Statement. Financial information for
Disciplined Value Fund is contained in its current Prospectus
accompanying this Proxy Statement and Prospectus and incorporated
herein by reference, and in its Annual Report as of October 31,
1996, which are included in the Additional Statement.
Public Information
Additional information about Value Stock Fund and Disciplined Value
Fund is available, as applicable, in the following documents which
are incorporated herein by reference: (i) Disciplined Value Fund's
Prospectus dated December 16, 1996, as supplemented January 1,
1997, accompanying this Proxy Statement and incorporated herein;
(ii) Value Stock Fund's Prospectus dated April 15, 1997, which may
be obtained without charge by writing to OppenheimerFunds Services,
P.O. Box 5270, Denver, Colorado 80217; (iii) Disciplined Value
Fund's Annual Report as of October 31, 1996, which may be obtained
without charge by writing to OppenheimerFunds Services at the
address indicated above; and (iv) Value Stock Fund's Annual Report
as of December 31, 1996, which may be obtained without charge by
writing to OppenheimerFunds Services at the address indicated
above. All of the foregoing documents may be obtained by calling
the toll-free number on the cover of this Proxy Statement and
Prospectus.
Additional information about the following matters is contained in
the Statement of Additional Information, which incorporates by
reference the Disciplined Value Fund Statement of Additional
Information dated December 16, 1996, and Value Stock Fund's
Prospectus dated April 15, 1997, and Statement of Additional
Information dated April 15, 1997; the organization and operation of
Disciplined Value Fund and Value Stock Fund; more information on
investment policies, practices and risks; information about Value
Stock Fund's and Disciplined Value Fund's Boards of Directors and
their responsibilities; a further description of the services
provided by Disciplined Value Fund's and Value Stock Fund's
investment adviser, distributor, and transfer and shareholder
servicing agent; dividend policies; tax matters; an explanation of
the method of determining the offering price of the shares and/or
contingent deferred sales charges, as applicable of Class A, Class
B and Class C shares of Disciplined Value Fund and Value Stock
Fund; purchase, redemption and exchange programs; the different
expenses paid by each class of shares; and distribution
arrangements.
Value Stock Fund and Disciplined Value Fund are subject to the
informational requirements of the Securities Exchange Act of 1934,
as amended, and in accordance therewith, file reports and other
information with the SEC. Proxy material, reports and other
information about Value Stock Fund and Disciplined Value Fund which
are of public record can be inspected and copied at public
reference facilities maintained by the SEC in Washington, D.C. and
certain of its regional offices, and copies of such materials can
be obtained at prescribed rates from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC,
Washington, D.C. 20549.
OTHER BUSINESS
Management of Value Stock Fund knows of no business other than the
matters specified above which will be presented at the Meeting.
Since matters not known at the time of the solicitation may come
before the Meeting, the proxy as solicited confers discretionary
authority with respect to such matters as properly come before the
Meeting, including any adjournment or adjournments thereof, and it
is the intention of the persons named as attorneys-in-fact in the
proxy to vote this proxy in accordance with their judgment on such
matters.
By Order of the Board of Trustees
Andrew J. Donohue, Secretary
May 23, 1997 375
<PAGE>
Exhibit B
Average Annual Total Returns
for the Periods Ended 12/31/96
<TABLE>
<CAPTION>
1-year 3-year 5-year 10-year
<S> <C> <C> <C> <C>
Disciplined Value Fund Class A Shares(1) 11.57 14.77 15.41 14.77
Value Stock Fund Class A Shares 12.53 14.76 12.54 12.24
Disciplined Value Fund Class B Shares(2) 17.15 n/a n/a n/a
Value Stock Fund Class B Shares 18.50 n/a n/a n/a
Disciplined Value Fund Class C Shares(3) _____ n/a n/a n/a
Value Stock Fund Class C Shares 18.39 n/a n/a n/a
Disciplined Value Fund Class Y Shares ______ n/a n/a n/a
</TABLE>
Total Returns include change in share price and reinvestment of
dividends and capital gains distributions in a hypothetical
investment for the periods shown. An explanation of the
different performance calculations is in each fund's Prospectus.
(1) Class A returns include the current maximum initial sales
charge of 5.75%. Disciplined Value Fund's maximum sales charge
rate for Class A shares was higher during a portion of some of
the periods shown, so that actual results would have been lower.
(2) Class B returns include the applicable contingent deferred
sales charge of 5% (1-year). Class B shares are subject to an
annual 0.75% asset-based sales charge.
(3) Class C returns include the 1% contingent deferred sales
charge for the 1-year result. Class C shares are subject to an
annual 0.75% asset-based sales charge.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated
as of _____________ by and between Oppenheimer Integrity Funds
(the Trust ) on behalf of its series, Oppenheimer Value Stock
Fund ("Value Stock Fund"), a series of Oppenheimer Integrity
Funds, a Massachusetts business trust, and Oppenheimer Series
Funds, Inc. (the Company ) on behalf of its series, Oppenheimer
Disciplined Value Fund ("Disciplined Value Fund"), a Maryland
Corporation.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies
of the management type; and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), of Value Stock
Fund through the acquisition by Disciplined Value Fund of
substantially all of the assets of Value Stock Fund in exchange
for the voting shares of beneficial interest ("shares") of Class
A, Class B and Class C shares of Disciplined Value Fund and the
assumption by Disciplined Value Fund of certain liabilities of
Value Stock Fund, which Class A, Class B and Class C shares of
Disciplined Value Fund are to be distributed by Value Stock Fund
pro rate to its shareholders in complete liquidation of Value
Stock Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan
of Reorganization (the "Agreement") pursuant to Section 368(a)(1)
of the Code as follows: The reorganization will be comprised of
the acquisition by Disciplined Value Fund of substantially all of
the properties and assets of Value Stock Fund in exchange for
Class A, Class B and Class C shares of Disciplined Value Fund and
the assumption by Disciplined Value Fund of certain liabilities
of Value Stock Fund, followed by the distribution of such Class
A, Class B and Class C shares of Disciplined Value Fund shares to
the Class A, Class B and Class C shareholders of Value Stock Fund
in exchange for their Class A, Class B and Class C shares of
Value Stock Fund, all upon and subject to the terms of the
Agreement hereinafter set forth.
The share transfer books of Value Stock Fund will be
permanently closed at the close of business on the Valuation Date
(as hereinafter defined) and only redemption requests received in
proper form on or prior to the close of business on the Valuation
Date shall be fulfilled by Value Stock Fund; redemption requests
received by Value Stock Fund after that date shall be treated as
requests for the redemption of the shares of Disciplined Value
Fund to be distributed to the shareholder in question as provided
in Section 5.
2. On the Closing Date (as hereinafter defined), all of
the assets of Value Stock Fund on that date, excluding a cash
reserve (the "Cash Reserve") to be retained by Value Stock Fund
sufficient in its discretion for the payment of the expenses of
Value Stock Fund's dissolution and its liabilities, but not in
excess of the amount contemplated by Section 10E, shall be
delivered as provided in Section 8 to Disciplined Value Fund, in
exchange for and against delivery to Value Stock Fund on the
Closing Date of a number of Class A, Class B and Class C shares
of Disciplined Value Fund, having an aggregate net asset value
equal to the value of the assets of Value Stock Fund so
transferred and delivered.
3. The net asset value of Class A, Class B and Class C
shares of Disciplined Value Fund and the value of the assets of
Value Stock Fund to be transferred shall in each case be
determined as of the close of business of the New York Stock
Exchange on the Valuation Date. The computation of the net asset
value of the Class A, Class B and Class C shares of Disciplined
Value Fund and the Class A, Class B and Class C shares of Value
Stock Fund shall be done in the manner used by Disciplined Value
Fund and Value Stock Fund, respectively, in the computation of
such net asset value per share as set forth in their respective
prospectuses. The methods used by Disciplined Value Fund in such
computation shall be applied to the valuation of the assets of
Value Stock Fund to be transferred to Disciplined Value Fund.
Value Stock Fund shall declare and pay, immediately
prior to the Valuation Date, a dividend or dividends which,
together with all previous such dividends, shall have the effect
of distributing to Value Stock Fund's shareholders all of Value
Stock Fund's investment company taxable income for taxable years
ending on or prior to the Closing Date (computed without regard
to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date
(after reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), Two World Trade Center,
34th Floor, New York, New York 10048, at 4:00 P.M. New York time
on July 25, 1997 or at such other time or place as the parties
may designate or as provided below (the "Closing Date"). The
business day preceding the Closing Date is herein referred to as
the "Valuation Date."
In the event that on the Valuation Date either party
has, pursuant to the Investment Company Act of 1940, as amended
(the "Act"), or any rule, regulation or order thereunder,
suspended the redemption of its shares or postponed payment
therefor, the Closing Date shall be postponed until the first
business day after the date when both parties have ceased such
suspension or postponement; provided, however, that if such
suspension shall continue for a period of 60 days beyond the
Valuation Date, then the other party to the Agreement shall be
permitted to terminate the Agreement without liability to either
party for such termination.
5. In conjunction with the closing, Value Stock Fund shall
distribute on a pro rate basis to the shareholders of Value Stock
Fund on the Valuation Date the Class A, Class B and Class C
shares of Disciplined Value Fund received by Value Stock Fund on
the Closing Date in exchange for the assets of Value Stock Fund
in complete liquidation of Value Stock Fund; for the purpose of
the distribution by Value Stock Fund of Class A, Class B and
Class C shares of Disciplined Value Fund to its shareholders,
Disciplined Value Fund will promptly cause its transfer agent to:
(a) credit an appropriate number of Class A, Class B and Class C
shares of Disciplined Value Fund on the books of Disciplined
Value Fund to each Class A, Class B and Class C shareholder,
respectively of Value Stock Fund in accordance with a list (the
"Shareholder List") of its shareholders received from Value Stock
Fund; and (b) confirm an appropriate number of Class A, Class B
and Class C shares of Disciplined Value Fund to each shareholder
of Value Stock Fund; certificates for Class A, Class B and Class
C shares of Disciplined Value Fund will be issued upon written
request of a former shareholder of Value Stock Fund but only for
whole shares, with fractional shares credited to the name of the
shareholder on the books of Disciplined Value Fund.
The Shareholder List shall indicate, as of the close of
business on the Valuation Date, the name and address of each
shareholder of Value Stock Fund, indicating his or her share
balance. Value Stock Fund agrees to supply the Shareholder List
to Disciplined Value Fund not later than the Closing Date.
Shareholders of Value Stock Fund holding certificates
representing their shares shall not be required to surrender
their certificates to anyone in connection with the
reorganization. After the Closing Date, however, it will be
necessary for such shareholders to surrender their certificates
in order to redeem, transfer or pledge the shares of Disciplined
Value Fund which they received.
6. Within one year after the Closing Date, Value Stock
Fund shall (a) either pay or make provision for payment of all of
its liabilities and taxes, and (b) either (i) transfer any
remaining amount of the Cash Reserve to Disciplined Value Fund,
if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined
below) or (ii) distribute such remaining amount to the
shareholders of Value Stock Fund on the Valuation Date. Such
remaining amount shall be deemed to be material if the amount to
be distributed, after deduction of the estimated expenses of the
distribution, equals or exceeds one cent per share of Value Stock
Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination
between the parties as to their respective portfolios so that,
after the closing, Disciplined Value Fund will be in compliance
with all of its investment policies and restrictions. Promptly
after the Closing, Value Stock Fund shall deliver to Disciplined
Value Fund two copies of a list setting forth the securities then
owned by Value Stock Fund. Promptly after the Closing, Value
Stock Fund shall provide Disciplined Value Fund a list setting
forth the respective federal income tax bases thereof.
8. Portfolio securities or written evidence acceptable to
Disciplined Value Fund of record ownership thereof by The
Depository Trust Company or through the Federal Reserve Book
Entry System or any other depository approved by Value Stock Fund
pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be
endorsed and delivered, or transferred by appropriate transfer or
assignment documents, by Value Stock Fund on the Closing Date to
Disciplined Value Fund, or at its direction, to its custodian
bank, in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of
brokers and shall be accompanied by all necessary state transfer
stamps, if any. The cash delivered shall be in the form of
certified or bank cashiers' checks or by bank wire or intra-bank
transfer payable to the order of Disciplined Value Fund for the
account of Disciplined Value Fund. Shares of Disciplined Value
Fund representing the number of shares of Disciplined Value Fund
being delivered against the assets of Value Stock Fund,
registered in the name of Value Stock Fund, shall be transferred
to Value Stock Fund on the Closing Date. Such shares shall
thereupon be assigned by Value Stock Fund to its shareholders so
that the shares of Disciplined Value Fund may be distributed as
provided in Section 5.
If, at the Closing Date, Value Stock Fund is unable to
make delivery under this Section 8 to Disciplined Value Fund of
any of its portfolio securities or cash for the reason that any
of such securities purchased by Value Stock Fund, or the cash
proceeds of a sale of portfolio securities, prior to the Closing
Date have not yet been delivered to it or Value Stock Fund's
custodian, then the delivery requirements of this Section 8 with
respect to said undelivered securities or cash will be waived and
Value Stock Fund will deliver to Disciplined Value Fund by or on
the Closing Date and with respect to said undelivered securities
or cash executed copies of an agreement or agreements of
assignment in a form reasonably satisfactory to Disciplined Value
Fund, together with such other documents, including a due bill or
due bills and brokers' confirmation slips as may reasonably be
required by Disciplined Value Fund.
9. Disciplined Value Fund shall not assume the liabilities
(except for portfolio securities purchased which have not settled
and for shareholder redemption and dividend checks outstanding)
of Value Stock Fund, but Value Stock Fund will, nevertheless, use
its best efforts to discharge all known liabilities, so far as
may be possible, prior to the Closing Date. The cost of printing
and mailing the proxies and proxy statements will be borne by
Value Stock Fund. Value Stock Fund and Disciplined Value Fund
will bear the cost of their respective tax opinion. Any
documents such as existing prospectuses or annual reports that
are included in that mailing will be a cost of the fund issuing
the document. Any other out-of-pocket expenses of Disciplined
Value Fund and Value Stock Fund associated with this
reorganization, including legal, accounting and transfer agent
expenses, will be borne by Value Stock Fund and Disciplined Value
Fund, respectively, in the amounts so incurred by each.
10. The obligations of Disciplined Value Fund hereunder
shall be subject to the following conditions:
A. The Board of Trustees of Value Stock Fund shall
have authorized the execution of the Agreement, and the
shareholders of Value Stock Fund shall have approved the
Agreement and the transactions contemplated thereby, and Value
Stock Fund shall have furnished to Disciplined Value Fund copies
of resolutions to that effect certified by the Secretary or an
Assistant Secretary of the Trust; such shareholder approval shall
have been by the affirmative vote of "a majority of the
outstanding voting securities" (as defined in the Act) of Value
Stock Fund at a meeting for which proxies have been solicited by
the Proxy Statement and Prospectus (as hereinafter defined).
B. Disciplined Value Fund shall have received an
opinion dated the Closing Date of counsel to Value Stock Fund, to
the effect that (i) Value Stock Fund is a series of the Trust
which is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts
with full powers to carry on its business as then being conducted
and to enter into and perform the Agreement; and (ii) that all
action necessary to make the Agreement, according to its terms,
valid, binding and enforceable on Value Stock Fund and to
authorize effectively the transactions contemplated by the
Agreement have been taken by Value Stock Fund.
C. The representations and warranties of Value Stock
Fund contained herein shall be true and correct at and as of the
Closing Date, and Disciplined Value Fund shall have been
furnished with a certificate of the President, or a Vice
President, or the Secretary or the Assistant Secretary or the
Treasurer of the Trust, dated the Closing Date, to that effect.
D. On the Closing Date, Value Stock Fund shall have
furnished to Disciplined Value Fund a certificate of the
Treasurer or Assistant Treasurer of the Trust as to the amount of
the capital loss carry-over and net unrealized appreciation or
depreciation, if any, with respect to Value Stock Fund as of the
Closing Date.
E. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of Value
Stock Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by the
Trust under the Securities Act of 1933, as amended (the "1933
Act"), containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not
later than August 30, 1997.
G. On the Closing Date, Disciplined Value Fund shall
have received a letter of Andrew J. Donohue or other senior
executive officer of OppenheimerFunds, Inc. acceptable to
Disciplined Value Fund, stating that nothing has come to his or
her attention which in his or her judgment would indicate that as
of the Closing Date there were any material actual or contingent
liabilities of Value Stock Fund arising out of litigation brought
against Value Stock Fund or claims asserted against it, or
pending or to the best of his or her knowledge threatened claims
or litigation not reflected in or apparent from the most recent
audited financial statements and footnotes thereto of Value Stock
Fund delivered to Disciplined Value Fund. Such letter may also
include such additional statements relating to the scope of the
review conducted by such person and his or her responsibilities
and liabilities as are not unreasonable under the circumstances.
H. Disciplined Value Fund shall have received an
opinion, dated the Closing Date, of Deloitte & Touche LLP, to the
same effect as the opinion contemplated by Section 11.E. of the
Agreement.
I. Disciplined Value Fund shall have received at the
closing all of the assets of Value Stock Fund to be conveyed
hereunder, which assets shall be free and clear of all liens,
encumbrances, security interests, restrictions and limitations
whatsoever.
11. The obligations of Value Stock Fund hereunder shall be
subject to the following conditions:
A. The Board of Directors of the Company shall have
authorized the execution of the Agreement, and the transactions
contemplated thereby, and Disciplined Value Fund shall have
furnished to Value Stock Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of
the Company.
B. Value Stock Fund's shareholders shall have
approved the Agreement and the transactions contemplated hereby,
by an affirmative vote of "a majority of the outstanding voting
securities" (as defined in the Act) of Value Stock Fund, and
Value Stock Fund shall have furnished Disciplined Value Fund
copies of resolutions to that effect certified by the Secretary
or an Assistant Secretary of the Trust.
C. Value Stock Fund shall have received an opinion
dated the Closing Date of counsel to Disciplined Value Fund, to
the effect that (i) Disciplined Value Fund is a series of the
Company and is duly organized, validly existing and in good
standing under the laws of the State of Maryland with full powers
to carry on its business as then being conducted and to enter
into and perform the Agreement; (ii) all action necessary to make
the Agreement, according to its terms, valid, binding and
enforceable upon Disciplined Value Fund and to authorize
effectively the transactions contemplated by the Agreement have
been taken by Disciplined Value Fund, and (iii) the shares of
Disciplined Value Fund to be issued hereunder are duly authorized
and when issued will be validly issued, fully-paid and non-
assessable.
D. The representations and warranties of Disciplined
Value Fund contained herein shall be true and correct at and as
of the Closing Date, and Value Stock Fund shall have been
furnished with a certificate of the President, a Vice President
or the Secretary or an Assistant Secretary or the Treasurer of
Disciplined Value Fund to that effect dated the Closing Date.
E. Value Stock Fund shall have received an opinion of
Deloitte & Touche LLP to the effect that the Federal tax
consequences of the transaction, if carried out in the manner
outlined in this Plan of Reorganization and in accordance with
(i) Value Stock Fund's representation that there is no plan or
intention by any Fund shareholder who owns 5% or more of Value
Stock Fund's outstanding shares, and, to Value Stock Fund's best
knowledge, there is no plan or intention on the part of the
remaining Fund shareholders, to redeem, sell, exchange or
otherwise dispose of a number of Disciplined Value Fund shares
received in the transaction that would reduce Value Stock Fund
shareholders' ownership of Disciplined Value Fund shares to a
number of shares having a value, as of the Closing Date, of less
than 50% of the value of all of the formerly outstanding Fund
shares as of the same date, and (ii) the representation by each
of Value Stock Fund and Disciplined Value Fund that, as of the
Closing Date, Value Stock Fund and Disciplined Value Fund will
qualify as regulated investment companies or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code,
will be as follows:
1. The transactions contemplated by the
Agreement will qualify as a tax-free "reorganization" within the
meaning of Section 368(a)(1) of the Code, and under the
regulations promulgated thereunder.
2. Value Stock Fund and Disciplined Value Fund
will each qualify as a "party to a reorganization" within the
meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the
shareholders of Value Stock Fund upon the distribution of shares
of beneficial interest in Disciplined Value Fund to the
shareholders of Value Stock Fund pursuant to Section 354 of the
Code.
4. Under Section 361(a) of the Code no gain or
loss will be recognized by Value Stock Fund by reason of the
transfer of substantially all its assets in exchange for shares
of Disciplined Value Fund.
5. Under Section 1032 of the Code no gain or
loss will be recognized by Disciplined Value Fund by reason of
the transfer of substantially all Value Stock Fund's assets in
exchange for Class A, Class B and Class C shares of Disciplined
Value Fund and Disciplined Value Fund's assumption of certain
liabilities of Value Stock Fund.
6. The shareholders of Value Stock Fund will
have the same tax basis and holding period for the Class A, Class
B or Class C shares of beneficial interest in Disciplined Value
Fund that they receive as they had for Value Stock Fund shares
that they previously held, pursuant to Section 358(a) and
1223(1), respectively, of the Code.
7. The securities transferred by Value Stock
Fund to Disciplined Value Fund will have the same tax basis and
holding period in the hands of Disciplined Value Fund as they had
for Value Stock Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of Value
Stock Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by the
Company under the 1933 Act, containing a preliminary form of the
Proxy Statement and Prospectus, shall have become effective under
the 1933 Act not later than August 30, 1997.
H. On the Closing Date, Value Stock Fund shall have
received a letter of Andrew J. Donohue or other senior executive
officer of OppenheimerFunds, Inc. acceptable to Value Stock Fund,
stating that nothing has come to his or her attention which in
his or her judgment would indicate that as of the Closing Date
there were any material actual or contingent liabilities of
Disciplined Value Fund arising out of litigation brought against
Disciplined Value Fund or claims asserted against it, or pending
or, to the best of his or her knowledge, threatened claims or
litigation not reflected in or apparent by the most recent
audited financial statements and footnotes thereto of Disciplined
Value Fund delivered to Value Stock Fund. Such letter may also
include such additional statements relating to the scope of the
review conducted by such person and his or her responsibilities
and liabilities as are not unreasonable under the circumstances.
I. Value Stock Fund shall acknowledge receipt of the
shares of Disciplined Value Fund.
12. Value Stock Fund hereby represents and warrants that:
A. The financial statements of Value Stock Fund as at
December 31, 1996 (audited) heretofore furnished to Disciplined
Value Fund, present fairly the financial position, results of
operations, and changes in net assets of Value Stock Fund as of
that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year;
and that from December 31, 1996 through the date hereof there
have not been, and through the Closing Date there will not be,
any material adverse change in the business or financial
condition of Value Stock Fund, it being agreed that a decrease in
the size of Value Stock Fund due to a diminution in the value of
its portfolio and/or redemption of its shares shall not be
considered a material adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Value Stock Fund's
shareholders, Value Stock Fund has authority to transfer all of
the assets of Value Stock Fund to be conveyed hereunder free and
clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented,
contained in Value Stock Fund's Registration Statement under the
1933 Act, as amended, is true, correct and complete, conforms to
the requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. The Registration Statement, as amended,
was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
D. There is no material contingent liability of Value
Stock Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge
of Value Stock Fund, threatened against Value Stock Fund, not
reflected in such Prospectus;
E. Except for this Agreement, there are no material
contracts outstanding to which Value Stock Fund is a party other
than those ordinary in the conduct of its business;
F. Value Stock Fund is a series of the Trust which is
a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts; and
has all necessary and material Federal and state authorizations
to own all of its assets and to carry on its business as now
being conducted; and Value Stock Fund is duly registered under
the Act and such registration has not been rescinded or revoked
and is in full force and effect;
G. All Federal and other tax returns and reports of
Value Stock Fund required by law to be filed have been filed, and
all Federal and other taxes shown due on said returns and reports
have been paid or provision shall have been made for the payment
thereof and to the best of the knowledge of Value Stock Fund no
such return is currently under audit and no assessment has been
asserted with respect to such returns and to the extent such tax
returns with respect to the taxable year of Value Stock Fund
ended December 31, 1996 have not been filed, such returns will be
filed when required and the amount of tax shown as due thereon
shall be paid when due; and
H. Value Stock Fund has elected to be treated as a
regulated investment company and, for each fiscal year of its
operations, Value Stock Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and Value Stock Fund intends to meet
such requirements with respect to its current taxable year.
13. Disciplined Value Fund hereby represents and warrants
that:
A. The financial statements of Disciplined Value Fund
as at October 31, 1996 (audited) heretofore furnished to Value
Stock Fund, present fairly the financial position, results of
operations, and changes in net assets of Disciplined Value Fund,
as of that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year;
and that from October 31, 1996 through the date hereof there have
not been, and through the Closing Date there will not be, any
material adverse changes in the business or financial condition
of Disciplined Value Fund, it being understood that a decrease in
the size of Disciplined Value Fund due to a diminution in the
value of its portfolio and/or redemption of its shares shall not
be considered a material or adverse change;
B. The Prospectus, as amended and supplemented,
contained in the Company s Registration Statement under the 1933
Act, is true, correct and complete, conforms to the requirements
of the 1933 Act and does not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Registration Statement, as amended, was, as of
the date of the filing of the last Post-Effective Amendment,
true, correct and complete, conformed to the requirements of the
1933 Act and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading;
C. Except for this Agreement, there is no material
contingent liability of Disciplined Value Fund and no material
claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Disciplined Value Fund,
threatened against Disciplined Value Fund, not reflected in such
Prospectus;
D. There are no material contracts outstanding to
which Disciplined Value Fund is a party other than those ordinary
in the conduct of its business;
E. Disciplined Value Fund is series of the company
which is a Maryland corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland; has
all necessary and material Federal and state authorizations to
own all its properties and assets and to carry on its business as
now being conducted; the shares of Disciplined Value Fund which
it issues to Value Stock Fund pursuant to the Agreement will be
duly authorized, validly issued, fully-paid and non-assessable;
and will conform to the description thereof contained in
Disciplined Value Fund's Registration Statement, will be duly
registered under the 1933 Act and in the states where
registration is required; and Disciplined Value Fund is duly
registered under the Act and such registration has not been
revoked or rescinded and is in full force and effect;
F. All Federal and other tax returns and reports of
Disciplined Value Fund required by law to be filed have been
filed, and all Federal and other taxes shown due on said returns
and reports have been paid or provision shall have been made for
the payment thereof and to the best of the knowledge of
Disciplined Value Fund no such return is currently under audit
and no assessment has been asserted with respect to such returns
and to the extent such tax returns with respect to the taxable
year of Disciplined Value Fund ended October 31, 1996 have not
been filed, such returns will be filed when required and the
amount of tax shown as due thereon shall be paid when due;
G. Disciplined Value Fund has elected to be treated
as a regulated investment company and, for each fiscal year of
its operations, Disciplined Value Fund has met the requirements
of Subchapter M of the Code for qualification and treatment as a
regulated investment company and Disciplined Value Fund intends
to meet such requirements with respect to its current taxable
year;
H. Disciplined Value Fund has no plan or intention
(i) to dispose of any of the assets transferred by Value Stock
Fund, other than in the ordinary course of business, or (ii) to
redeem or reacquire any of the shares issued by it in the
reorganization other than pursuant to valid requests of
shareholders; and
I. After consummation of the transactions
contemplated by the Agreement, Disciplined Value Fund intends to
operate its business in a substantially unchanged manner.
14. Each party hereby represents to the other that no
broker or finder has been employed by it with respect to the
Agreement or the transactions contemplated hereby. Each party
also represents and warrants to the other that the information
concerning it in the Proxy Statement and Prospectus will not as
of its date contain any untrue statement of a material fact or
omit to state a fact necessary to make the statements concerning
it therein not misleading and that the financial statements
concerning it will present the information shown fairly in
accordance with generally accepted accounting principles applied
on a basis consistent with the preceding year. Each party also
represents and warrants to the other that the Agreement is valid,
binding and enforceable in accordance with its terms and that the
execution, delivery and performance of the Agreement will not
result in any violation of, or be in conflict with, any provision
of any charter, by-laws, contract, agreement, judgment, decree or
order to which it is subject or to which it is a party.
Disciplined Value Fund hereby represents to and covenants with
Value Stock Fund that, if the reorganization becomes effective,
Disciplined Value Fund will treat each shareholder of Value Stock
Fund who received any of Disciplined Value Fund's shares as a
result of the reorganization as having made the minimum initial
purchase of shares of Disciplined Value Fund received by such
shareholder for the purpose of making additional investments in
shares of Disciplined Value Fund, regardless of the value of the
shares of Disciplined Value Fund received.
15. Disciplined Value Fund agrees that it will prepare and
file a Registration Statement on Form N-14 under the 1933 Act
which shall contain a preliminary form of proxy statement and
prospectus contemplated by Rule 145 under the 1933 Act. The
final form of such proxy statement and prospectus is referred to
in the Agreement as the "Proxy Statement and Prospectus." Each
party agrees that it will use its best efforts to have such
Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy
Statement and Prospectus as may be necessary or desirable in this
connection. Oppenheimer Value Stock Fund covenants and agrees to
deregister as an investment company under the Investment Company
Act of 1940, as amended, as soon as practicable and, thereafter,
to cause the cancellation of its outstanding shares.
16. The obligations of the parties under the Agreement
shall be subject to the right of either party to abandon and
terminate the Agreement without liability if the other party
breaches any material provision of the Agreement or if any
material legal, administrative or other proceeding shall be
instituted or threatened between the date of the Agreement and
the Closing Date (i) seeking to restrain or otherwise prohibit
the transactions contemplated hereby and/or (ii) asserting a
material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing
Date.
17. The Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all taken together
shall constitute one Agreement. The rights and obligations of
each party pursuant to the Agreement shall not be assignable.
18. All prior or contemporaneous agreements and
representations are merged into the Agreement, which constitutes
the entire contract between the parties hereto. No amendment or
modification hereof shall be of any force and effect unless in
writing and signed by the parties and no party shall be deemed to
have waived any provision herein for its benefit unless it
executes a written acknowledgment of such waiver.
19. Value Stock Fund understands that the obligations of
Disciplined Value Fund under the Agreement are not binding upon
any Director or shareholder of Disciplined Value Fund personally,
but bind only Disciplined Value Fund and Disciplined Value Fund's
property.
20. Disciplined Value Fund understands that the obligations
of Value Stock Fund under the Agreement are not binding upon any
Trustee or shareholder of Value Stock Fund personally, but bind
only Value Stock Fund and Value Stock Fund's property.
Disciplined Value Fund represents that it has notice of the
provisions of the Declaration of Trust of Value Stock Fund
disclaiming shareholder and Trustee liability for acts or
obligations of Value Stock Fund.
IN WITNESS WHEREOF, each of the parties has caused the
Agreement to be executed and attested by its officers thereunto
duly authorized on the date first set forth above.
OPPENHEIMER SERIES FUND, INC.,
on behalf of,
OPPENHEIMER DISCIPLINED VALUE FUND
By:__________________________________
Andrew J. Donohue, Secretary
OPPENHEIMER INTEGRITY FUNDS
on behalf of
OPPENHEIMER VALUE STOCK FUND
By:_________________________________
Andrew J. Donohue, Vice
President and Secretary
Oppenheimer Value Stock Fund Proxy for Shareholders Meeting To
Class A, Class B and Be Held July 21, 1997
Class C Shares
Your shareholder Your prompt response can save your
vote is important! Fund the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before
mailing.
OPPENHEIMER VALUE STOCK FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD July 21, 1997
The undersigned shareholder of Oppenheimer Value Stock Fund (the
"Fund"), does hereby appoint Rendle Myer, George C. Bowen, Robert
Bishop and Scott Farrar, and each of them, as attorneys-in-fact
and proxies of the undersigned, with full power of substitution,
to attend the Special Meeting of the Fund to be held on July 21,
1997, at 6803 South Tucson Way, Englewood, Colorado 80112 at
10:00 A.M., Denver time, and at all adjournments thereof, and to
vote the shares held in the name of the undersigned on the record
date for said meeting on the Proposal specified on the reverse
side. Said attorneys-in-fact shall vote in accordance with their
best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO
RECOMMENDS A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE
SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE
REVERSE SIDE OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires
no postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between
the Fund and Oppenheimer Disciplined Value Fund
("Disciplined Value Fund"), and the transactions
contemplated thereby, including the transfer of
substantially all the assets of the Fund, in exchange for
Class A, Class B and Class C shares of Disciplined Value
Fund. The distribution of such shares to the Class A, Class
B and Class C shareholders of the Fund in complete
liquidation of the Fund, the de-registration of the Fund as
an investment company under the Investment Company Act of
1940, as amended, and the cancellation of the outstanding
shares of the Fund (the "Proposal").
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1997
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this
ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners
should sign this proxy. If the account is registered in the name
of a corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
OPPENHEIMER Value Sto ck FUND
Two World Trade Cente r, New York, New York 10048
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
___________________________________
This Statement of Additional Information of Oppenheimer
Disciplined Value Fund consists of this cover page and the
following documents:
1. Statement of Additional Information of Oppenheimer
Disciplined Value Fund dated December 16, 1996.
2. Prospectus of Oppenheimer Value Stock Fund dated April 30,
1997.
3. Statement of Additional Information of Oppenheimer Value
Stock Fund dated April 30, 1997.
4. Oppenheimer Disciplined Value Fund's Annual Report as of
October 31, 1996.
5. Oppenheimer Value Stock Fund's Annual Report as of December
31, 1996.
6. Pro Forma Financial Statements, including Pro Forma
Statement of Investments: Value Stock Fund into Disciplined Value
Fund.
This Statement of Additional Information is not a
Prospectus. This Statement of Additional Information should be
read in conjunction with the Proxy Statement and Prospectus,
which may be obtained by written request to OppenheimerFunds
Services, P.O. Box 5270, Denver, Colorado 80217, or by calling
OppenheimerFunds Services at the toll-free number shown above.
MERGE\375PROXY
Oppenheimer Disciplined Value Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December 16, 1996
This Statement of Additional Information for Oppenheimer
Disciplined Value Fund (the "Fund") is not a Prospectus. This
document contains additional information about the Fund and
supplements information in the Fund's Prospectus dated December 16,
1996. It should be read together with the Prospectus which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling
the Transfer Agent at the toll-free number shown above.
The Fund's investment adviser is OppenheimerFunds, Inc. (the
"Manager").
Contents
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . 2
Other Investment Restrictions. . . . . . . . . . . . .19
How the Fund are Managed . . . . . . . . . . . . . . . .22
Organization and History . . . . . . . . . . . . . . .22
Directors and Officers of the Fund . . . . . . . . . .23
The Manager and Its Affiliates . . . . . . . . . . . .28
Brokerage Policies of the Fund . . . . . . . . . . . . .30
Performance of the Fund. . . . . . . . . . . . . . . . .32
Distribution and Service Plan. . . . . . . . . . . . . .37
About Your Account
How to Buy Shares. . . . . . . . . . . . . . . . . . . .39
How to Sell Shares . . . . . . . . . . . . . . . . . . .47
How to Exchange Shares . . . . . . . . . . . . . . . . .53
Dividends, Capital Gains and Taxes . . . . . . . . . . .52
Additional Information About the Fund. . . . . . . . . .55
Independent Auditors' Report . . . . . . . . . . . . . .56
Financial Statement. . . . . . . . . . . . . . . . . . .57
Appendix: Industry Classification. . . . . . . . . . . A-1
<PAGE>
ABOUT THE FUND
Investment Objectives And Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are described in its 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 have the same meaning as those terms have in the
Prospectus.
Foreign Securities. Consistent with the limitations on
foreign investing set forth in the Fund's Prospectus, the Fund may
invest in foreign securities. The Fund may also invest in debt and
equity securities of corporate and governmental issuers of
countries with emerging economies or securities markets. Investing
in foreign securities offers potential benefits not available from
investing solely in securities of domestic issuers, such as the
opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign
stock or bond markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the
countries in which such securities may be held and the sub-
custodians holding them must be approved by the Fund's Board of
Directors under applicable rules of the Securities and Exchange
Commission ("SEC"). In buying foreign securities, the Fund may
convert U.S. dollars into foreign currency, but only to effect
securities transactions on foreign securities exchanges and not to
hold such currency as an investment.
"Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the
United States and debt securities of foreign governments, that are
traded on foreign securities exchanges or in the foreign over-the-
counter markets. Securities of foreign issuers that are
represented by American depository receipts, or that are listed on
a U.S. securities exchange, or are traded in the U.S. over-the-
counter market are not considered "foreign securities" for purposes
of 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.
ADRs, EDRs and GDRs. ADRs are receipts issued by a U.S. bank
or trust company which evidence ownership of underlying securities
of foreign companies. ADRs are traded on domestic exchanges or in
the U.S. over-the-counter market and generally are in registered
form. If ADRs are bought through banks that do not have a
contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service the ADR, there is a risk
that the Fund will not learn of corporate actions affecting the
issuer in a timely manner. EDRs and GDRs are receipts evidencing an
arrangement with a non-U.S. bank similar to that for ADRs and are
designed for use in non-U.S. securities markets. EDRs and GDRs are
not necessarily quoted in the same currency as the underlying
security.
Investing in foreign securities, and in particular in
securities in emerging countries, involves special additional risks
and considerations not typically associated with investing in
securities of issuers traded in the U.S. These include: reduction
of income by foreign taxes; fluctuation in value of foreign
portfolio investments due to changes in currency rates and control
regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign
issuers; lack of uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity in foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and
brokers than in the U.S.; greater difficulties in commencing
lawsuits against foreign issuers; higher brokerage commission rates
than in the U.S.; increased risks of delays in settlement of
portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries, and in particular
emerging countries, of expropriation or nationalization of assets,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and unfavorable differences
between the U.S. economy and foreign economies. In the past, U.S.
Government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be re-imposed.
The Fund's investment income or, in some cases, capital gains
from foreign issuers may be subject to foreign withholding or other
foreign taxes, thereby reducing the Fund's net investment income
and/or net realized capital gains. See "Dividends, Capital Gains
and Taxes."
Debt Securities. The Fund may invest in debt securities. All
debt securities are subject to two types of risks: credit risk and
interest rate risk (these are in addition to other investment risks
that may affect a particular security).
Credit Risk. Credit risk relates to the ability of the issuer
to meet interest or principal payments or both as they become due.
Generally, higher yielding bonds are subject to credit risk to a
greater extent than higher quality bonds.
Interest Rate Risk. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between the market value of
outstanding fixed-income securities and changes in interest rates.
An increase in interest rates will generally reduce the market
value of fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities
subsequent to their acquisition will not affect the interest
payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of those
securities used to compute the Fund's net asset values.
High Yield Securities. The Fund may invest in high-yield/high
risk securities (commonly called junk bonds).
The Manager does not rely on credit ratings assigned by rating
agencies in assessing investment opportunities in debt securities.
Ratings by credit agencies assess safety of principal and interest
payments and do not reflect market risks. In addition, ratings by
credit agencies may not be changed by the agencies in a timely
manner to reflect subsequent economic events. By carefully
selecting individual issues and diversifying portfolio holdings by
industry sector and issuer, the Manager believes that the risk of
the Fund holding defaulted lower grade securities can be reduced.
Emphasis on credit risk management involves the Manager's own
internal analysis to determine the debt service capability,
financial flexibility and liquidity of an issuer, as well as the
fundamental trends and outlook for the issuer and its industry.
The Manager's rating helps it determine the attractiveness of
specific issues relative to the valuation by the market place of
similarly rated credits.
Risks of high yield securities include: (i) limited liquidity
and secondary market support, (ii) substantial market price
volatility resulting from changes in prevailing interest rates,
(iii) subordination to the prior claims of banks and other senior
lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest
rates which may cause the Fund to invest premature redemption
proceeds in lower yielding portfolio securities, (v) the
possibility that earnings of the issuer may be insufficient to meet
its debt service, and (vi) the issuer's low creditworthiness and
potential for insolvency during periods of rising interest rates
and economic downturn. As a result of the limited liquidity of
high yield securities, their prices have at times experienced
significant and rapid decline when a substantial number of holders
decided to sell. A decline is also likely in the high yield bond
market during an economic downturn. An economic downturn or an
increase in interest rates could severely disrupt the market for
high yield bonds and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and
interest. In addition, there have been several Congressional
attempts to limit the use of tax and other advantages of high yield
bonds which, if enacted, could adversely affect the value of these
securities and the net asset value of the Fund. For example,
federally-insured savings and loan associations have been required
to divest their investments in high yield bonds.
U.S. Government Securities. The Fund may invest in U.S.
Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities, and include "zero coupon"
Treasury securities.
U.S. Treasury Obligations. These include Treasury Bills
(which have maturities of one year or less when issued), Treasury
Notes (which have maturities of one to ten years when issued) and
Treasury Bonds (which have maturities generally greater than ten
years when issued). U.S. Treasury obligations are backed by the
full faith and credit of the United States.
U.S. Government and Agency. U.S. Government Securities are
debt obligations issued by or guaranteed by the United States
government or any of its agencies or instrumentalities. Some of
these obligations, including U.S. Treasury notes and bonds, and
mortgage-backed securities (referred to as "Ginnie Maes")
guaranteed by the Government National Mortgage Association, are
supported by the full faith and credit of the United States, which
means that the government pledges to use its taxing power to repay
the debt. Other U.S. Government Securities issued or guaranteed by
Federal agencies or government-sponsored enterprises are not
supported by the full faith and credit of the United States. They
may include obligations supported by the ability of the issuer to
borrow from the U.S. Treasury. However, the Treasury is not under
a legal obligation to make a loan. Examples of these are
obligations of Federal Home Loan Mortgage Corporation (those
securities are often called "Freddie Macs"). Other obligations are
supported by the credit of the instrumentality, such as Federal
National Mortgage Association bonds (these securities are often
called "Fannie Maes").
GNMA Certificates. Certificates of Government National
Mortgage Association ("GNMA") are mortgaged-backed securities of
GNMA that evidence an undivided interest in a pool or pools of
mortgages ("GNMA Certificates"). The GNMA Certificates that the
Fund may purchase may be of the "modified pass-through" type, which
entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to
the "issuer" and GNMA, regardless of whether the mortgagor actually
makes the payments.
The National Housing Act authorizes GNMA to guarantee the
timely payment of principal and interest on securities backed by a
pool of mortgages insured by the Federal Housing Administration
("FHA") or guaranteed by the Veterans Administration ("VA"). The
GNMA guarantee is backed by the full faith and credit of the U.S.
Government. GNMA is also empowered to borrow without limitation
from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
principal investment long before the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment
because of the GNMA guarantee, except to the extent that 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 certificates ("FHLMC
Certificates"): mortgage participation certificates ("PCS") and
guaranteed mortgage certificates ("GMCs"). PCS resemble GNMA
Certificates in that each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying
pool. FHLMC guarantees timely monthly payment of interest on PCS
and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semi-annually
and return principal once a year in guaranteed minimum payments.
The expected average life of these securities is approximately ten
years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
Zero Coupon Securities and Deferred Interest Bonds. The Fund
may invest in zero coupon securities and deferred interest bonds
issued by the U.S. Treasury or by private issuers such as domestic
or foreign corporations. Zero coupon U.S. Treasury securities
include: (1) U.S. Treasury bills without interest coupons, (2)
U.S. Treasury notes and bonds that have been stripped of their
unmatured interest coupons and (3) receipts or certificates
representing interests in such stripped debt obligations or
coupons. Zero coupon securities and deferred interest bonds
usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations in market value in response
to changing interest rates than debt obligations of comparable
maturities that make current payments of interest. An additional
risk of private-issuer zero coupon securities and deferred interest
bonds is the credit risk that the issuer will be unable to make
payment at maturity of the obligation.
While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds generally provide for a period of
delay before the regular payment of interest begins. Although this
period of delay is different for each deferred interest bond, a
typical period is approximately one-third of the bond's term to
maturity. Such investments benefit the issuer by mitigating its
initial need for cash to meet debt service, but some also provide
a higher rate of return to attract investors who are willing to
defer receipt of such cash. With zero coupon securities, however,
the lack of periodic interest payments means that the interest rate
is "locked in" and the investor avoids the risk of having to
reinvest periodic interest payments in securities having lower
rates.
Because the Fund accrues taxable income from zero coupon and
deferred interest securities without receiving cash, the Fund may
be required to sell portfolio securities in order to pay dividends
or redemption proceeds for its shares, which require the payment of
cash. This will depend on several factors: the proportion of
shareholders who elect to receive dividends in cash rather than
reinvesting dividends in additional shares of the Fund, and the
amount of cash income the Fund receives from other investments and
the sale of shares. In either case, cash distributed or held by
the Fund that is not reinvested by investors in additional Fund
shares will hinder the Fund from seeking current income.
Mortgage-Backed Securities. The Fund may invest in Mortgage-
backed securities. These securities represent participation
interests in pools of residential mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S. Government.
Such securities differ from conventional debt securities which
generally provide for periodic payment of interest in fixed or
determinable amounts (usually semi-annually) with principal
payments at maturity or specified call dates. Some mortgage-backed
securities in which the Fund may invest may be backed by the full
faith and credit of the U.S. Treasury (e.g., direct pass-through
certificates of Government National Mortgage Association); some are
supported by the right of the issuer to borrower from the U.S.
Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer
itself. Those guarantees do not extend to the value of or yield of
the mortgage-backed securities themselves or to the net asset value
of the Fund's shares.
Mortgage-backed securities may also be issued by trusts or
other entities formed or sponsored by private originators of and
institutional investors in mortgage loans and other foreign or
domestic non-governmental entities (or represent custodial
arrangements administered by such institutions). These private
originators and institutions include domestic and foreign savings
and loan associations, mortgage bankers, commercial banks,
insurance companies, investment banks and special purpose
subsidiaries of the foregoing. Privately issued mortgage-backed
securities are generally backed by pools of conventional (i.e.,
non-government guaranteed or insured) mortgage loans. Since such
mortgage-backed securities are not guaranteed by an entity having
the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in
order to receive a high quality rating, they normally are
structured with one or more types of "credit enhancement." Such
credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting
after default by a borrower and liquidation of the collateral.
Liquidity protection refers to the providing of cash advances to
holders of mortgage-backed securities when a borrower on an
underlying mortgage fails to make its monthly payment on time.
Protection against losses resulting after default and liquidation
is designed to cover losses resulting when, for example, the
proceeds of a foreclosure sale are insufficient to cover the
outstanding amount on the mortgage. Such protection may be
provided through guarantees, insurance policies or letters of
credit, though various means of structuring the transaction or
through a combination of such approaches.
The yield on mortgage-backed securities is based on the
average expected life of the underlying pool of mortgage loans.
The actual life of any particular pool will be shortened by any
unscheduled or early payments of principal and interest. Principal
prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The occurrence of prepayments is affected by a wide range of
economic, demographic and social factors and, accordingly, it is
not possible to predict accurately the average life of a particular
pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of
newly issued mortgages, the prepayment history of similar pools.
The actual prepayment experience of a pool of mortgage loans may
cause the yield realized by the Fund to differ from the yield
calculated on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. When prevailing interest
rates rise, the value of a pass-through security may decrease as do
the values of other debt securities, but, when prevailing interest
rates decline, the value of a pass-through security is not likely
to rise to the extent that the value of other debt securities rise,
because of the prepayment feature of pass-through securities. The
Fund's reinvestment of scheduled principal payments and unscheduled
prepayments it receives may occur at times when available
investments offer higher or lower rates than the original
investment, thus affecting the yield of such Fund. Monthly
interest payments received by the Fund have a compounding effect
which may increase the yield to the Fund more than debt obligations
that pay interest semi-annually. Because of those factors,
mortgage-backed securities may be less effective than Treasury
bonds of similar maturity at maintaining yields during periods of
declining interest rates. The Fund may purchase mortgage-backed
securities at par, at a premium or at a discount. Accelerated
prepayments adversely affect yields for pass-through securities
purchased at a premium (i.e., at a price in excess of their
principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at
the time the obligation is repaid. The opposite is true for pass-
through securities purchased at a discount.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during
periods of declining interest rates. As new types of mortgage-
related securities are developed and offered to investors, the
Manager will, subject to the direction of the Board of Directors
and consistent with the Fund's investment objective and policies,
consider making investments in such new types of mortgage-related
securities.
Custodial Receipts. The Fund may acquire U.S. Government
Securities and their unmatured interest coupons that have been
separated (stripped) by their holder, typically a custodian bank or
investment brokerage firm. Having separated the interest coupons
from the underlying principal of the U.S. Government Securities,
the holder will resell the stripped securities in custodial receipt
programs with a number of different names, including Treasury
Income Growth Receipts (TIGRs) and Certificate of Accrual on
Treasury Securities (CATS). The stripped coupons are sold
separately from the underlying principal, which is usually sold at
a deep discount because the buyer receives only the right to
receive a future fixed payment on the security and does not receive
any rights to periodic interest (cash) payments. The underlying
U.S. Treasury bonds and notes themselves are generally held in
book-entry form at a Federal Reserve Bank. Counsel to the
underwriters of these certificates or other evidences of ownership
of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed
the beneficial holders of the underlying U.S. Government Securities
for federal tax and securities purposes. In the case of CATS and
TIGRs, the IRS has reached this conclusion for the purpose of
applying the tax diversification requirements applicable to
regulated investment companies such as the Fund. CATS and TIGRs
are not considered U.S. Government Securities by the Staff of the
SEC, however. Further, the IRS' conclusion is contained only in a
general counsel memorandum, which is an internal document of no
precedential value or binding effect, and a private letter ruling,
which also may not be relied upon by the Fund. The Company is not
aware of any binding legislative, judicial or administrative
authority on this issue.
Commercial Paper. The Fund may purchase commercial paper for
temporary defensive purposes as described in its Prospectus. In
addition, the Fund may invest in variable amount master demand
notes and floating rate notes as follows:
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations which permit the investment of fluctuating
amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. They
permit daily changes in the amounts borrowed. The Fund has the
right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the
amount, and the borrower may prepay up to the full amount of the
note without penalty. These notes may or may not be backed by bank
letters of credit. Because these notes are direct lending
arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary
market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at principal amount, plus
accrued interest, at any time. Accordingly, the Fund's right to
redeem such notes is dependent upon the ability of the borrower to
pay principal and interest on demand. The Fund has no limitations
on the type of issuer from whom these notes will be purchased;
however, in connection with such purchases and on an ongoing basis,
the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. Investments in master
demand notes are subject to the limitation on investments by the
Fund in illiquid securities, described in the Fund's Prospectus.
The Manager and relevant Subadviser will consider the earning
power, cash flow and other liquidity ratios of issuers of demand
notes and continually will monitor their financial ability to meet
payment on demand.
Floating Rate/Variable Rate Notes. Some of the notes the Fund
may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals;
floating rates are automatically adjusted according to a specified
market rate for such investments, such as the percentage of the
prime rate of a bank, or the 91-day U.S. Treasury Bill rate. Such
obligations may be secured by bank letters of credit or other
support arrangements. Any bank providing such a bank letter, line
of credit, guarantee or loan commitment will meet the Fund's
investment quality standards relating to investments in bank
obligations. The Fund will invest in variable and floating rate
instruments only when the Manager or relevant Subadviser deems the
investment to meet the investment guidelines applicable to the
Fund. The Manager or relevant Subadviser will also continuously
monitor the creditworthiness of issuers of such instruments to
determine whether the Fund should continue to hold the investments.
The absence of an active secondary market for certain variable
and floating rate notes could make it difficult to dispose of the
instruments, and the Fund could suffer a loss if the issuer
defaults or during periods in which the Fund is not entitled to
exercise its demand rights.
Variable and floating rate instruments held by the Fund will
be subject to the Fund's limitation on investments in illiquid
securities when a reliable trading market for the instruments does
not exist and the Fund may not demand payment of the principal
amount of such instruments within seven days.
Bank Obligations and Instruments Secured Thereby. The bank
obligations the Fund may invest in include time deposits,
certificates of deposit, and bankers' acceptances if they are: (i)
obligations of a domestic bank with total assets of at least $1
billion or (ii) obligations of a foreign bank with total assets of
at least U.S. $1 billion. The Fund may also invest in instruments
secured by such obligations (e.g., debt which is guaranteed by the
bank). For purposes of this section, the term "bank" includes
commercial banks, savings banks, and savings and loan associations
which may or may not be members of the Federal Deposit Insurance
Corporation.
Time deposits are non-negotiable deposits in a bank for a
specified period of time at a stated interest rate, whether or not
subject to withdrawal penalties. However, time deposits that are
subject to withdrawal penalties, other than those maturing in seven
days or less, are subject to the limitation on investments by the
Fund in illiquid investments, set forth in the Fund's Prospectus
under "Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit
instruments used to finance the import, export, transfer or storage
of goods. They are deemed "accepted" when a bank guarantees their
payment at maturity.
Equity Securities. Additional information about some of the
types of equity securities the Fund may invest in is provided
below.
Convertible Securities. The Fund may invest in convertible
securities. Convertible securities are bonds, preferred stocks and
other securities that pay a fixed rate of interest or dividend and
are convertible into the issuer's common stock at the option of the
buyer. While the value of these securities depends in part on
interest rate changes, their value is also sensitive to the credit
quality of the issuer and will change based on the price of the
underlying stock. The Manager consequently does not look primarily
to the ratings of these securities but considers them as "equity
substitutes." While these securities generally offer less potential
for gains than common stock and less income than non-convertible
bonds, their income helps to provide a cushion against the stock
price's declines.
While convertible securities are a form of debt security in
many cases, their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity
equivalents." As a result, any rating assigned to the security has
less impact on the Manager's investment decision with respect to
convertible securities than in the case of non-convertible debt
securities. To determine whether convertible securities should be
regarded as "equity equivalents," the Manager examines the
following factors: (1) whether, at the option of the investor, the
convertible security can be exchanged for a fixed number of shares
of common stock of the issuer, (2) whether the issuer of the
convertible securities has restated its earnings per share of
common stock on a fully diluted basis (considering the effect of
converting the convertible securities), and (3) the extent to which
the convertible security may be a defensive "equity substitute,"
providing the ability to participate in any appreciation in the
price of the issuer's common stock.
Warrants and Rights. The Fund may purchase warrants.
Warrants are options to purchase equity securities at set prices
valid for a specified period of time. The prices of warrants do
not necessarily move in a manner parallel to the prices of the
underlying securities. The price the Fund pays for a warrant will
be lost unless the warrant is exercised prior to its expiration.
Rights are similar to warrants, but normally have a short duration
and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
Preferred Stock. The Fund, subject to its investment
objective, may purchase preferred stock. Preferred stocks are
equity securities, but possess certain attributes of debt
securities and are generally considered fixed income securities.
Holders of preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other amounts
available for distribution by the issuing corporation. Dividends
on the preferred stock may be cumulative, and all cumulative
dividends usually must be paid prior to dividend payments to common
stockholders. Because of this preference, preferred stocks
generally entail less risk than common stocks. Upon liquidation,
preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or stated value,
and are senior in right of payment to common stocks. However,
preferred stocks are equity securities in that they do not
represent a liability of the issuer and therefore do not offer as
great a degree of protection of capital or assurance of continued
income as investments in corporate debt securities. In addition,
preferred stocks are subordinated in right of payment to all debt
obligations and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the same
issuer.
Hedging. Consistent with the limitations set forth in the
Prospectus and below, the Fund may employ one or more of the types
of hedging instruments described below. Additional information
about the hedging instruments the Fund may use is provided below.
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, legally permissible and
adequately disclosed.
Covered Call Options on Securities, Securities Indices and
Foreign Currencies. The Fund may write covered call options.
Such options may relate to particular U.S. or non-U.S. securities
to various U.S. or non-U.S. stock indices or to U.S. or non-U.S.
currencies. The Fund may purchase and write, as the case may be,
call options which are issued by the Options Clearing Corporation
(OCC) or which are traded on U.S. and non-U.S. exchanges.
Writing Covered Calls. 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 (usually not more than 9 months) at
a fixed exercise price (which may differ from the market price of
the underlying security), regardless of market price changes during
the call period. The Fund retains the risk of loss should the
price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
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 expires 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 shall not write a covered call option if as a result
thereof the assets underlying calls outstanding (including the
proposed call option) would exceed 20% of the value of the assets
of the Fund.
Futures Contracts and Related Options. To hedge against
changes in interest rates, securities prices or currency exchange
rates or for certain non-hedging purposes, the Fund may, subject to
its investment objectives and policies, purchase and sell various
kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. The Fund may also enter
into closing purchase and sale transactions with respect to any of
such contracts and options. The futures contracts may be based on
various securities (such as U.S. Government securities), securities
indices, currencies and other financial instruments and indices.
The Fund may purchase and sell futures contracts on stock indices
and sell options on such futures. In addition, the Fund that may
invest in securities that are denominated in a foreign currency may
purchase and sell futures on currencies and sell options on such
futures. The Fund will engage in futures and related options
transactions only for bona fide hedging or other non-hedging
purposes as defined in regulations promulgated by the CFTC. All
futures contracts entered into by the Fund are traded on U.S.
exchanges or boards of trade that are licensed and regulated by the
CFTC or on foreign exchanges approved by the CFTC.
The Fund may buy and sell futures contracts on interest rates
("Interest Rate Futures"). No price is paid or received upon the
purchase or sale of an Interest Rate Future. An Interest Rate
Future obligates the seller to deliver and the purchaser to take a
specific type of debt security at a specific future date for a
fixed price. That obligation may be satisfied by actual delivery
of the debt security or by entering into an offsetting contract.
The Fund may buy and sell futures contracts related to
financial indices (a "Financial Future"). A financial index
assigns relative values to the securities included in the index and
fluctuates with the changes in the market value of those
securities. Financial indices cannot be purchased or sold
directly. The contracts obligate the seller to deliver, and the
purchaser to take, cash to settle the futures transaction or to
enter into an offsetting contract. No physical delivery of the
securities underlying the index is made on settling the futures
obligation. No monetary amount is paid or received by the Fund on
the purchase or sale of a Financial Future.
Upon entering into a futures transaction, the Fund will be
required to deposit an initial margin payment in cash or U.S.
Treasury bills with the futures commission merchant (the "futures
broker"). 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 made to or by the futures broker
on a daily basis. Prior to expiration of the Future, if the Fund
elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is
required to be paid by or released to the Fund, and any loss or
gain is realized for tax purposes. Although Financial Futures and
Interest Rate Futures by their terms call for settlement by
delivery cash or securities, respectively, in most cases the
obligation is fulfilled by entering into an offsetting position.
All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Options on Futures Contracts. The acquisition of put and call
options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase,
respectively, the underlying futures contract at any time during
the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if
prices move in a favorable direction but limits its risk of loss in
the event of an unfavorable price movement to the loss of the
premium and transaction costs.
The writing of a call option on a futures contract generates
a premium which may partially offset a decline in the value of the
Fund's assets. By writing a call option, the Fund becomes
obligated, in exchange for the premium, to sell a futures contract
(if the option is exercised), which may have a value higher than
the exercise price. Conversely, the writing of a put option on a
futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to
purchase. However, the Fund becomes obligated to purchase a
futures contract (if the option is exercised) which may have a
value lower than the exercise price. Thus, the loss incurred by
the Fund in writing options on futures is potentially unlimited and
may exceed the amount of the premium received. The Fund will incur
transaction costs in connection with the writing of options on
futures.
The holder or writer of an option on a futures contract may
terminate its position by selling or purchasing an offsetting
option on the same series. There is no guarantee that such closing
transactions can be effected. The Fund's ability to establish and
close out positions on such options will be subject to the
development and maintenance of a liquid market.
The Fund may use options on futures contracts solely for bona
fide hedging or other non-hedging purposes as described below.
Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts") for hedging and non-
hedging purposes. A forward currency exchange contract generally
has no deposit requirement, and no commissions are generally
charged at any stage for trades. A Forward Contract involves
bilateral obligations of one party to purchase, and another party
to sell, a specific currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by
the parties), at a price set at the time the contract is entered
into. The Fund generally will not enter into a forward currency
exchange contract with a term of greater than one year. These
contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers.
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.
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 it anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when it believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar
amount. In this situation the Fund may, in the alternative, enter
into a Forward Contract to sell a different foreign currency for a
fixed U.S. dollar amount where the Fund believes that the U.S.
dollar value of the currency to be sold pursuant to the Forward
Contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund is
denominated ("cross hedge").
The Fund will not enter into such Forward Contracts or
maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or another
currency that is also the subject of the hedge. The Fund, however,
in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value
of the Fund's portfolio securities or other assets denominated in
these currencies provided the excess amount is "covered" by liquid,
high-grade debt securities, denominated in any currency, at least
equal at all times to the amount of such excess. Unanticipated
changes in currency prices may result in poorer overall performance
for the Fund than if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund, may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Because such contracts are not
traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may
convert foreign currency from time to time, and investors should be
aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at
which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.
Interest Rate Swap Transactions. The Fund may enter into swap
transactions. Swap agreements entail both interest rate risk and
credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap
agreement will have been greater than those received by them.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults,
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 that master agreement shall be regarded as
parts of an integral agreement. If on any date amounts are payable
in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid.
In addition, the master netting agreement may provide that if one
party defaults generally or on one swap, the counterparty may
terminate the swaps with that party. Under such agreements, if
there is a default resulting in a loss to one party, the measure of
that party's damages is calculated by reference to the average cost
of a replacement swap with respect to each swap (i.e., the mark-to-
market value at the time of the termination of each swap). The
gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of
all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation." The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid in comparison with the markets
for other similar instruments which are traded in the interbank
market.
However, the staff of the SEC takes the position that swaps, caps
and floors are illiquid investments that are subject to a
limitation on such investments.
Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities covering a call on the expiration of the option or
upon the Fund entering into a closing purchase transaction. An
option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any
particular option.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. The Rule does not limit the percentage of the
Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under
the Rule the Fund must limit its aggregate initial futures margin
and related option premiums to no more than 5% of the Fund's net
assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule. Under the Rule, the Fund also
must use short futures and options on futures positions solely for
bona fide hedging purposes within the meaning and intent of the
applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number
of options which may be written or held by a single investor or
group of investors acting in concert, regardless of whether the
options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or
more different exchanges through one or more or brokers. Thus, the
number of options which the Fund may write or hold may be affected
by options written or held by other entities, including other
investment companies having the same or an affiliated investment
adviser. Position limits also apply to Futures. An exchange may
order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions. Due to
requirements under the Investment Company Act of 1940 (the
"Investment Company Act"), when the Fund purchases a Future, the
Fund will maintain, in a segregated account or accounts with its
Custodian, cash or readily-marketable, short-term (maturing in one
year or less) debt instruments in an amount equal to the market
value of the securities underlying such Future, less the margin
deposit applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code. That qualification enables the Fund to
"pass through" its income and realized capital gains to
shareholders without the Fund having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since
shareholders will be taxed on the dividends and capital gains they
receive from the Fund. One of the tests for the Fund's
qualification is that less than 30% of its gross income
(irrespective of losses) must be derived from gains realized on the
sale of securities held for less than three months. To comply with
that 30% cap, the Fund will limit the extent to which it engages in
the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three
months, whether or not they were purchased on the exercise of a
call held by the Fund; (ii) purchasing calls or puts which expire
in less than three months; (iii) effecting closing transactions
with respect to calls or puts written or purchased less than three
months previously; (iv) exercising puts or calls held by the Fund
for less than three months; or (v) writing calls on investments
held for less than three months.
Risks Of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Fund's Prospectus
and above, there is a risk in using short hedging by selling
Futures to attempt to protect against a decline in value of 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
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market
for the future or option.
Options trading involves the payment of premiums, and options,
futures and forward contracts are subject to special tax rules that
may affect the amount, timing and character of the Fund's income
and distributions. There are also special risks in particular
hedging strategies. For example, if a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. The use of Forward
Contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign
currency.
There are Special Risks in Investing in Derivative
Investments. The Fund can invest in a number of different kinds of
"derivative" investments. In general, a "derivative investment" is
a specially designed investment whose performance is linked to the
performance of another investment or security, such as an option,
future, index, currency or commodity. The company issuing the
instrument may fail to pay the amount due on the maturity of the
instrument. Also, the underlying investment or security might not
perform the way the Manager expected it to perform. Markets,
underlying securities and indices may move in a direction not
anticipated by the Manager. Performance of derivative investments
may also be influenced by interest rate and stock market changes in
the U.S. and abroad. All of this can mean that the Fund will
realize less principal or income from the investment than expected.
Certain derivative investments held by the Fund may be illiquid.
Please refer to "Illiquid and Restricted Securities" in the Fund's
prospectus.
Loans of Portfolio Securities. Subject to its investment
policies and restrictions, the Fund may seek to increase its income
by lending portfolio securities to brokers, dealers and financial
institutions in transactions other than repurchase agreements. The
Fund must receive collateral for a loan. As a matter of fundamental
policy, these loans are limited to not more than 33-1/3% of the
Fund's total assets (taken at market value) and are subject to
other conditions set forth in "Other Investment Restrictions." The
Fund presently does not intend to engage in loans of securities,
but if it does so it does not intend to lend securities that will
exceed 5% of the value of the Fund's total assets in the coming
year.
Portfolio Turnover. The Fund's particular portfolio
securities may be changed without regard to the holding period of
these securities (subject to certain tax restrictions), when the
Manager deems that this action will help achieve the Fund's
objective given a change in an issuer's operations or changes in
general market conditions. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a
relatively brief period of time. The Fund does not generally
intend to invest for the purpose of seeking short-term profits.
Variations in portfolio turnover rate from year to year reflect the
investment discipline applied to the particular Fund and do not
generally reflect trading for short-term profits.
Other Investment Restrictions
A. Fundamental Investment Restrictions
The Fund has adopted the following fundamental investment
restrictions. The Fund's most significant investment restrictions
are also set forth in the Prospectus. Fundamental policies cannot
be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act,
such a "majority" vote is defined as the vote of the holders of the
lesser of (i) 67% or more of the shares present or represented by
proxy at a shareholder meeting, if the holders of more than 50% of
the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
The Fund may not:
1. Issue senior securities, except as permitted by
paragraphs 7, 8, 9 and 11 below. For purposes of this restriction,
the issuance of shares of common stock in multiple classes or
series, the purchase or sale of options, futures contracts and
options on futures contracts, forward commitments, and repurchase
agreements entered into in accordance with the Fund's investment
policies, and the pledge, mortgage or hypothecation of the Fund's
assets are not deemed to be senior securities.
2. (a) Invest more than 5 percent of its total assets (taken
at market value at the time of each investment) in the securities
(other than United States Government or Government agency
securities) of any one issuer (including repurchase agreements with
any one bank or dealer) or more than 15 percent of its total assets
in the obligations of any one bank; and (b) purchase more than
either (i) 10 percent in principal amount of the outstanding debt
securities of an issuer, or (ii) 10 percent of the outstanding
voting securities of an issuer, except that such restrictions shall
not apply to securities issued or guaranteed by the United States
Government or its agencies, bank money instruments or bank
repurchase agreements.
3. Invest more than 25 percent of the value of its total
assets in the securities of issuers in any single industry,
provided that this limitation shall not apply to the purchase of
obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities. For the purpose of this
restriction, each utility that provides a separate service (e.g.,
gas, gas transmission, electric or telephone) shall be considered
to be a separate industry. This test shall be applied on a
proforma basis using the market value of all assets immediately
prior to making any investment.
The Fund has undertaken as a matter of non-fundamental policy to
apply this restriction to 25% or more of its total assets.
4. Alone, or together with any other portfolio or
portfolios, make investments for the purpose of exercising control
over, or management of, any issuer. The Fund has undertaken as a
matter of non-fundamental policy to apply this restriction to 25%
or more of its total assets.
5. Purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than the customary broker's commission
is involved and only if immediately thereafter not more than 10
percent of the Fund's total assets, taken at market value, would be
invested in such securities.
6. Purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity
contracts or real estate, except that such portfolio may: (1)
purchase securities of issuers which invest or deal an any of the
above and (2) invest for hedging purposes in futures contracts on
securities, financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.
7. Purchase any securities on margin (except that the
Company may obtain such short- term credits as may be necessary for
the clearance of purchases and sales of portfolio securities) or
make short sales of securities or maintain a short position. The
deposit or payment by the Fund of initial or maintenance margin in
connection with futures contracts or related options transactions
is not considered the purchase of a security on margin.
8. Make loans, except that the Fund (1) may lend portfolio
securities in accordance with the Fund's investment policies up to
33 1/3% of the Fund's total assets taken at market value, (2) enter
into repurchase agreements, and (3) purchase all or a portion of an
issue of publicly distributed debt securities, bank loan
participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.
9. Borrow amounts in excess of 10 percent of its total
assets, taken at market value at the time of the borrowing, and
then only from banks as a temporary measure for extraordinary or
emergency purposes, or make investments in portfolio securities
while such outstanding borrowings exceed 5 percent of its total
assets.
10. Allow its current obligations under reverse repurchase
agreements, together with borrowings, to exceed 1/3 of the value of
its total assets (less all its liabilities other than the
obligations under borrowings and such agreements).
11. Mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by the
Fund except as may be necessary in connection with borrowings as
mentioned in investment restriction (9) above, and then such
mortgaging, pledging or hypothecating may not exceed 10 percent of
the Fund's total assets, taken at market value at the time thereof.
In order to comply with certain state statutes, the Fund will not,
as a matter of operating policy, mortgage, pledge or hypothecate
its portfolio securities to the extent that at any time the
percentage of the value of pledged securities plus the maximum
sales charge will exceed 10 percent of the value of the Fund's
shares at the maximum offering price. The deposit of cash, cash
equivalents and liquid debt securities in a segregated account with
the custodian and/or with a broker in connection with futures
contracts or related options transactions and the purchase of
securities on a "when-issued" basis is not deemed to be a pledge.
12. Underwrite securities of other issuers except insofar as
the Company may be deemed an underwriter under the 1933 Act in
selling portfolio securities.
13. Write, purchase or sell puts, calls or combinations
thereof, except that covered call options may be written.
14. Invest in securities of foreign issuers if at the time of
acquisition more than 10 percent of its total assets, taken at
market value at the time of the investment, would be invested in
such securities. However, up to 25 percent of the total assets of
such portfolio may be invested in the aggregate in such securities
(i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities thereof, (ii) assumed
or guaranteed by domestic issuers, including Eurodollar securities,
or (iii) issued, assumed or guaranteed by foreign issuers having a
class of securities listed for trading on the New York Stock
Exchange.
15. Invest more than 10 percent in the aggregate of the value
of its total assets in repurchase agreements maturing in more than
seven days, time deposits maturing in more than 2 days, portfolio
securities which do not have readily available market quotations
and all other illiquid assets.
(b) such purchase would at the time result in more than 10%
of the outstanding voting securities of such issuer being held by
the Fund.
For purposes of the fundamental investment restrictions, the
term "borrow" does not include mortgage dollar rolls, reverse
repurchase agreements or lending portfolio securities and the terms
"illiquid securities" and "portfolio securities which do not have
readily available market quotations" shall include restricted
securities. However, as non-fundamental policies, the Company will
treat reverse repurchase agreements as borrowings, master demand
notes as illiquid securities and mortgage dollar rolls as sales
transactions and not as a financing.
For purposes of the restriction on investing more than 25% of
the Fund's assets in the securities of issuers in any single
industry, the category Financial Services as used in the Financial
Statements may include several different industries such as
mortgage-backed securities, brokerage firms and other financial
institutions.
For purposes of the Fund's policy not to concentrate their
assets, described in the above restrictions, the Fund has adopted
the industry classifications set forth in the Appendix to this
Statement of Additional Information. This is not the Fundamental
policy.
The percentage restrictions described above and in the Fund's
Prospectus are applicable only at the time of investment and
require no action by the Fund as a result of subsequent changes in
value of the investments or the size of the Fund.
How the Funds are Managed
Organization and History. The Company was incorporated in Maryland
on December 9, 1981. Prior to March 18, 1996, the Company was
named Connecticut Mutual Investment Accounts, Inc. On March 18,
1996 the Fund changed its name from Connecticut Mutual Growth
Account to Oppenheimer Disciplined Value Fund.
As a Maryland corporation, 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 Directors or upon proper
request of the shareholders. The Directors will call a meeting of
shareholders to vote on the removal of a Director upon the written
request of the record holders of 10% of its outstanding shares. In
addition, if the Directors receive a request from at least 10
shareholders (who have been shareholders for at least six months)
holding shares of the Company valued at $25,000 or more or holding
at least 1% of the Company's outstanding shares, whichever is less,
stating that they wish to communicate with other shareholders to
request a meeting to remove a Director, the Directors will then
either make the Fund's shareholder list available to the applicants
or mail their communication to all other shareholders at the
applicants' expense, or the Directors may take such other action as
set forth under Section 16(c) of the Investment Company Act.
Directors and Officers of the Company. The Company's Directors and
officers and their principal occupations and business affiliations
during the past five years are listed below. The address of each
Director and officer is Two World Trade Center, New York, New York
10048-0203, unless another address is listed below. All of the
Directors except Ms. Macaskill are directors of Oppenheimer Money
Market Fund, Inc. All of the Directors are directors of Oppenheimer
Target Fund, Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer
International Growth Fund, Oppenheimer Growth Fund, Oppenheimer
Developing Markets Fund, Oppenheimer Discovery Fund, Oppenheimer
Enterprise Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Emerging Growth Fund, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Bond Fund, Oppenheimer New York
Municipal Fund, Oppenheimer California Municipal Fund, Oppenheimer
Multi-State Municipal Trust, Oppenheimer Asset Allocation Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Multi-Sector Income
Trust and Oppenheimer World Bond Fund (collectively the "New York-
based Oppenheimer funds"). Ms. Macaskill and Messrs. Spiro,
Bishop, Bowen, Donohue, Farrar and Zack, who are officers of the
Company, hold the same offices with the other New York-based
Oppenheimer funds as with the Company. As of November 22, 1996,
the Directors and Officers of the Fund as a group owned less than
1% of the outstanding shares of the Fund. That statement does not
include ownership of shares held of record by an employee benefit
plan for employees of the Manager (two of the officers of the Fund
listed below, Ms. Macaskill and Mr. Donohue, are Trustees of that
plan) other than the shares beneficially owned under that plan by
the officers of the Fund list below.
Leon Levy, Chairman of the Board of Directors; Age: 71
31 West 52nd Street, New York, New York, 10019.
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Director*; Age: 63
Vice Chairman of the OppenheimerFunds, Inc. (the "Manager");
formerly he held the following positions: Vice President and
Counsel of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management
Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment advisory subsidiaries of the
Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, an officer of other Oppenheimer funds
and Executive Vice President and General Counsel of the Manager and
the Distributor.
______________________
* A Director who is an "interested person" of the Company as
defined in the Investment Company Act.
Benjamin Lipstein, Director; Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex
Publishers, Inc. (Publishers of Psychology Today on Mother Earth
News) and a director of Spy Magazine, L.P.
Bridget A. Macaskill, President and Director*; Age: 47
President, Chief Executive Officer and a Director of the Manager;
Chairman and a Director of SSI and SFSI, President and a director
of OAC, HarbourView and of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc.; formerly an Executive Vice
President of the Manager.
Elizabeth B. Moynihan, Director; Age: 67
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the Institute of Fine Arts (New
York University), National Building Museum; a member of the
Trustees Council, Preservation League of New York State; a member
of the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Director; Age: 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company),
Kemper Corporation (insurance and financial services company),
Fidelity Life Association (mutual life insurance company); formerly
President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research), and a director of
Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Director; Age: 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow of Jerome Levy Economics Institute; Bard
College; a member of the U.S. Competitiveness Policy Council; a
director of GranCare, Inc. (healthcare provider); formerly New York
State Comptroller and a trustee of the New York State and Local
Retirement Fund.
Russell S. Reynolds, Jr., Director; Age: 64
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc.
(executive recruiting); Chairman of Directorship, Inc. (consulting
and publishing); a director of XYAN, Inc. (printing), Professional
Staff Limited and American Scientific Resources, Inc.; a trustee of
Mystic Seaport Museum, International House, Greenwich Historical
Society and Greenwich Hospital.
______________________
* A Director who is an "interested person" of the Company as
defined in the Investment Company Act.
Sidney M. Robbins, Director; Age: 84
50 Overlook Road, Assigning, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting
Professor of Finance, University of Hawaii; Emeritus Founding and
a director of The Korethe Fund, Inc. (closed-end investment
company); a member of the Board of Advisors, Olympus Private
Placement Fund, L.P.; Professor Emeritus of Finance, Adelphi
University.
Donald W. Spiro, Vice Chairman and Director*; Age: 70
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Director; Age: 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Director; Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar,
Inc. (machinery), ConAgra, Inc. (food and agricultural products),
Farmers Insurance Company (Insurance); FMC Corp. (chemicals and
machinery), IMC Global Inc. (chemicals and animal feed) and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) Counselor to the President (Bush) for Domestic
Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a director of Centennial; Executive Vice
President General Counsel and a director of HarbourView, SSI, SFSI
and Oppenheimer Partnership Holdings, Inc.; President and director
of Oppenheimer Real Asset Management, Inc.; General Counsel of OAC;
Executive Vice President, General Counsel and a director of
MultiSource Services, Inc. (a broker-dealer) an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor, prior to which
he was a partner in Kraft & McManimon (a law firm), an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser),
and a director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
Robert Doll, Jr., Vice President; Age: 42
Executive Vice President and a director of the Manager; Executive
Vice President of HarbourView; Vice President and a director of
OAC: an officer of other Oppenheimer funds.
_________________________
* A Director who is an "interested person" of the Company as
defined in the Investment Company Act.
George C. Bowen, Treasurer; Age: 60
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC:
Vice President and Treasurer of Oppenheimer Real Asset Management
Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; and officer of other
Oppenheimer funds.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously the Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously the Fund Controller for the
Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager. They and the Directors of the Fund
who are affiliated with the Manager (Ms. Macaskill and Messrs.
Galli and Spiro) receive no salary or fee from the Fund. The
remaining Directors of the Fund received the compensation shown
below from the Fund, during its fiscal period from January 1, 1996
through October 31, 1996, and from all of the New York-based
Oppenheimer funds (including the Fund) for which they served as a
Trustee or Director. Compensation is paid for services in the
positions below their names.
<PAGE>
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued as From All
Compensation Part of New York-based
Name and Position From the Fund(1) Fund Expenses Oppenheimer Funds2
<S> <C> <C> <C>
Leon Levy
Chairman and Trustee 0 $1,303 $141,000.00
Benjamin Lipstein
Study Committee
Chairman, Audit
Committee Member
and Trustee 0 $797 $86,200
Elizabeth Moynihan
Study Committee Member
and Trustee 0 $797 $86,200
Kenneth A. Randall
Audit Committee
Chairman & Trustee 0 $724 $78,400.00
Edward V. Regan
Proxy Committee Chairman(2),
Audit Committee Member and
Trustee 0 $636 $68,800.00
Russell S. Reynolds, Jr.
Proxy Committee Member(2)
and Trustee 0 $481 $52,100.00
Sidney M. Robbins
Study Committee Advisory
Member, Audit Committee
Advisory Member
and Trustee 0 $1,128 $122,100.00
Pauline Trigere
Trustee 0 $481 $52,100.00
Clayton K. Yeutter
Proxy Committee Member(2)
and Trustee 0 $481 $52,100.00
For the 1995 calendar year (prior to the inception of the Proxy Committee)
during which the New York-based Oppenheimer funds, listed in the first paragraph
of this section, included Oppenheimer Mortgage Income and Oppenheimer Time Fund
(which ceased operation following the acquisition of their assets by certain
other Oppenheimer funds) but excluded Oppenheimer International Growth Fund,
which had not yet commenced operations.
(2)Committee position held during a portion of the shown. The Study and Audit
Committees meet for all of the New York-based Oppenheimer funds and the fees are
allocated among the funds by the Board.
</TABLE>
The Company has adopted a retirement plan that provides for payment
to a retired Director of up to 80% of the average compensation paid
during the Director's five years of service in which the highest
compensation was received. A Director must serve in that capacity
for any of the New York-based Oppenheimer funds for at least 15
years to be eligible for the maximum payment. Because each
Director's retirement benefits will depend on the amount of the
Director's future compensation and length of service, the amount of
those benefits cannot be determined at this time, nor can the Fund
estimate the number of years of credited service that will be used
to determine those benefits.
Major Shareholders. As of November 22, 1996, no person owned
of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding Class A, Class B or Class C shares
except: (i) Connecticut Mutual Life Insurance Company ("CML") and
its affiliates owned of record 2,003.386.167 Class A shares
(2,003,386.167% of the Class A shares then outstanding) of the
Fund, (ii) Mass Mutual Life Insurance Co., 1295 State St.,
Springfield MA 01111-0001, which owned of record for the benefit of
its clients, 1,946,278.264 Class A shares (20.84% of the Class A
shares outstanding as of such date), (iii) James W. Scott, FBO
James W. Scott, 225 Richlyn Dr., Adrian MI 49221-9295, which owned
of record 2,510.627 Class C shares (5.82% of the Class C shares
outstanding as of such date), (iv) French T. McCoy TR, Dayton Metal
Door, Inc. Profit Sharing Plan, 1717 Spaulding Rd., Dayton OH
45432-3727, which owned 5,238.345 Class C shares (12.15% of the
Class C shares outstanding as of such date), (v) NFSC FEBO-Ann &
Gregory Frost, 509 Wakashan Trail, Lima, Oh 45805, which owned
13,728.795 Class C shares (31.85% of the Class C shares outstanding
as of such date) and (vi) NFSC FEBO-Richard & Barbara Scherger,
1569 Fairway Dr., LIMA, OH 45805, which owned 2,410.582 Class C
shares (5.59% of the Class C shares outstanding as of such date).
CML is incorporated under the laws of the State of Connecticut.
CML and its affiliates are deemed to be controlling persons of the
Fund if they own more than 25% of the shares outstanding. As such,
the exercise by CML and its affiliates of their voting rights may
diminish the voting power of other shareholders. Effective March
1, 1996, Massachusetts Mutual Life Insurance Company, a
Massachusetts corporation, acquired CML's interests in the Funds.
The Manager, the Subadvisers and Their Affiliates. The Manager is
wholly-owned by Oppenheimer Acquisition Corporation ("OAC"), a
holding company controlled by Massachusetts Mutual Life Insurance
Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the
Funds, and three of whom (Ms. Macaskill and Messrs. Galli and
Spiro) serve as Directors of the Funds.
The Manager and the Company have a Code of Ethics. It is
designed to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Compliance
with the Code of Ethics is carefully monitored and strictly
enforced by the Manager.
The Investment Advisory Agreements. The Fund has entered into
an Investment Advisory Agreement with the Manager. The investment
advisory agreement between the Manager and the Fund requires the
Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including
the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for the
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under an
advisory agreement or by the Distributor under a Distribution
Agreement (defined below) are paid by the Fund. The advisory
agreement lists examples of expenses to be paid by the Fund, the
major categories of which relate to interest, taxes, brokerage
commissions, fees to certain Directors, legal, and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation.
For the fiscal years ended December 31, 1994 and 1995 the
Management's fees paid to G.R. Phelps & Co., the Fund's Investment
Advisor, was $342,082 and $613,378 respectively. For the fiscal
period ended October 31, 1996 the fund paid $719,186, in management
fees, some of which was paid to G.R. Phelps & Co., investment
advisor, prior to March 18, 1996.
Under the advisory agreement, the Manager has undertaken that
if the total expenses of the Fund in any fiscal year should exceed
the most stringent state regulatory requirements on expense
limitations applicable to the Fund, the Manager's compensation
under the advisory agreement will be reduced by the amount of such
excess. For the purpose of such calculation, there shall be
excluded any expense borne directly or indirectly by the Fund which
is permitted to be excluded from the computation of such limitation
by such statute or state regulatory authority. At present, that
limitation is imposed by California, and limits expenses (with
specific exclusions) to 2.5% of the first $30 million of average
net assets, 2% of the next $70 million of average net assets and
1.5% of average net assets in excess of $100 million. Any
assumption of the Fund's expenses under this limitation would lower
the Fund's overall expense ratio and increase its total return
during any period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under
the advisory agreement, the Manager is not liable for any loss
resulting from any good faith errors or omissions in connection
with any matters to which the Agreement relates. 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 its other investment activities. 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 their corporate
names may be withdrawn.
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's shares,
but is not obligated to sell a specific number of shares. Expenses
normally attributable to sales (other than those paid under the
Distribution and Service Plans, but including advertising and the
cost of printing and mailing prospectuses other than those
furnished to existing shareholders), are borne by the Distributor.
During the Fund's fiscal years ended December 31, 1994 and 1995 and
the fiscal period ended October 31, 1996 the aggregate sales
charges on sales of the Fund's Class A shares were $513,544,
$559,650 and $534,988 respectively, of which the Distributor and an
affiliated broker-dealer retained $0, $0 and $341,543 in those
respective years. During the Fund's fiscal period ended October
31, 1996 the contingent deferred sales charges collected on the
Fund's Class B shares totalled $3,336. During the fiscal year ended
October 31, 1996, sales charges advanced to broker/dealers by the
Distributor on sales of the Fund's Class B shares totalled $149,781
of which $79,814 was paid to an affiliated broker/dealer. During
the Fund's fiscal years ended October 31, 1996 there were no
contingent deferred sales charges collected on the Fund's Class C
shares. During the fiscal period ended October 31, 1996, sales
charges advanced to broker/dealers by the Distributor on sales of
the Fund's Class C shares totalled $6,734 of which $4,696 was paid
to an affiliated broker/dealer. 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.
For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please
refer to "Distribution and Service Plans," below.
The Transfer Agent. OppenheimerFunds Services, the Fund's
transfer agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under each advisory agreement is to
arrange the portfolio transactions for the Fund. The advisory
agreement contains provisions relating to the employment of broker-
dealers ("brokers") to effect the Fund's portfolio transactions.
In doing so, the Manager is authorized by the advisory agreement to
employ such broker-dealers, including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the
Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of
such transactions. The Manager need not seek competitive
commission bidding, but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the
Fund as established by the Board of Directors.
Under the advisory agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have
charged, if a good faith determination is made by the Manager and
the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment
companies managed by the Manager or its affiliates as a factor in
the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Most
purchases made by the Fund are principal transactions at net
prices, and the Fund incur little or no brokerage costs. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the
Manager's portfolio managers. In certain instances, portfolio
managers may directly place trades and allocate brokerage, also
subject to the provisions of the advisory agreement and the
procedures and rules described above. In either case, brokerage is
allocated under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals
or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed
income agency transactions in the secondary market and otherwise
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
and its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually
placed for each account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the 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 Directors has permitted the
Manager to use concessions on fixed price offerings to obtain
research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use
stated commissions on secondary fixed-income trades to obtain
research where the broker has represented to the Manager that (i)
the trade is not from the broker's own inventory, (ii) the trade
was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope
and supplements the research activities of the Manager, by making
available additional views for consideration and comparisons, and
enabling the Manager to obtain market information for the valuation
of securities held in the Fund's portfolio or being considered for
purchase. The Board of Directors, including the "independent"
Directors of the Fund (those Directors of the Fund who are not
"interested persons" as defined in the Investment Company Act, and
who have no direct or indirect financial interest in the operation
of the advisory agreement or the Distribution Plan described below)
annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the
Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
Brokerage commissions for the 1994 and 1995 calendar years was
$249,665 and $233,480 respectively. During the Fund's fiscal
period ended October 31, 1996 total brokerage commissions paid by
the Fund was $173,513, $166,527 was paid to brokers as commission
in return for research services, the total aggregate dollar amount
of those transactions was $107,956,581.
Performance of the Fund
Yield and Total Return Information. From time to time, as set
forth in the Fund's Prospectus, the "standardized yield,"
"dividend yield," "average annual total return," "total return," or
"total return at net asset value", as the case may be, of an
investment in a class of 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 maximum sales charge rate on Class A shares was lower
prior to March 18, 1996, and actual investment performance would be
affected by that change.
The Fund's advertisement of its performance must, under
applicable rules of the SEC, include the average annual total
returns for each class of shares of the Fund for the 1, 5 and 10-
year periods (or the life of the class, if less) as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare 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 yields and total returns
and share prices are not guaranteed and normally will fluctuate on
a daily basis. When redeemed, an investor's shares may be worth
more or less than their original cost. Yields and total returns
for any given past period are not a prediction or representation by
the Fund of future yields or rates of return on its shares. The
yields and total returns of Class A, Class B, Class C and Class Y
shares of the Fund, as the case may be, are affected by portfolio
quality, the type of investments the Fund holds and its operating
expenses allocated to a particular class.
<PAGE>
Standardized Yields
Yield. The Fund's "yields" (referred to as "standardized
yield") for a given 30-day period for a class of shares are
calculated using the following formula set forth in rules adopted
by the SEC that apply to all funds that quote yields:
2 [( a-b + 1)6 - 1]
Standardized Yield = ( cd )
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, using the current maximum sales charge rate
adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day
period may differ from its yield for any other period. The SEC
formula assumes that the standardized yield for a 30-day period
occurs at a constant rate for a six-month period and is annualized
at the end of the six-month period. This standardized yield is not
based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net
investment income from the Fund's portfolio investments calculated
for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally,
because each class of shares is subject to different expenses, it
is likely that the standardized yields of the Fund's classes of
shares will differ.
Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for
each class. Dividend yield is based on the dividends paid on
shares of a class from dividends derived from net investment income
during a stated period. Distribution return includes dividends
derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the
dividends and/or distributions for that class declared during a
stated period of one year or less (for example, 30 days) are added
together, and the sum is divided by the maximum offering price per
share of that class) on the last day of the period. When the
result is annualized for a period of less than one year, the
"dividend yield" is calculated as follows:
<PAGE>
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the
current maximum front-end sales charge. For Class B or Class C
shares, as the case may be, the maximum offering price is the net
asset value per share, without considering the effect of contingent
deferred sales charges. From time to time similar yield or
distribution return calculations may also be made using the Class
A net asset value (instead of its respective maximum offering
price) at the end of the period.
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return," "average annual total return," and "total return at net
asset value" of an investment in a class of shares of the Fund may
be advertised. An explanation of how these total returns are
calculated for each class and the components of those calculations
is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1,5, and 10-year periods (or the life of
the class, if less) ending as of the most recently-ended calendar
quarter prior to the publication of the advertisement. This enable
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 each
class of shares of the Fund are affected by portfolio quality, the
type of investments the Fund holds and its operating expenses
allocated to the particular class.
Average Annual Total Returns. The "average annual total
return" of each class of the Fund 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
<PAGE>
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV-P = Total Return
P
The average annual total returns on an investment in Class A
shares of the Fund for the one, five and ten year periods ended
October 31, 1996 and for the period from September 16, 1985
(commencement of operations) to October 31, 1996 were 13.41%,
15.09%, 14.00%, and 14.77% respectively.
The average annual total return on Class B shares for the one-
year period ended October 31, 1996 and for the period October 2,
1995 (commencement of the public offering of the class) through
October 31, 1996 were 15.18% and 14.08%, respectively.
The average annual total return on Class C shares for the
period May 1, 1996 (commencement of the public offering of the
class) through October 31, 1996 was 4.35%. The "cumulative total
return" on Class A from September 16, 1985 to October 31, 1996 was
362.86%. The "cumulative total return on Class B for the period
from October 2, 1995 through October 31, 1996 was 15.30%. The
"cumulative total return" on Class C shares for the period from May
1, 1996 to October 31, 1996 was 4.35%.
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% as a percentage of the offering
price, is deducted from the initial investment ("P"), unless the
return is shown at net asset value, as discussed below. For Class
B shares the payment of the current contingent deferred sales
charge (5.0% for the first year, 4.0% for the second year, 3.0% for
the third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter) is applied to the investment result
for the time period shown (unless the total return is shown at the
net asset value, as described below). For Class C shares, the
1.0% contingent deferred sales charge is applied to the investment
results for the one-year period (or less). 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.
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period.
Total Returns at Net Asset Value. From time to time 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, as the case may be. Each is
based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or
contingent deferred sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one, five and ten year periods ended
October 31, 1996 and from September 16, 1995 (commencement of
operations) to October 31, 1996 were 20.33%, 16.46%, 14.67% and
15.38%. The average annual total returns at net asset value for
the Fund's Class B shares for the one year period ended October 31,
1996 and for the period from October 2, 1996 (commencement of the
public offering of the class) through October 31, 1996 were 20.18%
and 17.74%. The average annual total returns at net asset value
for the Fund's Class C shares for the period May 1, 1996
(commencement of the public offering of the Class) through October
31, 1996 was 5.35%.
The "cumulative total returns at net asset value" of the
Fund's Class A shares for the period from inception to October 31,
1996 was 391.09%. For Class B shares, the "cumulative total
returns at net asset value for the period from inception through
October 31, 1996 was 19.30%. For Class C shares, the cumulative
total return at net asset value from inception to October 31, 1996
was 5.35%.
Other Performance Comparisons. From time to time the Fund may
also include in its advertisements and sales literature performance
information about the Fund or rankings of the Fund's performance
cited in newspapers or periodicals, such as The New York Times.
These articles may include quotations of performance from other
sources, such as Lapper Analytical Services, Inc. or Morningstar,
Inc.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or the Transfer Agent), by independent
third-parties, on the investor services provided by them to
shareholders of the Oppenheimer funds, other than the performance
rankings of the Oppenheimer funds themselves. These ratings or
rankings of shareholder/investor services by third parties may
compare the Oppenheimer funds services to those of other mutual
fund families selected by the rating or ranking services, and may
be based upon the opinions of the rating or ranking service itself,
using its own research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
When comparing yield, total return and investment risk of an
investment in Class A, Class B, Class C or Class Y shares, as the
case may be, of the Fund with other investments, investors should
understand that certain other investments have different risk
characteristics than an investment in shares of the Fund. For
example, certificates of deposit may have fixed rates of return and
may be insured as to principal and interest by the FDIC, while the
Fund's returns will fluctuate and its share values and returns are
not guaranteed. U.S. Treasury securities are guaranteed as to
principal and interest by the full faith and credit of the U.S.
government.
<PAGE>
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1
of the Investment Company Act. The Fund has adopted a Distribution
and Service Plan for Class C shares of such Fund under Rule 12b-1
of the Investment Company Act. Pursuant to such Plans, the Fund
will reimburse the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of
the shares of that class, as described in the Prospectus. Each
Plan has been approved by a vote of (i) the Board of Directors of
the effected Funds, including a majority of the Independent
Directors, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class.
For the Distribution and Service Plans for the Class C shares, the
votes were cast by the Manager as the then-sole initial holder of
Class C shares of the Fund.
In addition, under the Plans, the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make to Recipients from
their own resources.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of
Directors including its Independent Directors by a vote cast in
person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote
of a majority of the Independent Directors or by the vote of the
holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund auto-
matically convert into Class A shares after six years, the Fund is
required to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to a Class A Plan that would
materially increase payments under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as
defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Board and the
Independent Directors.
While the Plans are in effect, the Treasurer of the Funds
shall provide separate written reports to the Board of Directors at
least quarterly for its review, detailing the amount of all
payments made pursuant to each Plan, the purpose for which the
payments were made and the identity of each Recipient that received
any such payment and the purpose of the payments. The report for
the Class B Plan shall also include the Distributor's distribution
costs for that quarter, and such costs for previous fiscal periods
that are carried forward, as explained in the Prospectuses and
below. Those reports, including the allocations on which they are
based, will be subject to the review and approval of the
Independent Directors in the exercise of their fiduciary duty.
Each Plan further provides that while it is in effect, the
selection and nomination of those Directors who are not "interested
persons" of the Fund are committed to the discretion of the
Independent Directors. This does not prevent the involvement of
others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the
Independent Directors.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all shares of the
Fund held by the Recipient for itself and its customers did not
exceed a minimum amount, if any, that may be determined from time
to time by a majority of the Fund's Independent Directors.
Initially, the Board of Directors has set the fee at the maximum
rate and set no minimum amount. Any unreimbursed expenses incurred
by the Distributor with respect to Class A shares for any fiscal
quarter by the Distributor may not be recovered under the Class A
Plan in subsequent fiscal quarters. Payments received by the
Distributor under the Plan for Class A shares will not be used to
pay any interest expense, carrying charges, or other financial
costs, or allocation of overhead by the Distributor.
For the fiscal period ended October 31, 1996, payments under
this Class A Plan totaled $275,407, all of which $191,634 was paid
to an affiliate of the Distributor. Any unreimbursed expenses
incurred by the Distributor with respect to Class A shares for any
fiscal year may not be recovered in subsequent fiscal years.
Payments received by the Distributor under Class A Plan will not be
used to pay any interest expense, carrying charges, or other
financial costs, or allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payments
to be paid by the Distributor to Recipients in advance for the
first year Class B and Class C shares are outstanding, and
thereafter on a quarterly basis, as described in the Prospectuses.
The advance payment is based on the net asset value of the Class B
and Class C shares sold. An exchange of shares does not entitle
the Recipient to an advance payment of the service fee. In the
event Class B or Class C shares are redeemed during the first year
such shares are outstanding, the Recipient will be obligated to
repay a pro rata portion of the advance of the service fee payment
to the Distributor.
Payments made under the Class B plan for the fiscal year ended
October 31, 1996, total $24,189 of which $20,026 was retained by
the Distributor. Payments made under the Class C plan for the
fiscal year ended October 31, 1996, totaled $1,717, of which $1,623
was retained by the Distributor.
Although the Class B and the Class C Plans permit the
Distributor to retain both the asset-based sales charges and the
service fee, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently
intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the
Board. Initially, the Board has set no minimum holding period.
All payments under the Class B Plan and the Class C Plan are
subject to the limitations imposed by the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. The
Distributor anticipates that it will take a number of years for it
to recoup (from the Fund's payments to the Distributor under the
Class B or Class C Plan and from contingent deferred sales charges
collected on redeemed Class B or Class C shares) the sales
commissions paid to authorized brokers or dealers.
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. The Class B and Class C
Plans provide for the Distributor to be compensated at a flat rate
whether the Distributor's distribution expenses are more than the
amounts paid by the Fund during that period. Such payments are
made in recognition that the Distributor (i) pays sales commissions
to authorized brokers and dealers at the time of sale, (ii) may
finance such commissions and/or the advance of the service fee
payment to Recipients under those Plans or provide such financing
from its own resources, or from an affiliate, (iii) employs
personnel to support distribution of shares, and (iv) costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The Fund offers three classes of shares, Class A, Class B
and Class C shares. The availability of multiple classes of shares
permits an investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor will not accept any order for $500,000 or $1
million or more of Class B or Class C shares, respectively, on
behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous
for that investor to purchase Class A shares of the Fund instead.
A fourth Class of Shares may be purchased only be certain
institutional investors at net asset value per shares ("Class Y
Shares").
The Fund's classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the 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
Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and/or Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of 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 on each day the Exchange is open by dividing the
value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some
days (for example, in case of weather emergencies or on days
falling before a holiday). The Exchange's most recent annual
holiday schedule (which is subject to change) states that it will
close New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it
may close on other days. Trading may occur at times when the
Exchange is closed (including weekends and holidays or after 4:00
P.M., on a regular business day). Because the net asset values of
the Fund will not be calculated at such times, if securities held
in the Fund's portfolio are traded at such time, the net asset
values per share of Class A, Class B, Class C and Class Y shares of
the Fund may be significantly affected on such days when
shareholders do not have the ability to purchase or redeem shares.
The Fund's Board of Directors has established procedures for
the valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing "bid"
prices that day); (ii) 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 Directors or to
the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately
preceding the valuation date; or at the mean between "bid" and
"ask" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued based on the mean between the "bid"
and "ask" prices determined by a portfolio pricing service approved
by the Fund's Board of Directors or obtained by the Manager from
two active market makers in the security on the basis of reasonable
inquiry; (iv) debt instruments having a maturity of more than 397
days when issued, and non-money market type instruments having a
maturity of 397 days or less when issued, which have a remaining
maturity of 60 days or less are valued at the mean between "bid"
and "ask" prices determined by a pricing service approved by the
Fund's Board of Directors or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of
less than 397 days when issued that have a remaining maturity of 60
days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vi) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's
procedures. If the Manager is unable to locate two market makers
willing to give quotes (see (ii), (iii) and (iv) above), the
security may be priced at the mean between the "bid" and "ask"
prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "ask" price is available).
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity, and other special factors involved. The Manager may use
pricing services approved by the Board of Directors to price U.S.
Government Securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such
pricing services which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
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 Directors or the Manager, under
procedures established by the Board of Directors, 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 Directors 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 makes (which in certain cases
may be "bid" price if "ask" price is not available).
When the Fund writes an option, an amount equal to the premium
received is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent credit is included in
the liability section. The credit is adjusted ("marked-to market")
to reflect the current market value of the call or put. In
determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by 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
received was more or less than the cost of the closing transaction.
If the Fund exercises a put it holds, the amount the Fund receives
on its sale of the underlying investment is reduced by the amount
of premium paid by the fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy the shares. Dividends
will begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
such purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If the Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund three 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. 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 Fund's Prospectus because the
Distributor or broker-dealer incurs little or no selling expenses.
The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, parents-in-law, siblings,
sons- and daughters-in-law, aunts, uncles, nieces and nephews, a
sibling's spouse and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Bond Fund Series - Oppenheimer Bond Fund for Growth
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Rochester Fund Municipals*
Oppenheimer Disciplined Value Fund
Oppenheimer Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Developing Markets Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
________________________-
* Shares of the Fund are not presently exchangeable for shares of
this fund.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a CDSC).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares of the Fund (and Class
A and Class B shares of other Oppenheimer funds) during a 13-month
period (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under
the Letter to obtain the reduced sales charge rate on purchases of
Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of
Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales
charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Fund's Prospectus, this Statement of
Additional Information and the Application used for such Letter of
Intent, and if such terms are amended, as they may be from time to
time by 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 amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of
such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value to 5% of the intended purchase amount specified in the Letter
shall be held in escrow by the Transfer Agent. For example, if the
intended purchase amount is $50,000, the escrow shall be shares
valued in the amount of $2,500 (computed at the public offering
price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the total minimum investment specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended amount specified in the Letter, the investor must remit to
the Distributor an amount equal to the difference between the
dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A
initial or contingent deferred sales charge or (ii) Class B shares
of one of the other Oppenheimer funds that were acquired subject to
a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectuses entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectuses. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of Class A
shares of certain OppenheimerFunds, or a contingent deferred sales
charge may apply to shares purchased by Asset Builder payments. An
application should be obtained from the Transfer Agent, completed
and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before
initiating Asset Builder payments. The amount of the Asset Builder
investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue
offering such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee
benefit plans that may purchase Class A shares without being
subject to the Class A contingent differed sales charge, the term
"employee benefit plan" means any plan or arrangement, whether or
not "qualified" 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.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
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 has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectuses. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Directors has
the right to cause the involuntary redemption of the shares held in
any account if the number of shares is less than 1,000. Should the
Board elect to exercise this right, it may also fix, in accordance
with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days),
or the Board may set requirements for granting permission to the
shareholder to increase the investment, and set other terms and
conditions so that the shares would not be involuntarily redeemed.
Selling Shares by Wire. The wire of redemption proceeds may
be delayed if the Fund's Custodian bank is not open for business on
a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the
redemption. In those circumstances, the wire will not be
transmitted until the next bank business day on which the Fund is
open for business. No dividends will be paid on the proceeds of
redeemed shares awaiting transfer by wire.
Payments "In Kind". The Fund's Prospectus states that payment
for shares tendered for redemption is ordinarily made in cash.
However, if the Board of Directors of the Fund determines 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, the Fund may pay the redemption proceeds
in whole or in part by a distribution "in kind" of securities from
the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the SEC. 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 such
valuation will be made as of the time the redemption price is
determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares purchased subject to an initial sales charge, or
(ii) Class A or Class B shares on which the shareholder paid a
contingent deferred sales charge when redeemed. This privilege
does not apply to Class C shares.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Fund's
Prospectus under "How to Buy Shares" for the imposition of the
Class B and Class C contingent deferred sales charge will be
followed in determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans or pension or profit-sharing plans should be addressed
to "Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer
Agent at its address listed in "How To Sell Shares" in the Fund's
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and 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 or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension and profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The 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 their
shares from authorized dealers or brokers. The repurchase price
per share will be the net asset value next computed after the
Distributor receives the order placed by the dealer or broker,
except that if the Distributor receives a repurchase order from a
dealer or broker after the close of The New York Stock Exchange on
a regular business day, it will be processed at that day's net
asset value if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment
will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption
documents in proper form, with the signature(s) of the registered
owners guaranteed on the redemption document as described in the
Prospectuses.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of the payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans, because of the imposition of the
Class B and Class C contingent deferred sales charges on such
withdrawals (except where the Class B and Class C contingent
deferred sales charge is waived as described in the Prospectuses
under "Class B Contingent Deferred Sales Charge" or in "Class C
Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the
OppenheimerFunds Application relating to such Plans, as well as the
Prospectuses. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and thereafter shares acquired
with reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent and the Fund in good faith to
administer the Plan. Certificates will not be issued for shares of
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 such Fund. Any share certificates held by a
Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the
certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or AccountLink payments of the proceeds of
Plan withdrawals will normally be transmitted three business days
prior to the date selected for receipt of the payment (receipt of
payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How to Exchange Shares. As stated in the Prospectuses, shares of
a particular class of OppenheimerFunds having more than one class
of shares may be exchanged only for shares of the same class of
other OppenheimerFunds. Shares of the OppenheimerFunds that have
a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class
A, B and C shares except Oppenheimer Money Market Fund, Inc.,
Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P. and Daily Cash
Accumulation Fund Inc., which only offer Class A shares and
Oppenheimer Main Street California Tax Exempt Fund, which only
offers Class A and Class B shares. Class B and Class C shares of
Oppenheimer Cash reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or
available for direct purchases through OppenheimerFunds sponsored
401(k) plans.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge).
Shares of the Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds or from any
unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of
shares of either class purchased subject to a contingent deferred
sales charge. However, shares of Oppenheimer Money Market Fund,
Inc. purchased with the redemption proceeds of shares of other
mutual funds (other than funds managed by the Manager or its
subsidiaries) redeemed within the 12 months prior to that purchase
may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales
charge, whichever is applicable. To qualify for that privilege,
the investor or the investor's dealer must notify the Distributor
of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege. The
Class C contingent deferred sales charge is imposed on Class C
shares acquired by exchange if they are redeemed within 12 months
of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectuses for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining
the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability
and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares.
Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or
more accounts. The Fund may accept requests for exchanges of up to
50 accounts per day from representatives of authorized dealers that
qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Fund's Prospectus or
this Statement of Additional Information or would include shares
covered by a share certificate that is not tendered with the
request. In those cases, only the shares available for exchange
without restriction will be exchanged.
When exchanging shares by telephone, the shareholder must
either have an existing account in, or obtain acknowledge receipt
of a prospectus of, the fund to which the exchange is to be made.
For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the funds selected are appropriate
for his or her investment and should be aware of the tax
consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The 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 until such time as Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks
received from investors are converted to Federal Funds on the next
business day. Dividends will be declared on shares repurchased by
a dealer or broker for three business days following the trade date
(i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will
be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of 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 shares" above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower than dividends on Class A shares as a result
of the asset-based sales charges on Class B and Class C shares, and
will also differ in amount as a consequence of any difference in
net asset value between the classes.
If prior distributions must be re-characterized at the end of
the fiscal year as a result of the effect of the Fund's investment
policies, shareholders may have a non-taxable return of capital,
which will be identified in notices to shareholders. There is no
fixed dividend rate and there can be no assurance as to the payment
of any dividends or the realization of any capital gains.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, they will not be liable for
Federal income taxes on amounts paid by them as dividends and
distributions. 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 to determine whether the
Fund will qualify, and the Fund might not meet those tests in a
particular year. For example, if the Fund derives 30% or more of
its gross income from the sale of securities held less than three
months, it may fail to qualify (see "Tax Aspects of Covered Calls
and Hedging Instruments," above). If it does not qualify, the Fund
will be treated for tax purposes as an ordinary corporation and
will receive no tax deduction for payments of dividends and
distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year 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 and the Manager might determine in a particular
year that it would be in the best interest of shareholders for the
Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce
the amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges" above, at net
asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Transfer Agent to establish an account. The investment will be
made at net asset value per share in effect at the close of
business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of the Fund on the same basis.
Additional Information About The Fund
The Custodian. State Street Bank and Trust Company is the
Custodian of the Fund's assets. The Custodian's responsibilities
include safeguarding and controlling the Fund's portfolio
securities, collecting income on the portfolio securities and
handling the delivery of such securities to and from the Fund.
Independent Auditors. The independent auditors of the Fund audit
the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds
advised by the Manager and its affiliates.
<PAGE>
<PAGE>
Independent Auditors' Report
=====================================================================
======
The Board of Directors and Shareholders of Oppenheimer Disciplined Value Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Disciplined Value Fund (formerly Connecticut Mutual
Growth Account) as of October 31, 1996, and the related statement of operations,
the statement of changes in net assets and the financial highlights for the ten
month period then ended. 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
audit. The statement of changes in net assets for the year ended December 31,
1995 and the financial highlights for the five years ended December 31, 1995
were audited by other auditors whose report dated February 9, 1996 expressed an
unqualified opinion on this information.
We conducted our audit 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 as of October 31, 1996 by
correspondence with the custodian and brokers; and where confirmations 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Disciplined Value Fund as of October 31, 1996, and the results of
its operations, the changes in its net assets, and the financial highlights for
the ten month period ended October 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1996
Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
=========================================
STATEMENT OF INVESTMENTS October 31, 1996
FACE
MARKET VALUE
AMOUNT
SEE NOTE 1
=====================================================================
===========================================
==================
U.S. GOVERNMENT OBLIGATIONS - 13.8%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C> <C>
<C>
Federal Home Loan Bank Consolidated Disc. Nts., 5.50%, 11/1/96
$18,800,000
$ 18,800,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Federal Home Loan Mortgage Corp., 5.18%, 11/18/96 7,000,000
6,982,877
-------------
Total U.S. Government Obligations (Cost $25,782,877)
25,782,877
SHARES
=====================================================================
===========================================
==================
COMMON STOCKS - 85.7%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BASIC MATERIALS - 5.0%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CHEMICALS - 2.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Cabot Corp. 12,500
301,562
- ----------------------------------------------------------------------------------------------------------------
- -------
Potash Corp. of Saskatchewan, Inc. 31,300
2,218,387
- ----------------------------------------------------------------------------------------------------------------
- -------
Union Carbide Corp. 58,700
2,502,087
-------------
5,022,036
- ----------------------------------------------------------------------------------------------------------------
- ------------------
METALS - 1.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
UCAR International, Inc. (1) 45,400
1,776,275
- ----------------------------------------------------------------------------------------------------------------
- ------------------
PAPER - 1.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Fort Howard Corp. (1) 95,700
2,452,312
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER CYCLICALS - 9.4%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AUTOS & HOUSING - 0.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Black & Decker Corp. 37,300
1,394,087
- ----------------------------------------------------------------------------------------------------------------
- ------------------
LEISURE & ENTERTAINMENT - 2.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
AMR Corp. (1) 30,600
2,570,400
- ----------------------------------------------------------------------------------------------------------------
- -------
Northwest Airlines Corp., Cl. A (1) 43,500
1,440,937
-------------
4,011,337
- ----------------------------------------------------------------------------------------------------------------
- ------------------
RETAIL: GENERAL - 5.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
Eckerd Corp. (1) 77,700
2,156,175
- ----------------------------------------------------------------------------------------------------------------
- -------
Federated Department Stores, Inc. (1) 76,500
2,524,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Price/Costco, Inc. (1) 109,100
2,168,362
- ----------------------------------------------------------------------------------------------------------------
- -------
U.S. Industries, Inc. (1) 91,400
2,467,800
-------------
9,316,837
- ----------------------------------------------------------------------------------------------------------------
- ------------------
RETAIL: SPECIALTY - 1.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Toys 'R' Us, Inc. (1) 85,500
2,896,312
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER NON-CYCLICALS - 14.0%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BEVERAGES - 1.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Anheuser-Busch Cos., Inc. 72,900
2,806,650
- ----------------------------------------------------------------------------------------------------------------
- ------------------
FOOD - 5.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Stores Co. 77,400
3,202,425
- ----------------------------------------------------------------------------------------------------------------
- -------
Archer-Daniels-Midland Co. 143,390
3,118,732
- ----------------------------------------------------------------------------------------------------------------
- -------
Dole Food Co. 44,500
1,735,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Kroger Co. (1) 65,100
2,905,088
-------------
10,961,745
</TABLE>
5 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
=========================================
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/DRUGS - 1.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
Bristol-Myers Squibb Co. 26,900
$ 2,844,675
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/SUPPLIES & SERVICES - 2.4%
- ------------------------------------------------------------------------------------------------------------------
- -----
Columbia/HCA Healthcare Corp. 56,700
2,027,025
- ----------------------------------------------------------------------------------------------------------------
- -------
OrNda Healthcorp (1) 92,400
2,517,900
-------------
4,544,925
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HOUSEHOLD GOODS - 2.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Premark International, Inc. 125,800
2,626,075
- ----------------------------------------------------------------------------------------------------------------
- -------
Tupperware Corp. 48,500
2,491,688
-------------
5,117,763
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ENERGY - 5.2%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
OIL-INTEGRATED - 5.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Amoco Corp. 32,200
2,439,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Chevron Corp. 61,500
4,043,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Mobil Corp. 28,500
3,327,375
-------------
9,810,150
- ----------------------------------------------------------------------------------------------------------------
- ------------------
FINANCIAL - 13.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BANKS - 7.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Bank of Boston Corp. 60,300
3,859,200
- ----------------------------------------------------------------------------------------------------------------
- -------
BankAmerica Corp. 48,700
4,456,050
- ----------------------------------------------------------------------------------------------------------------
- -------
Chase Manhattan Corp. (New) 9,000
771,750
- ----------------------------------------------------------------------------------------------------------------
- -------
NationsBank Corp. 25,500
2,403,375
- ----------------------------------------------------------------------------------------------------------------
- -------
PNC Bank Corp. 66,300
2,403,375
-------------
13,893,750
- ----------------------------------------------------------------------------------------------------------------
- ------------------
DIVERSIFIED FINANCIAL - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Crescent Real Estate Equities, Inc. 36,400
1,519,700
- ----------------------------------------------------------------------------------------------------------------
- -------
Salomon, Inc. 65,300
2,946,663
-------------
4,466,363
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INSURANCE - 3.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
AFLAC, Inc. 68,900
2,764,613
- ----------------------------------------------------------------------------------------------------------------
- -------
General Re Corp. 11,300
1,663,925
- ----------------------------------------------------------------------------------------------------------------
- -------
Travelers/Aetna Property Casualty Corp., Cl. A 91,300
2,739,000
-------------
7,167,538
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL - 12.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
MANUFACTURING - 11.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
AGCO Corp. 92,900
2,357,338
- ----------------------------------------------------------------------------------------------------------------
- -------
Case Corp. 62,200
2,892,300
- ----------------------------------------------------------------------------------------------------------------
- -------
Deere & Co. 61,000
2,546,750
- ----------------------------------------------------------------------------------------------------------------
- -------
General Signal Corp. 62,400
2,542,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Ingersoll-Rand Co. 58,600
2,439,225
- ----------------------------------------------------------------------------------------------------------------
- -------
Mark IV Industries, Inc. 50,902
1,100,756
- ----------------------------------------------------------------------------------------------------------------
- -------
Textron, Inc. 44,000
3,905,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Tyco International Ltd. 64,400
3,195,850
-------------
20,980,019
</TABLE>
6 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TRANSPORTATION - 1.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
PACCAR, Inc. 15,300
$ 852,975
- ----------------------------------------------------------------------------------------------------------------
- -------
Union Pacific Corp. 32,600
1,829,675
-------------
2,682,650
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TECHNOLOGY - 14.4%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AEROSPACE/DEFENSE - 9.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
General Dynamics Corp. 40,300
2,765,588
- ----------------------------------------------------------------------------------------------------------------
- -------
Goodrich (B.F.) Co. 42,300
1,792,463
- ----------------------------------------------------------------------------------------------------------------
- -------
Lockheed Martin Corp. 39,071
3,501,738
- ----------------------------------------------------------------------------------------------------------------
- -------
McDonnell Douglas Corp. 67,900
3,700,550
- ----------------------------------------------------------------------------------------------------------------
- -------
Rockwell International Corp. 44,600
2,453,000
- ----------------------------------------------------------------------------------------------------------------
- -------
TRW, Inc. 28,700
2,597,350
-------------
16,810,689
- ----------------------------------------------------------------------------------------------------------------
- ------------------
COMPUTER HARDWARE - 3.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Dell Computer Corp. (1) 25,200
2,050,650
- ----------------------------------------------------------------------------------------------------------------
- -------
Gateway 2000, Inc. (1) 21,600
1,016,550
- ----------------------------------------------------------------------------------------------------------------
- -------
Storage Technology Corp. (New) (1) 86,300
3,678,538
-------------
6,745,738
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRONICS - 1.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Atmel Corp. (1) 8,400
213,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Intel Corp. 23,500
2,582,063
- ----------------------------------------------------------------------------------------------------------------
- -------
Waters Corp. (1) 17,400
539,400
-------------
3,334,613
- ----------------------------------------------------------------------------------------------------------------
- ------------------
UTILITIES - 11.5%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRIC UTILITIES - 4.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Electric Power Co., Inc. 33,100
1,373,650
- ----------------------------------------------------------------------------------------------------------------
- -------
CalEnergy, Inc. (1) 48,000
1,392,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Entergy Corp. 77,700
2,175,600
- ----------------------------------------------------------------------------------------------------------------
- -------
FPL Group, Inc. 44,300
2,037,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Texas Utilities Co. 54,900
2,223,450
-------------
9,202,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
GAS UTILITIES - 5.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Columbia Gas System, Inc. (The) 86,600
5,260,950
- ----------------------------------------------------------------------------------------------------------------
- -------
PanEnergy Corp. 101,900
3,923,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Questar Corp. 27,900
1,004,400
-------------
10,188,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TELEPHONE UTILITIES - 1.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
GTE Corp. 50,900
2,144,163
-------------
Total Common Stocks (Cost $134,182,459)
160,571,627
- ----------------------------------------------------------------------------------------------------------------
- -------
TOTAL INVESTMENTS, AT VALUE (COST $159,965,336)
99.5%
186,354,504
- ----------------------------------------------------------------------------------------------------------------
- -------
OTHER ASSETS NET OF LIABILITIES 0.5
999,004
------
-------------
NET ASSETS 100.0%
$187,353,508
======
=============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
7 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================================
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
=====================================================================
===========================================
==================
<S> <C>
<C>
ASSETS Investments, at value (cost $159,965,336) - see accompanying
statement
$186,354,504
- --------------------------------------------------------------------------------------------------
Cash
1,903,355
- --------------------------------------------------------------------------------------------------
Receivables:
Investments sold
855,619
Shares of capital stock sold
404,481
Interest and dividends
127,102
-------------
Total assets
189,645,061
=====================================================================
===========================================
==================
LIABILITIES Payables and other liabilities:
Investments purchased
2,107,323
Shares of capital stock redeemed
46,764
Distribution and service plan fees
32,317
Transfer and shareholder servicing agent fees
12,790
Directors' fees
7,976
Other
84,383
-------------
Total liabilities
2,291,553
=====================================================================
===========================================
==================
NET ASSETS
$187,353,508
=============
=====================================================================
===========================================
==================
COMPOSITION OF Par value of shares of capital stock
$ 9,534
NET ASSETS
- --------------------------------------------------------------------------------------------------
Additional paid-in capital
147,179,680
- --------------------------------------------------------------------------------------------------
Undistributed net investment income
479,425
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions
13,295,701
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Note 3
26,389,168
-------------
Net assets
$187,353,508
=============
=====================================================================
===========================================
==================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on
net assets of $180,784,352 and 9,201,201 shares of capital stock
outstanding)
$19.65
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$20.85
- --------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $5,854,228 and 296,100 shares of capital stock outstanding)
$19.77
- --------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $714,928 and 36,533 shares of capital stock outstanding)
$19.57
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================================================
STATEMENT OF OPERATIONS FOR THE TEN MONTHS ENDED
OCTOBER 31, 1996(1)
=====================================================================
===========================================
==================
<S> <C>
<C>
INVESTMENT INCOME Dividends (net of foreign withholding taxes of $1,451)
$ 1,741,056
- --------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $1,612)
735,017
-------------
Total income
2,476,073
=====================================================================
===========================================
==================
EXPENSES Management fees - Note 4
719,186
- --------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A
275,407
Class B
24,189
Class C
1,717
- --------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4
154,397
- --------------------------------------------------------------------------------------------------
Custodian fees and expenses
41,841
- --------------------------------------------------------------------------------------------------
Legal and auditing fees
38,719
- --------------------------------------------------------------------------------------------------
Shareholder reports
32,274
- --------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A
14,944
Class B
1,470
Class C
211
- --------------------------------------------------------------------------------------------------
Accounting service fees
12,500
- --------------------------------------------------------------------------------------------------
Directors' fees and expenses - Note 1
7,976
- --------------------------------------------------------------------------------------------------
Other
1,613
-------------
Total expenses
1,326,444
=====================================================================
===========================================
==================
NET INVESTMENT INCOME
1,149,629
=====================================================================
===========================================
==================
REALIZED AND Net realized gain on investments
13,385,207
UNREALIZED GAIN
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
665,122
-------------
Net realized and unrealized gain
14,050,329
=====================================================================
===========================================
==================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 15,199,958
=============
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to October 31.
See accompanying Notes to Financial Statements.
9 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
===================================
STATEMENTS OF CHANGES IN NET ASSETS
TEN MONTHS
YEAR ENDED
ENDED OCTOBER 31,
DECEMBER 31,
1996(1)
1995
=====================================================================
===========================================
==================
<S> <C> <C>
<C>
OPERATIONS Net investment income $ 1,149,629
$ 1,501,707
- ---------------------------------------------------------------------------------------------------
Net realized gain 13,385,207
7,939,891
- ----------------------------------
Net change in unrealized appreciation or depreciation 665,122
20,902,301
- ----------------------------------
Net increase in net assets resulting
from operations 15,199,958
30,343,899
=====================================================================
===========================================
==================
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income:
TO SHAREHOLDERS Class A (669,566)
(1,491,101)
Class B (11,039)
(561)
Class C (1,428)
--
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (841,952)
(7,649,952)
Class B (19,962)
(42,834)
Class C (1,789)
--
=====================================================================
===========================================
==================
CAPITAL STOCK Net increase in net assets resulting from capital
TRANSACTIONS stock transactions - Note 2:
Class A 49,316,623
18,560,935
Class B 4,851,609
724,308
Class C 696,522
--
=====================================================================
===========================================
==================
NET ASSETS Total increase 68,518,976
40,444,694
- --------------------------------------------------------------------------------------------------
Beginning of period 118,834,532
78,389,838
- ----------------------------------
End of period (including undistributed net investment
income of $479,425 and $11,438, respectively) $187,353,508
$118,834,532
==================================
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to October 31.
See accompanying Notes to Financial Statements.
10 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS A
----------------------------------------------------------------------------
TEN MONTHS
ENDED
OCTOBER 31, YEAR ENDED DECEMBER 31,
1996(3) 1995 1994 1993 1992 1991
=====================================================================
==============================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $17.84 $14.20 $15.14 $14.20 $14.40 $11.62
- ------------------------------------------------------------------------------------------------------------------
- -
Income (loss) from investment
operations:
Net investment income .15 .25 .22 .30 .26 .25
Net realized and unrealized
gain (loss) 1.88 4.88 (.32) 2.64 1.44 4.00
- ------------------------------------------------------------------------------------------------------------------
- -
Total income (loss) from
investment operations 2.03 5.13 (.10) 2.94 1.70 4.25
- ------------------------------------------------------------------------------------------------------------------
- -
Dividends and distributions to
shareholders:
Dividends from net investment income (.10) (.25) (.22) (.30) (.26)
(.25)
Distributions from net realized gain (.12) (1.24) (.62) (1.70) (1.64) (1.22)
- ------------------------------------------------------------------------------------------------------------------
- -
Total dividends and distributions
to shareholders (.22) (1.49) (.84) (2.00) (1.90) (1.47)
- ------------------------------------------------------------------------------------------------------------------
- -
Net asset value, end of period $19.65 $17.84 $14.20 $15.14 $14.20
$14.40
=====================================================================
=====
=====================================================================
==============================================
TOTAL RETURN, AT NET ASSET VALUE(4) 11.41% 36.40% (0.65)%
20.91% 11.99% 36.91%
=====================================================================
==============================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $180,784 $118,118 $78,390 $64,495 $45,600
$40,716
- ------------------------------------------------------------------------------------------------------------------
- -
Average net assets (in thousands) $135,940 $ 98,063 $71,956 $54,682 $42,432
$36,087
- ------------------------------------------------------------------------------------------------------------------
- -
Ratios to average net assets:
Net investment income (loss) 1.01%(5) 1.53% 1.50% 1.95% 1.74%
1.74%
Expenses 1.13%(5) 1.22% 1.02% 1.05% 1.12%
1.19%
- ------------------------------------------------------------------------------------------------------------------
- -
Portfolio turnover rate(6) 73.9% 69.7% 98.5% 99.7% 141.7%
148.3%
Average brokerage commission rate(7) $0.0697 -- -- -- -- --
</TABLE>
1. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
2. For the period from October 1, 1995 (inception of offering) to December 31,
1995.
3. The Fund changed its fiscal year end from December 31 to October 31. On
March 18, 1996, OppenheimerFunds, Inc. became the investment adviser to the
Fund.
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.
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 October 31, 1996 were $128,801,684 and $90,147,069, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS B CLASS C
-------------------------------- ------------
TEN MONTHS PERIOD PERIOD
ENDED ENDED ENDED
OCTOBER 31, DECEMBER 31, OCTOBER 31,
1996(3) 1995(2) 1996(1)
=====================================================================
===================
PER SHARE OPERATING DATA:
<S> <C> <C> <C>
Net asset value, beginning of
period $18.08 $17.83 $18.79
- ----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .05 .02 .06
Net realized and unrealized
gain (loss) 1.83 1.40 .94
- ----------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.88 1.42 1.00
- ----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.07) (.02) (.10)
Distributions from net realized gain (.12) (1.15) (.12)
- ----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.19) (1.17) (.22)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $19.77 $18.08 $19.57
=================================================
=====================================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(4) 10.43% 8.04% 5.35%
=====================================================================
===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $5,854 $717 $715
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $2,903 $306 $342
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.22%(5) 0.21%(5) 0.04%(5)
Expenses 1.88%(5) 1.97%(5) 1.87%(5)
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(6) 73.9% 69.7% 73.9%
Average brokerage commission rate(7) $0.0697 -- $0.0697
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Disciplined Value Fund
<PAGE>
=============================
Notes to Financial Statements
=====================================================================
===========
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Disciplined Value Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. On August 15, 1996, the Board of Directors elected to change the
fiscal year end of the Fund from December to October. Accordingly, these
financial statements include information for the ten month period from
January 1, 1996 to October 31, 1996. The Fund's investment objective is to
seek capital appreciation by investing primarily in common stocks with low
price-earnings ratios and better-than-anticipated earnings. Until March 18,
1996, the Fund and the Company were named Connecticut Mutual Growth Account
and Connecticut Mutual Investment Accounts, Inc., respectively. On January
27, 1996, the policyholders of Connecticut Mutual Life Insurance Company
(CML) approved a merger of CML with Massachusetts Mutual Life Insurance
Company (MML). In connection with this change, effective March 18, 1996,
OppenheimerFunds, Inc. (the Manager) became the adviser of the Company. The
Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with respect
to matters affecting a single class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The
following is a summary of significant accounting policies consistently
followed by the Fund.
----------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last sale
price of the day or, in the absence of sales, at values based on the closing
bid or 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 Directors. Such securities which
cannot be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Directors 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.
----------------------------------------------------------------------------
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.
12 Oppenheimer Disciplined Value Fund
<PAGE>
=====================================================================
===========
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses are
allocated daily to each class of shares based upon the relative proportion
of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
----------------------------------------------------------------------------
DIRECTORS' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement
plan for the Fund's independent directors. Benefits are based on years of
service and fees paid to each director during the years of service. During
the ten months ended October 31, 1996, a provision of $7,976 was made for
the Fund's projected benefit obligations, resulting in an accumulated
liability of $7,976.
----------------------------------------------------------------------------
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.
----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
----------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain (loss) was recorded by
the Fund.
During the ten month period ended October 31, 1996, the Fund adjusted the
classification of investment income and capital gain (loss) to shareholders
to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. During
the ten month period ended October 31, 1996, amounts have been reclassified
to reflect an increase in paid-in capital of $648, a decrease in accumulated
net realized gain of $1,039, and an increase in undistributed net investment
income of $391.
----------------------------------------------------------------------------
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. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
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.
13 Oppenheimer Disciplined Value Fund
<PAGE>
=========================================
Notes to Financial Statements (Continued)
=====================================================================
===========
2. SHARES OF CAPITAL STOCK
The Fund has authorized 450 million of $0.001 par value shares of capital
stock. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
TEN MONTHS ENDED OCTOBER 31, 1996(2) YEAR ENDED
DECEMBER 31, 1995(1)
------------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 3,132,678 $ 59,597,763 1,242,427 $ 20,678,025
Dividends and distributions
reinvested 79,955 1,491,345 513,302 9,039,419
Redeemed (630,553) (11,772,485) (657,052)
(11,156,509)
---------- ------------- ---------- -------------
Net increase 2,582,080 $ 49,316,623 1,098,677 $ 18,560,935
========== ============= ==========
=============
--------------------------------------------------------------------------------------------------------------
Class B:
Sold 261,924 $ 4,955,930 37,415 $ 684,870
Dividends and distributions
reinvested 1,535 28,899 2,434 43,392
Redeemed (6,999) (133,220) (209) (3,954)
---------- ------------- ---------- -------------
Net increase 256,460 $ 4,851,609 39,640 $ 724,308
========== ============= ==========
=============
--------------------------------------------------------------------------------------------------------------
Class C:
Sold 36,414 $ 694,306 -- $ --
Dividends and distributions
reinvested 172 3,206 -- --
Redeemed (53) (990) -- --
---------- ------------- ---------- -------------
Net increase 36,533 $ 696,522 -- $ --
========== ============= ==========
=============
</TABLE>
1. For the year ended December 31, 1995 for Class A shares and for the
period from October 1, 1995 (inception of offering) to December 31, 1995 for
Class B shares.
2. For the ten months ended October 31, 1996 for Class A and Class B shares
and for the period from May 1,1996 (inception of offering) to October 31,
1996 for Class C shares. The Fund changed its fiscal year end from December
31 to October 31.
=====================================================================
===========
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1996, net unrealized appreciation on investments of
$26,389,168 was composed of gross appreciation of $27,298,502, and gross
depreciation of $909,334.
=====================================================================
===========
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 0.625% of the
first $300 million of average annual net assets, 0.500% of the next $100
million and 0.450% of net assets in excess of $400 million. Prior to
March 18, 1996, management fees were paid to G. R. Phelps & Co. (the former
Manager) at an annual rate of 0.625% of the Fund's average net assets. The
Manager has agreed to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable regulatory limit
on Fund expenses.
For the period ended October 31, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $534,988, of which $341,543
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 $149,781 and $6,734, of which $79,814 and
$4,696, respectively, were paid to an affiliated broker/dealer. During the
period ended October 31, 1996, OFDI received contingent deferred sales
charges of $3,336 upon redemption of Class B shares as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
14 Oppenheimer Disciplined Value Fund
<PAGE>
=====================================================================
=======
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
(CONTINUED)
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 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 period ended October 31,
1996, OFDI paid $191,634 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted a compensation type Distribution and Service Plan for
Class B shares to compensate OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares. OFDI
also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class B shares. Both fees
are computed on the average annual net assets of Class B shares, determined
as of the close of each regular business day. During the period ended
October 31, 1996, OFDI retained $20,026 as compensation 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 Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. As of October 31, 1996,
OFDI had incurred unreimbursed expenses of $153,254 for Class B.
The Fund has adopted a compensation type Distribution and Service Plan for
Class C shares to compensate OFDI for its services and costs in distributing
Class C shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C shares. OFDI
also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class C shares. Both fees
are computed on the average annual net assets of Class C shares, determined
as of the close of each regular business day. During the period ended
October 31, 1996, OFDI retained $1,623 as reimbursement 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 Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. As of October 31, 1996,
OFDI had incurred unreimbursed expenses of $11,314 for Class C.
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Oppenheimer Disciplined Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov
& Wein
114 West 47th Street
New York, New York 10036
75sai.#1
<PAGE>
O P P E N H E I M E R
Value Stock Fund
Prospectus dated April 15, 1997
Oppenheimer Value Stock Fund is a mutual fund with the investment
objective of seeking long-term growth of capital and income
primarily through investments in stocks of well established
companies. You should carefully review the risks associated with
an investment in the Fund.
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 April 15, 1997, 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).
OppenheimerFunds logo
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective 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
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for Certain Persons
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended December 31, 1996.
Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," from pages ____ through ____ for an explanation of how
and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
- --------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the first 1% if shares are
Charge(as a % of the year, declining redeemed within
lower of the original to 1% in the 12 months of
offering price or sixth year and purchase(2)
redemption proceeds) eliminated
thereafter(2)
- --------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- --------------------------------------------------------------------------
Exchange Fee None None None
<FN>
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.
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.
</TABLE>
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 its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets):
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------
Management Fees 0.74% 0.74% 0.74%
- -------------------------------------------------------------------
12b-1 0.24% 1.00% 1.00%
Plan Fees
- -------------------------------------------------------------------
Other Expenses 0.22% .023% 0.28%
- -------------------------------------------------------------------
Total Fund 1.20% 1.97% 2.02%
Operating Expenses
The numbers in the table above are based on the Fund's
expenses in its last fiscal year ended December 31, 1996. These
amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that year. The 12b-1 Plan Fees for
Class A shares are service fees (the maximum fee is 0.25% of
average annual net assets of that class), and for Class B and Class
C shares, are the service fee (the maximum service fee is 0.25% of
average annual net assets of the class) and the asset-based sales
charge of 0.75%. These plans are described in greater detail in
"How to Buy Shares."
The actual expenses for each class of shares in future years
may be more or less than the numbers in the table, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each
class of shares of the Fund, and 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 $69 $93 $120 $195
- -------------------------------------------------------------------
Class B Shares $70 $92 $126 $191
- -------------------------------------------------------------------
Class C Shares $31 $63 $109 $235
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- -------------------------------------------------------------------
Class A Shares $69 $93 $120 $195
- -------------------------------------------------------------------
Class B Shares $20 $62 $106 $191
- -------------------------------------------------------------------
Class C Shares $21 $63 $109 $235
* 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 Class B shares into Class
A shares after 6 years. Because of the asset-based sales charge
and the contingent deferred sales charge on Class B and Class C
shares, long-term Class B and Class C shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations. For Class B shareholders,
the automatic conversion of Class B shares to Class A shares is
designed to minimize the likelihood that this will occur. Please
refer to "How to Buy Shares - Buying Class B Shares" for more
information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
What Is The Fund's Investment Objective? The Fund seeks
long-term growth of capital and income primarily through
investments in stocks of well established companies.
What Does The Fund Invest In? Under normal market
conditions the Fund primarily invests in a diversified portfolio of
(i) common stocks or preferred stocks that pay cash dividends, (ii)
securities convertible into common stocks, and (iii) other equity
securities issued by companies with a market capitalization of at
least $500 million or with a history of at least five years of
operations as a public company, and which are listed on a national
securities exchange or traded in the over-the-counter markets. The
Fund will invest primarily in cash dividend-paying stocks. The
Fund may also write covered calls and use certain derivative
investments and hedging instruments to try to manage investment
risks. These investments are more fully explained in "Investment
Objective and Policies" starting on page ____.
Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. Prior to January 5, 1996 the
Manager was known as Oppenheimer Management Corporation. The
Manager (including a subsidiary) manages investment company
portfolios currently having over $62 billion in assets at December
31, 1996. The Manager handles the day-to-day business of the Fund.
The Fund has a sub-adviser, David L. Babson & Co., (the "Sub-
Adviser") which is also responsible for choosing the Fund's
investments. The Manager is paid a management fee by the Fund, and
the Manager, not the Fund, pays the Sub-Adviser. The Fund s
portfolio manager, is James W. MacAllen, who is employed by the
Sub-Adviser and is primarily responsible for the selection of the
Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the Manager. Please refer to "How the Fund
is Managed," starting on page ____ for more information about the
Manager and the Sub-Adviser and their fees.
How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks are subject to changes in
their value from a number of factors such as changes in general
stock market movements or changes in value of a particular stock
because of an event affecting the issuer. These changes affect the
value of the Fund's investments and its price per share. In the
OppenheimerFunds spectrum, the Fund is generally more conservative
than aggressive growth funds, but more aggressive growth and income
funds. While the Sub-Adviser tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the
Fund's objective and your shares may be worth more or less than
their original cost when you redeem them. Please refer to
"Investment Objective and Policies" and Investment Risks starting
on page ____ for a more complete discussion of the Fund's
investment risks.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How to Buy Shares" starting on page ____ for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund offers
the individual investor three classes of shares. All have the same
investment portfolio but different expenses. Class A shares are
offered with a front-end sales charge, starting at 5.75%, and
reduced for larger purchases. Class B and Class C shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge if redeemed within 6 years or 12
months of purchase, respectively. There is also an annual asset-
based sales charge on Class B and Class C shares. Please review
"How to Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for
you.
How Can I Sell My Shares? Shares can be redeemed by mail or
by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How to Sell Shares" starting
on page ____. The Fund also offers exchange privileges to other
Oppenheimer funds, described in "How to Exchange Shares" on page
____.
How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total return and
cumulative total return, which measure historical performance.
Those total returns can be compared to the returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's
performance can also be compared to broad market indices, which we
have done on pages ____. Please remember that past performance
does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended December 31, 1996 is included
in the Statement of Additional Information. The information in the
table for the fiscal periods prior to 1991 was audited by the
Fund's previous independent auditors.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.84 $14.16 $14.41 $14.19
$13.57
- ------------------------------------------------------------------------------------------------------------------
- ----------
Income (loss) from investment operations:
Net investment income .34 .32 .31 .29 .32
Net realized and unrealized gain (loss) 3.11 3.90 .16 .98
.97
- ------------------------------------------------------------------------------------------------------------------
- ----------
Total income (loss) from investment
operations 3.45 4.22 .47 1.27 1.29
- ------------------------------------------------------------------------------------------------------------------
- ----------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.30) (.31) (.29)
(.32)
Dividends in excess of net investment
income -- -- (.01) -- --
Distributions from net realized gain (.61) (.24) (.40) (.76)
(.35)
- ------------------------------------------------------------------------------------------------------------------
- ----------
Total dividends and distributions
to shareholders (.96) (.54) (.72) (1.05) (.67)
- ------------------------------------------------------------------------------------------------------------------
- ----------
Net asset value, end of period $20.33 $17.84 $14.16 $14.41
$14.19
------------------------------------------------------------------
------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
TOTAL RETURN, AT NET ASSET VALUE(2) 19.39% 30.04%
3.28% 8.97% 9.61%
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $148,129 $136,270 $92,728
$90,470 $59,376
- ------------------------------------------------------------------------------------------------------------------
- ----------
Average net assets (in thousands) $144,498 $115,137 $90,158
$80,229 $53,485
- ------------------------------------------------------------------------------------------------------------------
- ----------
Ratios to average net assets:
Net investment income 1.73% 1.98% 2.16% 1.97%
2.34%
Expenses, before voluntary reimbursement 1.20% 1.28% 1.27%
1.24% 1.19%
Expenses, net of voluntary reimbursement N/A N/A N/A N/A
N/A
- ------------------------------------------------------------------------------------------------------------------
- ----------
Portfolio turnover rate(3) 14.5% 11.8% 16.3% 24.3%
12.3%
Average brokerage commission rate(4) $0.0573 $0.0597 -- --
--
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
1991(1) 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.39 $12.08 $10.47 $9.51
$9.98
- ------------------------------------------------------------------------------------------------------------------
- ----------
Income (loss) from investment operations:
Net investment income .33 .37 .40 .33 .34
Net realized and unrealized gain (loss) 2.49 (.57) 1.87 1.15
(.22)
- ------------------------------------------------------------------------------------------------------------------
- ----------
Total income (loss) from investment
operations 2.82 (.20) 2.27 1.48 .12
- ------------------------------------------------------------------------------------------------------------------
- ----------
Dividends and distributions to shareholders:
Dividends from net investment income (.33) (.39) (.41) (.33)
(.41)
Dividends in excess of net investment
income -- -- -- -- --
Distributions from net realized gain (.31) (.10) (.25) (.19)
(.18)
- ------------------------------------------------------------------------------------------------------------------
- ----------
Total dividends and distributions
to shareholders (.64) (.49) (.66) (.52) (.59)
- ------------------------------------------------------------------------------------------------------------------
- ----------
Net asset value, end of period $13.57 $11.39 $12.08 $10.47
$9.51
---------------------------------------------------------------
---------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
TOTAL RETURN, AT NET ASSET VALUE(2) 25.23% (1.53)%
21.93% 15.61% 1.10%
- ------------------------------------------------------------------------------------------------------------------
- ----------
- ------------------------------------------------------------------------------------------------------------------
- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $49,381 $40,153 $37,713
$27,434 $19,377
- ------------------------------------------------------------------------------------------------------------------
- ----------
Average net assets (in thousands) $45,581 $39,104 $33,742
$24,658 $22,322
- ------------------------------------------------------------------------------------------------------------------
- ----------
Ratios to average net assets:
Net investment income 2.59% 3.22% 3.51% 3.45%
3.15%
Expenses, before voluntary reimbursement 1.31% 1.36% 1.40%
1.21% 0.70%
Expenses, net of voluntary reimbursement 1.26% 1.30% 1.30%
1.19% N/A
- ------------------------------------------------------------------------------------------------------------------
- ----------
Portfolio turnover rate(3) 14.5% 13.5% 14.9% 13.1%
10.8%
Average brokerage commission rate(4) -- -- -- --
- --
</TABLE>
1. On March 28, 1991, OppenheimerFunds, Inc. became the investment adviser to
the Fund.
2. 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.
3. 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 December 31, 1996 were
$28,498,803 and $23,590,977, respectively.
4. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993(2)
- ------------------------------------------------------------------------------------------------------------------
- ----
- ------------------------------------------------------------------------------------------------------------------
- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.73 $14.09 $14.35
$14.60
- ------------------------------------------------------------------------------------------------------------------
- ----
Income from investment operations:
Net investment income .19 .21 .17 .17
Net realized and unrealized gain 3.09 3.86 .19 .51
- ------------------------------------------------------------------------------------------------------------------
- ----
Total income from investment
operations 3.28 4.07 .36 .68
- ------------------------------------------------------------------------------------------------------------------
- ----
Dividends and distributions to shareholders:
Dividends from net investment income (.21) (.19) (.21) (.17)
Dividends in excess of net investment
income -- -- (.01) --
Distributions from net realized gain (.61) (.24) (.40) (.76)
- ------------------------------------------------------------------------------------------------------------------
- ----
Total dividends and distributions
to shareholders (.82) (.43) (.62) (.93)
- ------------------------------------------------------------------------------------------------------------------
- ----
Net asset value, end of period $20.19 $17.73 $14.09 $14.35
---------------------------------------------------------
---------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ----
- ------------------------------------------------------------------------------------------------------------------
- ----
TOTAL RETURN, AT NET ASSET VALUE(2) 18.50% 29.03%
2.50% 4.63%
- ------------------------------------------------------------------------------------------------------------------
- ----
- ------------------------------------------------------------------------------------------------------------------
- ----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $40,142 $26,647 $10,893
$5,158
- ------------------------------------------------------------------------------------------------------------------
- ----
Average net assets (in thousands) $33,258 $18,857 $7,834
$2,527
- ------------------------------------------------------------------------------------------------------------------
- ----
Ratios to average net assets:
Net investment income 0.96% 1.19% 1.45% 0.97%
(7)
Expenses, before voluntary reimbursement 1.97% 2.07% 2.01%
2.14% (7)
Expenses, net of voluntary reimbursement N/A N/A N/A
N/A
- ------------------------------------------------------------------------------------------------------------------
- ----
Portfolio turnover rate(3) 14.5% 11.8% 16.3% 24.3%
Average brokerage commission rate(4) $0.0573 $0.0597 -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------
YEAR ENDED DECEMBER 31,
1996 1995(5)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.81 $17.12
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .22 .02
Net realized and unrealized gain 3.05 .97
- --------------------------------------------------------------------------------------
Total income from investment
operations 3.27 .99
- --------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.23) (.06)
Dividends in excess of net investment
income -- --
Distributions from net realized gain (.61) (.24)
- --------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.84) (.30)
- --------------------------------------------------------------------------------------
Net asset value, end of period $20.24 $17.81
------------------------
------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 18.39% 5.89%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,856 $130
- --------------------------------------------------------------------------------------
Average net assets (in thousands) $904 $57
- --------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.92% 0.56%(7)
Expenses, before voluntary reimbursement 2.02% 2.37%(7)
Expenses, net of voluntary reimbursement N/A N/A
- --------------------------------------------------------------------------------------
Portfolio turnover rate(3) 14.5% 11.8%
Average brokerage commission rate(4) $0.0573 $0.0597
</TABLE>
[FN]
2. 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.
3. 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 December 31, 1996 were
$28,498,803 and $23,590,977, respectively.
4. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
5. For the period from October 2, 1995 (inception of offering) to December
31, 1995.
6. For the period from May 1, 1993 (inception of offering) to December
31, 1993.
7. Annualized.
Investment Objective and Policies
Objective. The Fund seeks long-term growth of capital and income
primarily through investments in stocks of well established
companies.
Investment Policies and Strategies. In seeking its investment
objective the Fund will invest, under normal market conditions,
primarily in a diversified portfolio of (i) common stocks or
preferred stocks that pay cash dividends, (ii) securities
convertible into common stocks, and (iii) other equity securities
issued by companies with a market capitalization of at least $500
million or with a history of at least five years of operations as
a public company, and which are listed on a national securities
exchange or traded in the over-the-counter markets. The Fund will
invest primarily in cash dividend-paying stocks. To provide
liquidity or for temporary defensive purposes, the Fund may invest
all or any portion of its assets in high-quality, short-term money
market instruments.
The Sub-Adviser will seek to invest the Fund s assets in the
securities of companies which, in its opinion, are of high quality,
offer above-average dividend growth potential and are attractively
valued in the marketplace. This would include stocks selling below
their historical price/earnings ranges relative to the Standard &
Poor's 500 Stock Index or below their historical price/book value
ranges. The Sub-Adviser will give strong consideration to
securities of companies whose current prices do not adequately
reflect, in its opinion, the ongoing business value of the
enterprise.
The Fund may try to hedge against losses in the value of its
portfolio securities by using hedging strategies described below.
The Sub-Adviser may employ special investment techniques, also
described below. Additional information about the securities the
Fund may invest in, the hedging strategies the Fund may employ and
the special investment techniques may be found under the same
headings in the Statement of Additional Information.
Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies it follows to try to achieve its
objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those investment
policies. The Fund's investment policies and techniques are not
"fundamental" unless this Prospectus or the Statement of Additional
Information says that a particular policy is "fundamental." The
Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this prospectus.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." While it is a policy of the
Fund generally not to engage in trading for short-term gains,
portfolio changes will be made without regard to the length of time
a security has been held
or whether a sale would result in a profit or loss, if in the Sub-
Adviser's judgment, such transactions are advisable in light of the
circumstances of a particular company or within a particular
industry or in light of market, economic or financial conditions.
High portfolio turnover may affect the ability of the Fund to
qualify as a "regulated investment company" under the Internal
Revenue Code for tax deductions for dividends and capital gains
distributions the Fund pays to shareholders. Portfolio turnover
affects brokerage costs, dealer markups and other transaction
costs, and results in the Fund's realization of capital gains or
losses for tax purposes. See "Financial Highlights" above,
"Dividends, Capital Gains and Taxes" below and "Brokerage Policies
of the Fund" in the Statement of Additional Information.
Investment Risks.
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 obligation 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 companies the Fund invests in and the
investment techniques the Fund uses, some of which may be
speculative, the Fund is designed for those investors who are
investing for the long-term and who are willing to accept greater
risks of loss of their capital in the hope of achieving capital
appreciation. Investing for capital appreciation entails the risk
of loss of all or part of your principal. There is no assurance
that the Fund will achieve its objective, and when you redeem your
shares, they may be worth more or less than what you paid for them.
Stock Investment Risks. Because the Fund usually invests a
substantial portion (and from time to time may invest all) of its
assets in stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets. This market risk will
affect the Fund's net asset values per share, which will fluctuate
as the values of the Fund's portfolio securities change. Not all
stock prices change uniformly or at the same time, and other
factors can affect a particular stock's price (for example, poor
earnings reports by an issuer, loss of major customers, major
litigation against an issuer, or changes in government regulations
affecting an industry). Not all of these factors can be predicted.
Changes in the overall market conditions and prices can occur at
any time.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial
amount of the stock of any one company. Also, the Fund does not
concentrate its investment in any one industry or group of
industries
Foreign Securities Have Special Risks. There are certain
risks of holding foreign securities. The first is the risk of
changes in foreign currency values. Because the Fund may purchase
securities denominated in foreign currencies, a change in the value
of a foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of the Fund's securities
denominated in that currency. The currency rate change will also
affect its income available for distribution. Although the Fund's
investment income from foreign securities may be received in
foreign currencies, the Fund will be required to distribute its
income in U.S. dollars. Therefore, the Fund will absorb the cost
of currency fluctuations. If the Fund suffers losses on foreign
currencies after it has distributed its income during the year, the
Fund may find that it has distributed more income than was
available from actual investment income. That could result in a
return of capital to shareholders.
There are other risks of foreign investing. For example,
foreign issuers are not required to use generally-accepted
accounting principles. If foreign securities are not registered
for sale in the U.S. under U.S. securities laws, the issuer does
not have to comply with the disclosure requirements of U.S. laws,
which are generally more stringent than foreign laws. The values
of foreign securities investments will be affected by other
factors, including exchange control regulations or currency
blockage and possible expropriation or nationalization of assets.
There may also be changes in governmental administration or
economic or monetary policy in the U.S. or abroad that can affect
foreign investing. In addition, it is generally more difficult to
obtain court judgments outside the United States if the Fund has to
sue a foreign broker or issuer. Additional costs may be incurred
because foreign broker commissions are generally higher than U.S.
rates, and there are additional custodial costs associated with
holding securities abroad.
There are special risks in investing in derivative
investments. The Fund may invest in a number of different kinds of
derivative investments. In general, a derivative investment is
a specially designed investment whose performance is linked to the
performance of another investment of security. 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, may not
perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of 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" for
an explanation.
Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Sub-Adviser uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on a security that has increased in value, the
Fund will be required to sell the security at the call price and
will not be able to realize any profit if the security has
increased in value above the call price. The use of forward
contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign
currency. To limit its exposure in foreign currency exchange
contracts, the Fund limits its exposure to the amount of its assets
denominated in the foreign currency. Risks of hedging instruments
are described in greater detail in the Statement of Additional
Information.
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.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 10% of its net assets in
illiquid or restricted securities (the Board may increase that
limit to 15%). Certain restricted securities, eligible for resale
to qualified institutional purchasers, are not subject to that
limit. 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.
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 will receive
collateral for a loan. These loans are limited to not more than
25% of the value of the Fund's net assets and are subject to the
conditions described in the Statement of Additional Information.
The Fund presently does not intend to engage in loans of securities
that will exceed 5% of the value of the Fund's total assets in the
coming year.
Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized.
However, if the vendor of the securities under a repurchase
agreement fails to pay the resale price on the delivery date, the
Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days because such
repurchase agreements may be illiquid. 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.
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. These terms
refer to securities that have been created and for which a market
exists, but which are not available for immediate delivery or to be
delivered at a later date. There may be a risk of loss to the Fund
if the value of the security changes prior to the settlement date.
Securities of Foreign Governments and Companies. The Fund
may invest in debt and equity securities issued or guaranteed by
foreign companies, and debt securities of foreign governments or
their agencies. Foreign debt securities may include government
bonds, and debentures and notes issued by foreign companies. Some
of these debt securities may have variable interest rates or
"floating" interest rates that change as prevailing levels of
interest rates change. Those changes will affect the income the
Fund receives. The Fund is not restricted in the amount of its
assets it may invest in foreign countries or in which countries.
These securities are described in more detail in the Statement of
Additional Information.
Derivative Investments. In general, a "Derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The Fund can
invest in a number of different kinds of "derivative investments."
They are used in some cases for hedging purposes and in other cases
to enhance total return. In the broadest sense, exchange-traded
options and futures contracts (discussed in "Hedging," below) may
be considered "derivative investments."
Hedging. The Fund may purchase and sell certain kinds of
futures contracts, put and call options, forward contracts, and
options on futures and broadly-based securities indices. These are
all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on the
use of them, described below. The hedging instruments the Fund may
use are described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call
options, tend to increase the Fund's exposure to the securities
market. Forward contracts are used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options are used to try to protect against declines in the dollar
value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for
liquidity purposes or defensive reasons.
Futures. The Fund may buy and sell futures contracts that
relate to broadly-based securities indices (these are referred to
as Stock Index Futures) or debt securities (these are referred to
as "Interest Rate Futures").
Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may purchase calls on Stock Index Futures, Interest
Rate Futures, broadly-based securities indices and foreign
currencies, or to terminate its obligation on a call the Fund
previously wrote. The Fund may write (that is, sell) covered call
options. When the Fund writes a call, it receives cash (called a
premium). The call gives the buyer the ability to buy the
investment on which the call was written from the Fund at the call
price during the period in which the call may be exercised. If the
value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the
Fund keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can
purchase those puts that relate to (1) securities the Fund owns,
(2) Stock Index Futures or Interest Rate Futures (whether or not
the Fund owns that particular Future in its portfolio), (3)
broadly-based securities indices, or (4) foreign currencies.
The Fund may write puts on securities, broadly-based
securities indices, foreign currencies, Stock Index Futures or
Interest Rate Futures. Writing puts requires the segregation of
liquid assets to cover the put. The Fund will not write a put if
it would require more than 50% of its net assets to be segregated
to cover the put obligation.
The Fund may buy and sell calls if certain conditions are met.
Calls the Fund buys or sells must be listed on a domestic or
foreign securities or commodities exchange or quoted on the
Automated Quotation System ( NASDAQ ) of the Nasdaq Stock Market,
Inc. Each call the Fund writes must be "covered" while it is
outstanding. That means the Fund owns the investment on which the
call is written. After the Fund writes a call, not more than 25%
of the Fund's total assets may be subject to calls. In the case of
puts and calls on foreign currency, they must be traded on a
securities or commodities exchange, or quoted by recognized dealers
in these options. The Fund may also write calls on Futures
contracts it owns, but those calls must be covered by securities or
other liquid assets of any type including equity and debt
securities of any grade, the Fund owns and segregates to enable it
to satisfy its obligations if the call is exercised. A call or put
option may not be purchased if the value of all of the Fund's put
and call options would exceed 5% of the Fund's total assets.
Other Investment Restrictions. The Fund has other investment
restrictions which are "fundamental" policies. Under these
fundamental policies, the Fund cannot do any of the following:
The Fund cannot make short sales except for sales "against
the box";
The Fund cannot borrow money or enter into reverse
repurchase agreements, except that the Fund may borrow money from
banks and enter into reverse repurchase agreements as a temporary
measure for extraordinary or emergency purposes (but not for the
purpose of making investments), provided that the aggregate amount
of all such borrowings and commitments under such agreements does
not, at the time of borrowing or of entering into such an
agreement, exceed 10% of the Fund's total assets taken at current
market value; the Fund will not purchase additional portfolio
securities at any time that the aggregate amount of its borrowings
and its commitments under reverse repurchase agreements exceeds 5%
of the Fund's net assets (for purposes of this restriction,
entering into portfolio lending agreements shall not be deemed to
constitute borrowing money);
The Fund cannot concentrate its investments in any
particular industry except that it may invest up to 25% of the
value of its total assets in the securities of issuers of any one
industry (of the utility companies, gas, electric, water and
telephone will each be considered as a separate industry); and
The Fund cannot 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 (1)
more than 5% of the Fund's total assets would be invested in the
securities of such issuer, or (2) the Fund would own more than 10%
of that issuer's voting securities.
Unless the prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time that 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 Investment Restrictions in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the
"Trust") was organized in 1982 as a multi-series Massachusetts
business trust and Oppenheimer Value Stock Fund (the "Fund") is a
series of that Trust. The Trust is an open-end, diversified
management investment company, with an unlimited number of
authorized shares of beneficial interest. The Fund is one of two
series of the Trust. Each of the two series of the Trust is a
mutual fund that issues its own shares, has its own investment
portfolio, and its own assets and liabilities.
The Trust is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and provides more information about them and the officers of the
Fund. Although the Fund 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 three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Shares of each class may
have separate voting rights on matters in which interests of one
class are different from interests of another class, and shares of
a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable. Please refer to
How the Fund is Managed in the Statement of Additional
Information for more information on voting of shares.
The Manager and Its Affiliates. Since March 28, 1991, the Fund has
been managed by the Manager, which handles its day-to-day business.
The Manager carries out its duties, subject to the policies
established by the Board of Trustees, under an investment advisory
agreement which states the Manager s responsibilities. The
agreement sets forth the fees paid by the Fund to the manager and
describes the expenses that the Fund is responsible to pay to
conduct its business. David L. Babson & Co., Inc., (the Sub-
Adviser ), acts as the Fund s sub-adviser. The Sub-Adviser is
responsible for choosing the Fund s investments and its duties and
responsibilities are set forth in its contract with the Manager.
The Manager, not the Fund, pays the Sub-Adviser. The Sub-Adviser
began managing equity assets in 1968. It became a wholly-owned
indirect subsidiary of Massachusetts Mutual Life Insurance Company
( MassMutual ) in June 1995. It advises other mutual funds and
institutional clients. On January 1, 1997, the Fund s previous
sub-advisor, Concert Capital Management, Inc. merged into the Sub-
Advisor which assumed its contract with the Manager.
The Manager has operated as an investment adviser since 1959.
The Manager (including subsidiaries) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $62 billion as of December 31, 1996, held in more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by MassMutual.
Portfolio Manager. The Portfolio Manager of the Fund is
James W. MacAllen, a Managing Director of the Sub-Adviser. He is
responsible for the day-to-day management of the Fund's portfolio
since May 1, 1996. Mr. MacAllen is also a Senior Vice President of
the Sub-Adviser. Mr MacAllen has been associated with the Sub-
Adviser since January 1, 1996 prior to which he associated with
Hagler, Mastrovita & Hewitt. Mr. MacAllen was also President and
Chief Executive Officer of Wilmington Capital Management and Senior
Vice President and head of the Securities Division of MassMutual.
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 $100
million of the Fund's average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million of net assets, and
0.66% of average annual net assets in excess of $500 million. The
Fund's management fee for its last fiscal year was % of average
annual net assets for its Class A, Class B and Class C shares.
Under the Sub-Advisory Agreement, the Manager pays the Sub-
Adviser the following annual fees, which decline on additional
assets as the Fund grows: 0.40% of the first $50 million of the
Fund's average annual net assets and 0.20% of net assets in excess
of $50 million.
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 the Fund s 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. The
Fund usually uses brokers when buying portfolio securities. When
deciding which brokers to use, the Sub-Adviser is permitted by the
sub-advisory agreement to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager or the Sub-
Adviser or their affiliates serve as investment adviser.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other Oppenheimer funds managed
by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other
Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free
number shown below under How to Sell Shares in this Prospectus and
on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"cumulative total return" and "average annual total return" to
illustrate its performance. The performance of each class of
shares is shown separately, because the performance of each class
of shares will usually be different, as a result of the different
kinds of expenses each class bears. This performance information
may be useful to help you see how well your investment has done and
to compare it to other funds or market indices, as we have done
below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance data
is described below, but more detailed information about how total
returns are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment
performance will vary over time, depending on market conditions,
the composition of the portfolio, expenses and which class of
shares you purchase.
Total Returns. There are different types of "total returns"
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, 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 the sales charge, and those returns would
be less if the sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during its last fiscal year ended
December 31, 1996, followed by a graphical comparison of the Fund's
performance to an appropriate broad-based market index.
Management's Discussion of Performance. During the Fund's
fiscal year ended December 31, 1996,
The Funds portfolio holdings, allocation and strategies are
subject to change.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held at December
31, 1996; in the case of Class A shares, from the inception of the
class on December 26, 1986, in the case of Class B shares, from the
inception of the class on May 1, 1993, and in the case of Class C
shares, performance is measured from the inception of the class on
October 2, 1995.
The performance of each class of the Fund's shares is compared
to the performance of the S&P 500 Index, an unmanaged index of 500
widely-held common stocks traded on the New York and American Stock
Exchanges and the over-the-counter market. It is widely recognized
as a general measure of stock market performance. It includes a
factor for the reinvestment of dividends but does not reflect
expenses or taxes. Index performance reflects 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 performance data
does not reflect any assessment of the risk of the investments
included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer Value Stock Fund (Class A) and S&P 500 Index
[Graph]
Average Annual Total Return of Class A Shares of the Fund at
12/31/951
1 Year 5 Years 10 Years
- -------------------------------------------------------------------
12.53% 12.54% 12.24%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer Value Stock Fund (Class B) and S&P 500 Index
[Graph]
Average Annual Total Return of Class B Shares of the Fund at
12/31/962
1 Year Life
- -------------------------------------------------------------------
13.50% 13.87%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer Value Stock Fund (Class C) and S&P 500 Index
[Graph]
Average Annual Total Return of Class C Shares of the Fund at
12/31/963
1 Year Life
- -------------------------------------------------------------------
- ---
17.39% 19.88%
1The inception data of the Fund (Class A shares) was 12/22/86. The
average annual total returns and the ending account value in the
graph reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 5.75% maximum
initial sales charge.
2Class B shares of the Fund were first publicly offered on 5/1/93.
The average annual total returns reflect reinvestment of all
dividends and capital gains distributions and are shown net of the
applicable 5% and 3% contingent deferred sales charges,
respectively, for the 1-year period and life-of-the-class. The
ending account value in the graph is net of the applicable 3%
contingent deferred sales charge.
3Class C shares of the fund were first publicly offered on 10/2/95.
The average annual total returns reflect reinvestment of all
dividends and capital gains distributions and the one year return
is shown net of the applicable 1% contingent deferred sales charge.
Past Performance is not predictive of future performance.
Graphs are not drawn to same scale.
<PAGE>
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by Retirement Plans defined in Class A
Contingent Deferred Sales Charges on page ). If you purchase
Class A shares as part of an investment of at least $1 million or
more (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. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
six years of buying them, you will normally pay a contingent
deferred sales charge. That sales charge varies depending on how
long you own your shares as described below in "Buying Class B
Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as described in "Buying Class C
Shares," below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time
and you plan to purchase additional shares, you should re-evaluate
those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to Class A, Class
B and Class C shares, and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which,
like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in your investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary,
based on the Fund's actual investment returns, and the operating
expenses borne by each class of shares, and which class of shares
you invest in. The factors discussed below are not intended to be
investment advice or recommendations, because each investor's
financial considerations are different. The discussion below of
the factors to consider in purchasing a particular class of shares
assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B or Class
C for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
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 Class C shares from a
single investor.
Investing for the Longer Term. If you are investing for the
longer-term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore, you should analyze your options
carefully.
Are There Differences in Account Features That Matter to
You? Because some account features may not be available to or
advisable 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 is better for you. For example, share
certificates are not available for Class B or Class C shares and if
you are considering using your shares as collateral for a loan,
that may be a factor to consider. Additionally, the dividends
payable to Class B and Class C shareholders will be reduced by the
additional expenses borne by those classes, such as the asset-based
sales charges described below and in the Statement of Additional
Information.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales charge
and asset-based sales charge is the same as the purpose of the
front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can
make initial and subsequent investments for as little as $25; and
subsequent purchases of at least $25 can be made by telephone
through AccountLink.
Under pension, profit-sharing, 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.
How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as 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.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
Buying Shares Through 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.
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, or have the Transfer Agent send redemption
proceeds or to transmit dividends and distributions to your bank
account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the Statement
of Additional Information.
At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales
charge that applies) that is next determined after the Distributor
receives the purchase order in Denver, Colorado. In most cases, to
enable you to receive that day's offering price, the Distributor or
its designated agent must receive your order by the time of day The
New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time
in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The
New York Stock Exchange is open (which is a "regular business
day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange, on a
regular business day and transmit it to the Distributor so that it
is received before the Distributor's close of business that day,
which is normally 5:00 P.M. The Distributor in its sole discretion
may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A
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 a commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
- ----------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
- ----------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
- ----------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
- ----------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
- ----------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
</TABLE>
The Distributor reserves the right to reallot the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
Purchase aggregating $1 million or more;
Purchase by a retirement plan qualified under section 401(a)
if the retirement plan has total plan assets of $500,000 or more;
Purchases by a retirement plan qualified under section
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
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 4200,000 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. 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.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the 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 commissions the Distributor paid to your dealer on all
Class A shares of all Oppenheimer funds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will
apply.
Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also count Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A shares and Class B shares of the Fund and
other Oppenheimer funds during a 13-month period, you can reduce
the sales charge rate that applies to your purchases of Class A
shares. The total amount of your intended purchases of both Class
A and Class B shares will determine the reduced sales charge rate
for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter.
More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses
and minor children) 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 benefit plans made available to
their clients (those clients may be charged a transaction fee by
their dealer, broker, financial intermediary or advisor for the
purchase or sales of Fund shares);
(1) investment advisors and financial planners 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 such investment advisors or financial planners 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;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; 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:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see Shareholder Account
Rules and Policies, below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer s portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and no further
commission will be payable if the shares are redeemed within 18
months of purchase);
for distributions from a TRAC-2000 401(k) plan 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
deferred 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.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of
the Fund. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. Payments are made by the Distributor
quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the dealer
or its customers. The payments under the Plan increase the annual
expenses of Class A shares. For more details, please refer to
"Distribution and Service Plans" in the Statement of Additional
Information.
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 the increase in net
asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in Waivers of Class B and Class C Sales Charges, below.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Beginning of Month in which On Redemptions in That Year
Purchase Order Was Accepted (As % of Amount Subject to
Charge)
- -------------------------------------------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
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. 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.
Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for its
services and costs in distributing Class B and C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor
an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C
shares. The Distributor also receives a service fee of 0.25% per
year under each plan. If either Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing
shares before the Plan was terminated.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge 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.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
C shares. Those services are similar to those provided under the
Class A Service Plan, described above. The Distributor pays the
0.25% service fees to dealers in advance for the first year after
Class B or Class C shares have been sold by the dealer and retains
the service fee paid by the Fund in that year. After the shares
have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class B shares is 4.00% of the purchase
price. The Fund pays the asset-based sales charge to the
Distributor for its services rendered in distributing Class B
shares. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee
payments it makes, and its financing costs of distributing and
selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is 1.00% of the purchase
price. Those payments, retained by the Distributor during the
first year Class C shares are outstanding, are at a fixed rate that
is not related to the Distributor's expenses. The Distributor
plans to pay the asset-based sales charge as an ongoing commission
to the dealer on Class C shares that have been outstanding for a
year or more.
The Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred
sales charges collected on redeemed shares and from the Fund under
the Distribution and Service Plan for Class B shares. Therefore,
those expenses may be carried over and paid in future years. At
December 31, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses in connection with
the sale of Class B shares of $11,881,867 (equal to 3.49% of the
Fund's net assets represented by Class B shares on that date),
which have been carried over into the present Plan year.
Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charge will be waived for
redemptions of shares in the following cases:
to make 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 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 that qualify as
"substantially equal periodic payments" under Section 72(t) of the
Internal Revenue Code, provided the distributions do not exceed 10%
of the account value annually, measured from the date the Transfer
Agent receives the request; and
distributions from OppenheimerFunds prototype 401(k) plans
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (5)
for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class
B and Class C shares sold or issued in the following cases:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; and
shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please 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.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is $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. Automatic withdrawal Plans are not advisable for
Class B and Class C shares subject to a contingent deferred sales
charge ( CDSC ) unless waivers of the CDSC apply. 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.
Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of the same class 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
fund 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
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
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.
You can sell your shares by written directions to the Transfer
Agent or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax
withholding requirements for distributions from retirement plans
and you must submit a withholding form with your request to avoid
delay. If your retirement plan account is held for you by your
employer, you must arrange for the distribution request to be sent
by the plan administrator or trustee. There are additional details
in the Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
You wish to redeem more than $50,000 worth of shares and
receive a check
The redemption check is not payable to all shareholders
listed on the account statement
The redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business or as a fiduciary, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
requests by mail to: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your request must be
received by the Transfer Agent or its 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. Shares held in an OppenheimerFunds
retirement plan or under a share certificate may not be redeemed 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 transferred to that bank account.
Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone once in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
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.
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
You must meet the minimum purchase requirements for the fund
you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457 or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price
disadvantageous to the Fund.
Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $1,000 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or Employer Identification Number when
you sign your application, or if you violate Internal Revenue
Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales charge when redeeming certain Class A, Class B and Class C
shares.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net investment income and pays such
dividends to shareholders quarterly. It is expected that
distributions paid with respect to Class A shares will generally be
higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher.
Capital Gains. The Fund may make distributions annually in
December out of any net short-term or long-term capital gains, and
the Fund may make supplemental distributions of dividends and
capital gains following the end of its fiscal year. Long-term
capital gains will be separately identified in the tax information
the Fund sends you after the end of the year. Short-term capital
gains are treated as dividends for tax purposes. There can be no
assurance that the Fund will pay any capital gains distributions in
a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in the Same Class of Shares of
Another Oppenheimer Fund Account. You can reinvest all
distributions in another Oppenheimer fund account you have
established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
"Buying a Dividend": When a fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A
capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER VALUE STOCK FUND
Graphic material included in Prospectus of Oppenheimer Value
Stock Fund: "Comparison of Total Return of Oppenheimer Value Stock
Fund with the S&P 500 Index - Change in Value of a $10,000
Hypothetical Investment"
Linear graphs will be included in the Prospectus of
Oppenheimer Value Stock Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical
$10,000 investment in each class of shares of the Fund. In the
case of Class A shares, that graph will cover each of the Fund's
fiscal years from the inception of the class (December 31, 1986)
through December 31, 1996, in the case of Class B shares the graph
will cover the periods from inception of the class (May 1, 1993)
through December 31, 1996, and in the case of Class C shares the
graph will cover the period from inception of the class (October 2,
1995) through December 31, 1996. The graphs will compare such
values with the same investments over the same time periods with
the S&P 500 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 S&P Index,
is set forth in the Prospectus under "Performance of the Fund --
Comparing the Fund's Performance to Market"
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund A S&P 500 Index
12/31/86 $9,425 $10,000
12/31/87 $9,528 $10,525
12/31/88 $11,016 $12,268
2/31/89 $13,430 $16,149
12/31/90 $13,225 $15,647
12/31/91 $16,562 $20,404
12/31/92 $18,153 $21,956
12/31/93 $19,781 $24,164
12/31/94 $20,431 $24,482
12/31/95 $26,576 $33,671
12/31/96 $31,719 $41,397
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund B(1) S&P 500 Index
05/1/93 $10,000 $10,000
12/31/93 $10,464 $10,807
12/31/94 $10,725 $10,949
12/31/95 $13,839 $15,058
12/31/96 $16,099 $18,513
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund C(2) S&P 500 Index
10/02/05 $10,000 $10,000
12/31/95 $10,589 $10,600
12/31/95 $12,536 $13,034
- -------------------
(1) Class B shares of the Fund were first publicly offered on May
1, 1993.
(2) Class C shares of the Fund were first publicly offered on
October 2, 1995.<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment 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) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement Plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages ____ to ____ of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates. Class A
shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders. Class
A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will
not apply to redemptions of Class A shares of the Fund purchased by
the following investors who were shareholders of any Former Quest
for Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March 6,
1995. In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, B or C shares of the
Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995. In the following cases, the
contingent deferred sales charge will be waived for redemptions of
Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into
which such fund merged, if those shares were purchased on or after
March 6, 1995, but prior to November 24, 1995: (1) distributions
to participants or beneficiaries from Individual Retirement
Accounts under Section 408(a) of the Internal Revenue Code or
retirement plans under Section 401(a), 401(k), 403(b) and 457 of
the Code, if those distributions are made either (a) to an
individual participant as a result of separation from service or
(b) following the death or disability (as defined in the Code) of
the participant or beneficiary; (2) returns of excess contributions
to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); (4) withdrawals under
an automatic withdrawal plan (but only for Class B or C shares)
where the annual withdrawals do not exceed 10% of the initial value
of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales
charge paid on the redemption of any Class A, B or C shares of the
Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares
in this Fund or another Oppenheimer fund.
Special Dealer Arrangements. Dealers who sold Class B shares of a
Former Quest for Value Fund to Quest for Value prototype 401(k)
plans that were maintained on the TRAC-2000 recordkeeping system
and that were transferred to an OppenheimerFunds prototype 401(k)
plan shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value
Fund to Quest for Value prototype 401(k) plans that were maintained
on the TRAC-2000 recordkeeping system and (i) the shares held by
those plans were exchanged for Class A shares, or (ii) the plan
assets were transferred to an OppenheimerFunds prototype 401(k)
plan, shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
Oppenheimer Value Stock Fund
6803 South Tucson Way
Englewood, Colorado 80112
Telephone: 1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
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., David L. Babson & Co., Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any
state to any person to whom it is unlawful to make such offer in
such state.
PR0325.001.4___ *Printed on recycled paper
<PAGE>
OPPENHEIMER VALUE STOCK FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated April 15, 1997.
This Statement of Additional Information of Oppenheimer Value
Stock Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the
Prospectus dated April 15, 1997. It should be read together with
the Prospectus which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the
toll-free number shown above.
Contents Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . .
Investment Policies and Strategies . . . . . . . . . . . .
Other Investment Techniques and Strategies . . . . . . . .
Other Investment Restrictions. . . . . . . . . . . . . . .
How the Fund is Managed. . . . . . . . . . . . . . . . . .
Organization and History . . . . . . . . . . . . . . . . .
Trustees and Officers of the Fund. . . . . . . . . . . . .
The Manager and Its Affiliates . . . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account
How to Buy Shares. . . . . . . . . . . . . . . . . . . . .
How to Sell Shares . . . . . . . . . . . . . . . . . . . .
How to Exchange Shares . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . .
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
Appendix A: Corporate Industry Classifications . . . . .A-1<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are discussed in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund invests, as well as the
strategies the Fund may use to try to achieve its objective.
Certain capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the
Prospectus.
Equity Securities
Preferred Stocks. Preferred stocks, unlike common stocks,
offer a stated dividend rate payable from the corporation's
earnings. Such preferred stock dividends may be cumulative or non-
cumulative, participating, or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline.
Preferred stock may have mandatory sinking fund provisions, as well
as call/redemption provisions prior to maturity. Those can be a
negative feature when interest rates decline. Dividends on some
preferred stock may be "cumulative," requiring all or a portion of
prior unpaid dividends to be paid. Preferred stock also generally
has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the
corporation, and may be "participating," which means that it may be
entitled to a dividend exceeding the stated dividend in certain
cases. The rights of preferred stocks on distribution of a
corporation's assets in the event of a liquidation are generally
subordinate to the rights associated with a corporation's debt
securities.
Convertible Securities. While convertible securities are a
form of debt security, in many cases their conversion feature
(allowing conversion into equity securities) causes them to be
regarded more as "equity equivalents." As a result, the rating
assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in
the case of non-convertible debt securities. To determine whether
convertible securities should be regarded as "equity equivalents,"
the Manager examines the following factors: (1) whether, at the
option of the investor, the convertible security can be exchanged
for a fixed number of shares of common stock of the issuer, (2)
whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of converting the convertible securities),
and (3) the extent to which the convertible security may be a
defensive "equity substitute," providing the ability to participate
in any appreciation in the price of the issuer's common stock.
Debt Securities
U.S. Government Securities. The U.S. government obligations
in which the Fund may invest in for defensive reasons include U.S.
Treasury bills, notes and bonds which are direct obligations of the
U.S. government and debt obligations issued, assumed, guaranteed or
sponsored by agencies or instrumentalities established under the
authority of an Act of Congress, or obligations secured by such
securities.
Floating Rate/Variable Rate Notes. Some of the notes the
Fund may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals;
floating rates are automatically adjusted according to a specified
market rate for such investments, such as a percentage of the prime
rate of a bank or the 91-day U.S. Treasury bill rate. Such
obligations may be secured by bank letters of credit or other
credit support arrangements.
Short-Term Money Market Securities. The high-quality,
short-term money market instruments the Fund may invest in to
provide liquidity or for temporary defensive purposes include U.S.
government obligations; commercial paper which at the date of the
investment is rated A-1 or A-2 by Standard & Poor's Corporation
("Standard & Poor's") or P-1 or P-2 by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, is issued by companies having an
outstanding debt issue currently rated at least A by Standard &
Poor's or Moody's; short-term obligations of corporate issuers
which at the date of investment are rated AAA or AA by Standard &
Poor's or Aaa or Aa by Moody's; bank participation certificates,
provided that at the date of investment each of the underlying
loans is made to an issuer of securities rated at least A-2, AA or
SP-2 by Standard & Poor's or P-2 or Aa by Moody's, and also
provided that the underlying loans have a remaining maturity of one
year or less; and certificates of deposit and bankers' acceptances
of banks and savings and loan associations. The Fund may also
purchase short-term money market instruments which ratings are
substantially similar to the Moody's and Standard & Poor's ratings
and are from another NRSRO.
Warrants. The Fund may invest up to 5% of the value of its
assets in warrants in an effort to build a position in the
underlying common stocks and, of such 5%, no more than 2% may be
invested in warrants that are not listed on the New York Stock
Exchange or the American Stock Exchange. A warrant typically gives
the holder the right to purchase underlying stock at a specified
price for a designated period of time. Warrants may be a
relatively volatile investment. The holder of a warrant takes the
risk that the market price of the underlying stock may never equal
or exceed the exercise price of the warrant. A warrant will expire
without value if it is not exercised or sold during its exercise
period.
Securities of Foreign Governments and Companies. As stated in
the Prospectus, the Fund may invest in equity or debt securities
(which may be dominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational
entities (described below) and foreign governments or their
agencies or instrumentalities, and in securities issued by U.S.
corporations denominated in non-U.S. currencies. All of these
securities are considered to be "Foreign Securities."
The percentage of the Fund's assets that will be allocated to
foreign securities will vary from time to time depending on, among
other things, the relative yields of foreign and U.S. securities,
the economies of foreign countries, the condition of such
countries' financial markets, the interest rate climate of such
countries and the relationship of such countries' currency to the
U.S. dollar. The Sub-Adviser will consider an issuer's
affiliation, if any, with a foreign government as one of the
factors in determining whether to purchase any particular foreign
security. These factors are judged on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data. The Fund's
portfolio of foreign securities may include those of a number of
foreign countries or, depending upon market conditions, those of a
single country.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic
issuers, by offering the opportunity to invest in foreign issuers
that appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign bond or other markets that do not move in a
manner parallel to U.S. markets. From time to time, U.S.
government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be reimposed.
Securities of foreign issuers that are represented by American
depository receipts (known as "ADRs"), or that are listed on a U.S.
securities exchange, or are traded in the U.S. over-the-counter
market are not considered "foreign securities," because they are
not subject to many of the special considerations and risks
(discussed below) that apply to foreign securities traded and held
abroad. If the Fund's securities are held abroad, the countries in
which such securities may be held and the sub-custodians holding
must be approved by the Fund's Board of Trustees if required under
applicable SEC rules.
The obligations of foreign governmental entities may or may
not be supported by the full faith and credit of a foreign
government. Obligations of "supranational entities" include those
of international organizations designated or supported by
governmental entities to promote economic reconstruction or
development and of international banking institutions and related
government agencies. Examples include the International Bank for
Reconstruction and Development (the "World Bank"), the European
Coal and Steel Community, the Asian Development Bank and the Inter-
American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings. Each
supranational entity's lending activities are limited to a
percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net
income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and
possible risks not typically associated with investing in
securities in the U.S. The values of foreign securities will be
affected by changes in currency rates or exchange control
regulations or currency blockage, application of foreign tax laws,
including withholding taxes, changes in governmental administration
or economic or monetary policy (in the U.S. or abroad) or changed
circumstances in dealings between nations. There may be a lack of
public information about foreign issuers. Foreign countries may
not have financial reporting, accounting and auditing standards
comparable to those that apply to U.S. issuers. Costs will be
incurred in connection with conversions between various currencies.
Foreign brokerage commissions are generally higher than commissions
in the U.S., and foreign securities markets may be less liquid,
more volatile and less subject to governmental regulation than in
the U.S. They may have increased delays in settling portfolio
transactions. Investments in foreign countries could be affected
by other factors not generally thought to be present in the U.S.,
including expropriation or nationalization, confiscatory taxation
and potential difficulties in enforcing contractual obligations,
and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of any such currency
against the U.S. dollar will result in a change in the U.S. dollar
value of the Fund's assets and its income available for
distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign
currencies, the Fund will be required to compute and distribute its
income in U.S. dollars, and absorb the cost of currency
fluctuations. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in
future exchange rates. See "Other Investment Techniques and
Strategies - Hedging," below.
The values of foreign investments may also be affected
unfavorably by changes in currency exchange control regulations.
Although the Fund will invest only in securities denominated in
foreign currencies that at the time of investment do not have
significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities
will fluctuate in response to a variety of factors, including
changes in U.S. and foreign interest rates.
Other Investment Techniques and Strategies
Hedging with Options and Futures Contracts. The Fund may
employ one or more types of Hedging Instruments for the purposes
described in the Prospectus. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, 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)
purchase Futures or (ii) purchase calls on such Futures or
securities. Normally, the Fund would then purchase the equity
securities and terminate the hedging position. 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 or on foreign currency Futures, (b) write calls on
that currency or on such Futures, or (c) enter into Forward
Contracts at a lower rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's activities in the
underlying cash market. At present, the Fund does not intend to
enter into Futures, Forward Contracts and options on Futures if,
after any such purchase, the sum of margin deposits on Futures and
premiums paid on Futures options exceeds 5% of the value of the
Fund's total assets. 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, legally
permissible and adequately disclosed. Additional Information about
the Hedging Instruments the Fund may use is provided below.
Writing Call Options. The Fund may write (that is, sell)
call options ("calls"). All calls written by the Fund must be
"covered" while the call is outstanding (that means, the Fund must
own the securities subject to the call or other securities
acceptable for applicable escrow requirements). Calls on Futures
(discussed below) must be covered by deliverable securities or by
liquid assets segregated to satisfy the Futures contract.
When the Fund writes a call on an investment it receives a
premium and agrees to sell the callable investment to a purchaser
of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the
market price of the underlying investment), regardless of market
price changes during the call period. 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 the Fund has written is more or
less than the price of the call the Fund has subsequently
purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the underlying investment and
the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, and when distributed
by the Fund are taxable as ordinary income. If the Fund could not
effect a closing purchase transaction due to lack of a market, it
would have to hold the callable investments until the call lapsed
or was exercised.
The Fund may also write calls on Futures without owning a
futures contract or deliverable securities, provided that at the
time the call is written, the Fund covers the call by segregating
in escrow an equivalent dollar amount of deliverable securities or
liquid assets. The Fund will segregate additional liquid assets if
the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice
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. A put option on an investment 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 expires
unexercised, the Fund (as the writer of the put) realizes a gain in
the amount of the premium less transaction costs. If the put is
exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that
case, the Fund may incur a loss, equal to the sum of the sale price
of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs incurred.
When writing put options on securities or on foreign
currencies, to secure its obligation to pay for the underlying
security, the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying
securities. The Fund therefore foregoes 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 to
protect against the possibility that the Fund's portfolio will not
fully participate in an anticipated rise in the 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 stock
indices, 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, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund.
In purchasing a call, the Fund benefits only if the call is sold at
a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the
transaction costs and the premium paid and the call is exercised.
If the call is not exercised or sold (whether or not at a profit),
it will become worthless at its expiration date and the Fund will
lose its premium payment and the right to purchase the underlying
investment.
The Fund may purchase put options ("puts") which relate to
securities, foreign currencies or Futures. When the Fund purchases
a put, it pays a premium and, except as to puts on stock 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 the underlying investment at the
exercise price to a seller of a corresponding put. If the market
price of the underlying investment is equal to or above the
exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration date, and the Fund
will lose its premium payment and the right to sell the underlying
investment. The put may, however, be sold prior to expiration
(whether or not at a profit.)
Buying a put on an investment it does not own, either a put on
an index or a put on a Stock Index 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 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 stock indices or Stock Index
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.
Stock Index Futures and Interest Rate Futures. The Fund may
buy and sell futures contracts relating either to broadly-based
stock indices ("Stock Index Futures") or to debt securities
("Interest Rate Futures"). A Stock Index Future obligates the
seller to deliver (and the purchaser to take) cash to settle the
futures transaction, or to enter into an offsetting contract. No
physical delivery of the underlying stocks in the index is made.
Generally, contracts are closed out with offsetting transactions
prior to the expiration date of the contract. An Interest Rate
Future obligates the seller to deliver and the purchaser to take a
specific type of debt security or cash to settle the futures
transaction, or to enter 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 certain
specified conditions. As the Future is marked to market (that is,
the value on the Fund's books is changed to reflect changes in its
market value) subsequent margin payments, called variation margin,
will be paid to or by the futures broker on a daily basis.
At any time prior to expiration of the Future, the Fund may
elect to close out its position by taking an opposite position, at
which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized. Although Stock Index Futures
and Interest Rate Futures by their terms call for settlement by the
delivery of cash and of debt securities, respectively, in most
cases the obligation is fulfilled without such delivery by entering
into an offsetting transaction. All futures transactions are
effected through a clearinghouse associated with the exchange on
which the contracts are traded.
Options on Foreign Currencies. The Fund intends to write
and purchase calls and puts on foreign currencies. 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. Normally
this will be effected by the sale of a security denominated in the
relevant currency at a price higher or lower than the original
acquisition price of the security. This will result in a loss or
gain in addition to that resulting from the currency option
position. The Fund will not engage in writing options on foreign
currencies unless the Fund has sufficient liquid assets denominated
in the same currency as the option or in a currency that, in the
judgment of the Manager, will experience substantially similar
movements against the U.S. dollar as the option currency.
Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller
to deliver and the purchaser to take a specific amount of foreign
currency at a specific future date for a fixed price. A Forward
Contract involves bilateral obligations of one party to purchase,
and another party to sell, a specific currency at a future date
(which may be any fixed number of days from the date of the
contract agreed upon by the parties), at a price set at the time
the contract is entered into. These contracts are traded in the
interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may
enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in a foreign currency which it has
purchased or sold but which has not yet settled, or to protect
against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the
gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency. To attempt to
limit its exposure to loss under Forward Contracts in a particular
foreign currency, the Fund limits its use of these contracts to the
amount of its net assets denominated in that currency or
denominated in a closely-correlated foreign currency. Forward
contracts include standardized foreign currency futures contracts
which are traded on exchanges and are subject to procedures and
regulations applicable to other Futures. The Fund may also enter
into a forward contract to sell a foreign currency denominated in
a currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a
greater correlation between the foreign currency of the forward
contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying
investment. This technique is referred to as "cross hedging." The
success of cross hedging is dependent on many factors, including
the ability of the Manager to correctly identify and monitor the
correlation between foreign currencies and the U.S. dollar. To the
extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the
cross currency hedge.
The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange
contracts. The Fund does not enter into such forward contracts or
maintain a net exposure in such contracts to the extent that the
Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that
currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have
price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of
the tax treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount (or for a fixed
amount of another currency closely correlated with the U.S. dollar)
where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross
hedge").
The Fund will not enter into such Forward Contracts or
maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or another
currency that is also the subject of the hedge. The Fund, however,
in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value
of the Fund's portfolio securities denominated in these currencies
provided the excess amount is "covered" by liquid, high grade debt
securities, denominated in either that foreign currency or U.S.
dollars, at least equal at all times to the amount of such excess.
As an alternative, the Fund may purchase a call option permitting
the Fund to purchase the amount of foreign currency being hedged by
a forward sale contract at a price no higher than the Forward
Contract price or the Fund may purchase a put option permitting the
Fund to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the Forward
Contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Contracts are not traded on an
exchange and therefore, 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.
Additional Information about Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
securities on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When 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. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") is evaluating whether OTC options
should be considered liquid securities, and the procedure described
above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on
securities will cause the sale of related investments, increasing
portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the
put. The Fund will pay a brokerage commission each time it buys a
put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the
related investments, and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investments.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of Futures and options on Futures established by
the Commodities Futures Trading Commission ("CFTC"). In particular
the Fund is excluded from registration with the CFTC as a
"commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not
limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its
aggregate initial futures margin and related option premiums to no
more than 5% of the Fund's net assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule.
Under the Rule, the Fund also must use short Futures and Futures
options positions solely for "bona fide hedging purposes" within
the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by each of the option exchanges governing the maximum
number of options that may be written or held by a single investor
or group of investors acting in concert, regardless of whether the
options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or
more exchanges or brokers. Thus, the number of options which the
Fund may write or hold may be affected by options written or held
by other entities, including other investment companies having the
same advisor as the Fund, or an advisor that is an affiliate of the
Fund's advisor. Position limits also apply to Futures. An
exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its custodian bank, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through"
its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held less than three
months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this mark-to-
market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of equity 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 or Hedging with Futures and Options. 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 securities. The ordinary spreads
between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view
of speculators, the deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the portfolio securities being hedged
and movements in the price of the hedging instruments, the Fund may
use hedging instruments in a greater dollar amount than the dollar
amount of portfolio securities being hedged if the historical
volatility of the prices of such portfolio securities being hedged
is more than the historical volatility of the applicable index. It
is also possible that if the Fund has used hedging instruments in
a short hedge, the market may advance and the value of the
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 securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
Illiquid and Restricted 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.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Repurchase Agreements. In a repurchase transaction, the
Fund acquires a security from, and simultaneously resells it to, an
approved vendor (a U.S. commercial bank, the U.S. branch of a
foreign bank or a broker-dealer which has been designated a primary
dealer in government securities, which must meet the credit
requirements set by the Trust's Board of Trustees from time to
time), for delivery on an agreed upon future date. The resale
price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment
Company Act, collateralized by the underlying security. The 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 Sub-Adviser will impose
creditworthiness requirements to confirm that the vendor is
financially sound. Additionally, the Sub-Adviser will continuously
monitor the collateral's value.
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. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to
purchase a security for which payment will be made on a future date
may be deemed a separate security and involve a risk of loss if the
value of the security declines prior to the settlement date.
During the period between commitment by the Fund and settlement
(generally not more than 120 days from the date the offer is
accepted), no payment is made for the securities purchased by the
purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation;
the value at delivery may be less than the purchase price. The
Fund will identify to its custodian liquid assets at least equal to
the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund
losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received, in
determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed
delivery transactions, it generally will do so for the purpose of
acquiring or selling securities consistent with its investment
objective and policies and not for the purposes of investment
leverage. The Fund generally enters into such transactions with
the intention of actually receiving or delivering the securities,
although (as noted above), when-issued securities and forward
commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other
than that expected by the Sub-Adviser 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.
Short Sales Against-the-Box. In a short sale, while the
short position is open, the Fund must own an equal amount of the
securities sold short, or by virtue of ownership of other
securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold
short. Short sales against-the-box may be made to defer, for
Federal income tax purposes, recognition of gain or loss on the
sale of securities "in-the-box" until the short position is closed
out. They may also be used to protect a gain on the security "in-
the-box" when the Fund does not want to sell it and recognize a
capital gain.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act,
such a "majority" vote is defined as the vote of the holders of the
lesser of (i) 67% or more of the shares present or represented by
proxy at a shareholder meeting, if the holders of more than 50% of
the outstanding shares are present, or (ii) more than 50% of the
outstanding shares. Under these additional restrictions, the Trust
may not, on behalf of the Fund do any of the following:
The Fund may not act as an underwriter, except to the extent
that, in connection with the disposition of portfolio securities,
the Fund may be deemed an underwriter under applicable laws;
The Fund may not invest in oil, gas or other mineral leases,
rights, royalty contracts or exploration or development programs,
real estate or real estate mortgage loans (this restriction does
not prevent the Fund from purchasing securities secured or issued
by companies investing or dealing in real estate and by companies
that are not principally engaged in the business of buying and
selling such leases, rights, contracts or programs);
The Fund may not make loans other than by investing in
obligations in which the Fund may invest consistent with its
investment objective and policies and other than repurchase
agreements and loans of portfolio securities;
The Fund may not pledge, mortgage or hypothecate its assets,
except that, to secure permitted borrowings, it may pledge
securities having a market value at the time of the pledge not
exceeding 15% of the cost of the Fund's total assets and except in
connection with permitted transactions in options, futures
contracts and options on futures contracts, and except for reverse
repurchase agreements and securities lending;
The Fund may not purchase or retain securities of any issuer
if, to the knowledge of the Trust, more than 5% of such issuer's
securities are beneficially owned by officers and trustees of the
Trust or officers and directors of Massachusetts Mutual Life
Insurance Company ("MassMutual") who individually beneficially own
more than 1/2 of 1% of the securities of such issuer; and
The Fund may not make loans to an officer, trustee or
employee of the Trust or to any officer, director or employee of
MassMutual, or to MassMutual.
In addition to the investment restrictions described above and
those contained in the Prospectus, the Trustees of the Trust have
voluntarily adopted certain policies and restrictions which are
observed in the conduct of the affairs of the Fund. These
represent intentions of the Trustees based upon current
circumstances. They differ from fundamental investment policies in
that the following additional investment restrictions may be
changed or amended by action of the Trustees without requiring
prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not do
any of the following:
The Fund may not invest for the purpose of exercising
control over, or management of, any company;
The Fund may not purchase any security of a company which
(including any predecessor, controlling person, general partner and
guarantor) has a record of less than three years of continuous
operations or relevant business experience , if such purchase would
cause more than 5% of the current value of the Fund's assets to be
invested in such companies;
The Fund may not invest in securities of other investment
companies, except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, except when
such purchase is part of a plan of merger, consolidation,
reorganization or acquisition;
The Fund may not invest more than 5% of its net assets in
warrants;
The Fund may not invest more than 2% of its net assets in
warrants not listed on the New York Stock Exchange or the American
Stock Exchange; and
The Fund may not invest in real estate limited partnerships.
For purposes of the Fund's policy not to concentrate
investments as described in the investment restrictions in the
Prospectus, the Fund has adopted the industry classifications set
forth in Appendix A to this Statement of Additional Information.
This policy is not a fundamental policy.
How the Fund is Managed
Organization and History. Oppenheimer Value Stock Fund (referred
to as the "Fund") is one of two series of Oppenheimer Integrity
Funds (the "Trust"). This Statement of Additional Information may
be used with the Fund's Prospectus only to offer shares of the
Fund. The Trust was established in 1982 as MassMutual Liquid
Assets Trust and changed its name to MassMutual Integrity Funds on
April 15, 1988. The Fund was established as a separate
Massachusetts business trust known as MassMutual Equity Investors
Trust in 1986, and was reorganized as a series of the Trust on
April 15, 1988. On March 29, 1991, the Trust changed its name from
MassMutual Integrity Funds to Oppenheimer Integrity Funds and the
Fund changed its name from MassMutual Value Stock Fund to
Oppenheimer Value Stock Fund.
Each share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the
same class and entitle the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to
their vote at shareholders' meetings. Shareholders of the Fund and
of the Trust's other series vote together in the aggregate on
certain matters at shareholders' meetings, such as the election of
Trustees and ratification of appointment of auditors for the Trust.
Shareholders of a particular series or class vote separately on
proposals which affect that series or class, and shareholders of a
series or class which is not affected by that matter are not
entitled to vote on the proposal. For example, only shareholders
of a series, such as the Fund, vote exclusively on any material
amendment to the investment advisory agreement with respect to the
series. Only shareholders of a class of a series vote on certain
amendments to the Distribution and/or Service Plans if the
amendments affect only that class.
The Trustees are authorized to create new series and classes
of series. The Trustees may reclassify unissued shares of the
Trust or its series or classes into additional series or classes of
shares. The Trustees may also divide or combine the shares of a
class into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest of a shareholder in
the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person
or by proxy.
As a Massachusetts business trust, the Trust is not required
to hold, and does not plan to hold, regular annual meetings of
shareholders. The Trust will hold meetings when required to do so
by the Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper
request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds of the outstanding
shares of the Trust, to remove a Trustee. The Trustees will call
a meeting of shareholders to vote on the removal of a Trustee upon
the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request
from at least 10 shareholders (who have been shareholders for at
least six months) holding shares of the Trust valued at $25,000 or
more or holding at least 1% of the Trust's outstanding shares,
whichever is less, stating that they wish to communicate with other
shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Trust's shareholder list available to the
applicants or mail their communication to all other shareholders at
the applicant's expense, or the Trustees may take such other action
as set forth under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express
disclaimer of shareholder and Trustee liability for the Trust's
obligations, and provides for indemnification and reimbursement of
expenses out of its property for any shareholder held personally
liable for its obligations. The Declaration of Trust also provides
that the 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 Trust) to be
held personally liable as a "partner" under certain circumstances,
the risk of a Trust shareholder incurring financial loss on
account of shareholder liability is limited to the relatively
remote circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees And Officers of the Fund
The Fund's Trustees and officers and their principal
occupations and business affiliations during the past five years
are set forth below. All of the Trustees are also Trustees,
Directors or Managing General Partners of Centennial America Fund,
L.P., Centennial California Tax Exempt Trust, Centennial Government
Trust, Centennial Money Market Trust, Centennial New York Tax
Exempt Trust, Centennial Tax Exempt Trust, Daily Cash Accumulation
Fund, Inc., Oppenheimer Cash Reserves, Oppenheimer Equity Income
Fund, Oppenheimer Integrity Funds, Oppenheimer International Bond
Fund, Oppenheimer High Yield Fund, Oppenheimer Limited-Term
Government Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Income Fund, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Municipal Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Real Asset Fund, Oppenheimer Variable Account Funds,
Panorama Series Fund, Inc. and The New York Tax-Exempt Income Fund,
Inc., (the "Denver-based Oppenheimer funds"), except for Mr. Fossel
and Ms. Macaskill who are not Trustees or Directors Oppenheimer
Integrity Funds, Oppenheimer Strategic Income Fund, Oppenheimer
Variable Account Funds and Panorama Series Fund, Inc. Mr. Fossel
also is not a trustee of Centennial New York Tax Exempt Trust and
he is not a Managing General Partner of Centennial America Fund,
L.P. Ms. Macaskill is President and Mr. Swain is Chairman of the
Denver-based Oppenheimer funds. Messrs. Bishop, Bowen, Donohue,
Farrar and Zack hold similar positions as officers of all such
funds. As of March 21, 1997, the Trustees and officers of the Fund
as a group owned less than 1% of the Fund's outstanding Class A
shares, none of the Fund's outstanding Class B shares and none of
the Fund's outstanding Class C shares. The foregoing statement
does not reflect ownership of shares held of record by an employee
benefit plan for employees of the Manager (for which plan one of
the Trustees and officers listed below, Mr. Donohue, is a trustee),
other than the shares beneficially owned under that plan by the
officers of the Fund listed below.
Robert G. Avis, Trustee; Age: 65
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated
investment adviser and trust company, respectively).
William A. Baker, Trustee; Age: 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 66
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services
management company); formerly Vice President of McDonnell Douglas
Space Systems Co. and associated with the National Aeronautics and
Space Administration.
Sam Freedman, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of SSI,
Chairman, Chief Executive Officer and director of SFSI, Vice
President and director of OAC and a director of OppenheimerFunds,
Inc.
Raymond J. Kalinowski, Trustee; Age: 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.(a computer
products training company): formerly Vice Chairman and a director
of A.G. Edwards, Inc., parent holding company of A.G. Edwards &
Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age: 75
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age: 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and
a director of Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman Chief Executive Officer and Trustee; Age:
63
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager; formerly President and director of
Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial") and Chairman of the Board
of SSI.
Bridget A. Macaskill, President; Age 48*
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; Chairman and a director of SSI and
Shareholder Financial Services, Inc.; President and a director of
OAC and Oppenheimer Partnership Holdings, Inc., a holding company
subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc.; formerly an Executive Vice President of the
Manager.
Andrew J. Donohue, Vice President and Secretary; Age 46
Executive Vice President, General Counsel and a Director of the
Manager, the Distributor, HarbourView, SSI, SFSI, Oppenheimer
Partnership Holdings, Inc. and MultiSource Services, Inc. (a
broker-dealer); President and a director of Centennial;
President and a director of Oppenheimer Real Asset Management,
Inc.; General Counsel of OAC; an officer of other Oppenheimer
funds.
George C. Bowen, Vice President, Treasurer, and Assistant
Secretary; Age 60
6803 Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; President, Treasurer and a director of Centennial
Capital Corporation; Senior Vice President, Treasurer and
Secretary of SSI; Vice President, Treasurer and Secretary of SFSI;
Treasurer of OAC; Treasurer of Oppenheimer Partnership Holdings,
Inc.; Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc.; Chief Executive Officer, Treasurer and a
director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds.
James W. MacAllen, Portfolio Manager; Age: 53
Senior Vice President of David L. Babson and Company ("Babson");
formerly associated with Hagler, Mastrovita & Hewitt; President and
Chief Investment Officer of Wilmington Capital Management; and
Senior Vice President and head of the Securities Investment
Division of MassMutual.
Robert G. Zack, Assistant Secretary; Age: 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Scott T. Farrar, Assistant Treasurer; Age 31
6803 Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Remuneration of Trustees. The officers of the Fund and one
of the Trustees of the Fund (Mr. Swain) who is affiliated with the
Manager receives no salary or fee from the Fund. The remaining
Trustees of the Fund received the compensation shown below. Mr.
Freedman became a Trustee June 27, 1996 and received no
compensation from the Fund before that date. The compensation from
the Fund was paid during fiscal year ended December 31, 1996. The
compensation from all of the other 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 of those funds during the calendar year 1996. Compensation
is paid for services in the positions listed beneath their names:
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis, $725 $58,003
Trustee
William A. Baker, $996 $79,715
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr,. $934 $74,717
Audit and Review
Committee Member
and Trustee
Sam Freedman, $369 $29,502
Trustee
Raymond J. Kalinowski,
$927 $74,173
Trustee
C. Howard Kast, $927 $74,173
Trustee
Robert M. Kirchner, $934 $74,717
Audit and Review
Committee Member
and Trustee
Ned M. Steel, $725 $58,003
Trustee
________________
1For the 1996 calendar year.
Major Shareholders. As of March 21, 1997, the only entities that
owned of record or were known by the Fund to own beneficially 5% or
more of any class of the Fund's outstanding shares was (i) MML
Securities Corp., 1350 Main Street, Springfield, MA 01103-1627,
which owned 2,268,825.570 Class A shares (approximately 29.62% of
the Fund's Class A shares then outstanding); (ii) MassMutual Life
Insurance Company, c/o Investment Services Dept., 1295 State
Street, Springfield, MA 01111-0001, which owned 559,086.875 Class
A shares (approximately 7.30% of the Fund's Class A shares then
outstanding); (iii) PaineWebber for the Benefit of Kentucky Land
Title Agency, Inc. Profit Sharing Plan, 2362 Grandview Drive, Fort
Mitchell, KY 41017-1633 who owned 4,884.949 Class C shares
(approximately 18.17% of the Fund's Class C shares then
outstanding); (iv) RPSS TR IRA, 86 Tunapuna Lane, Coronado, CA
92118-3501, who owned 1,356.464 Class C shares (approximately 5.04%
of the Fund's Class C shares then outstanding); (v) RPSS TR IRA,
FBO Alice M. Rayl, 112 Wiest Creek Drive, Niagara Falls, NY 14304,
who owned 1,794.623 Class C shares (approximately 6.67% of the
Fund's Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund, and one of whom (Mr. James
C. Swain) serves as Trustees of the Fund.
The Manager and the Fund have a Code of Ethic, as does the
Sub-Adviser. The Codes are 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 Codes of Ethics is
carefully monitored and strictly enforced.
The Investment Advisory Agreement. The Investment Advisory
Agreement, dated as of March 28, 1991, between the Trust on behalf
of the Fund and the Manager requires the Manager, at its expense,
to provide the Fund with adequate office space, facilities and
equipment and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation
and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public
sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the
advisory agreement or by the Distributor under the General
Distributor's Agreement are paid by the Fund. The advisory
agreement lists examples of expenses paid by the Fund, the major
categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs.
The Investment 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 advisor 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 days' notice approved by a majority of the Trustees.
Prior to April 23, 1993, MassMutual served as the Fund's
investment sub-adviser under a prior sub-advisory agreement (the
"Prior Sub-Advisory Agreement"). The Manager paid MassMutual a
sub-advisory fee under the Prior Sub-Advisory Agreement at the
following annual rates: 0.40% of the Fund's first $100 million of
average annual net assets, 0.30% of the next $200 million, 0.25% of
the next $200 million and 0.20% of average annual net assets in
excess of $500 million.
On April 23, 1993, the Fund's shareholders approved a new sub-
advisory agreement (the "sub-advisory agreement") with the Sub-
Adviser. The sub-advisory fees paid under the sub-advisory
agreement are stated in the Prospectus. In connection with
approval of the sub-advisory agreement by the Trust's Board of
Trustees and shareholders, MassMutual also represented that there
will be no substantive change in the sub-advisory relationship
other than the restructuring of investment advisory duties between
MassMutual and the Sub-Adviser pursuant to MassMutual's internal
reorganization of its investment advisory services for equity
assets. MassMutual also agreed to guarantee the performance of the
Sub-Adviser under the sub-advisory agreement. That guarantee
provides that it will terminate as to the Sub-Adviser's performance
and the discharge of its responsibilities after such termination if
for three consecutive 12 month fiscal year ends the Sub-Adviser has
total stockholders equity of at least $200,000 according to its
annual audited financial statements delivered to the Fund. The
Sub-Adviser met the foregoing requirement as of the end of its
December 31, 1995 fiscal year end.
Under the sub-advisory agreement, the Sub-Adviser is
responsible for managing the Fund's portfolio of securities and
making investment decisions with respect to the Fund's investments
subject to the Fund's investment policies established by the Board
of Trustees of the Trust, and in accordance with the Fund's
investment objective, policies and restrictions, set forth in the
Prospectus and this Additional Statement. The sub-advisory
agreement has the same provisions as to renewal, termination and
the standard of care as the investment advisory agreement, and both
advisory agreements are subject to annual approval by the Trustees,
who may terminate either advisory agreement on sixty days' notice
approved by a majority of the Trustees.
The advisory agreements contain no expense limitation.
However, independently of the advisory and sub-advisory agreements,
the Manager has undertaken that the total expenses of the Fund in
any fiscal year (including the management fee, but excluding taxes,
interest, brokerage fees, distribution plan payments, and
extraordinary expenses, such as litigation costs) shall not exceed
(and the Manager undertakes to reduce the Fund's management fee in
the amount by which such expenses shall exceed) the most stringent
applicable state "blue sky" expense limitation requirement for
qualification of sale of the Fund's shares. At present, that
limitation is imposed by California and limits expenses (with
specified exclusions) to 2.5% of the first $30 million of the
Fund's average annual net assets, 2.0% of the next $70 million of
average net assets and 1.5% of average net assets in excess of $100
million. The Manager reserves the right to change or eliminate
this expense limitation at any time.
The payment of the management fee at the end of any month will
be reduced so that at no time will there be any accrued but unpaid
liability under the above expense limitation.
For the fiscal years ended December 31, 1994, 1995 and 1996
the advisory fees paid to the Manager were $738,121, $993,692 and
$ 1,315,835, respectively, of which $295,983, $364,728 and $452,194
respectively, was paid by the Manager to the Sub-Adviser.
The Distributor. Under the General Distributor's Agreement
between the Trust and the Distributor, the Distributor acts as the
Fund's principal underwriter in the continuous public offering of
the Fund's Class A, Class B and Class C shares, but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Class A
Service Plan and the Class B and Class C 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
December 31, 1994, 1995 and 1996, the aggregate amount of sales
charges on sales of the Fund's Class A shares was $204,620,
$318,952 and $345,153, respectively, of which the Distributor and
Massachusetts Mutual Life Investors Services, Inc. ("MMLISI")
retained in the aggregate $135,102, $193,431 and $192,834 in those
respective years. For the year ending December 31, 1995, the
Distributor advanced $299,002 to broker-dealers on the sales of the
Funds' Class B shares, $68,751 of which went to MMLISI. In
addition, the Distributor collected $62,751 from contingent
deferred sales charges assessed on Class B shares. During the
Fund's fiscal period October 2, 1995 through December 31, 1995, the
Distributor advanced $690 to broker-dealers on the sales of the
Funds' Class C shares, $60 of which went to MMLISI. For additional
information about distributing of the Fund's shares, payment made
by the Fund to the Distributor, and expenses connected with such
activities, refer to "Distribution and Service Plans," below.
The Transfer Agent. OppenheimerFunds Services, the Fund's
transfer agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Sub-Advisory Agreement. One of the
duties of the Sub-Adviser under the sub-advisory agreement is to
arrange the portfolio transactions of the Fund. In doing so, the
Sub-Adviser is authorized by the sub-advisory agreement to employ
broker-dealers ("brokers"), 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 the Trust's
Board of Trustees. Purchases of securities from underwriters
include a commission or concession by the issuer to the
underwriter, and purchases from dealers include a spread between
the bid and asked price.
Under the sub-advisory agreement, the Sub-Adviser is
authorized to select brokers which provide brokerage and/or
research services for the Fund and/or the other accounts over which
it 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
Sub-Adviser that the commission is fair and reasonable in relation
to the services provided.
Description of Brokerage Practices Followed by the Manager and Sub-
Adviser. Subject to the provisions of the sub-advisory agreement,
the procedures and rules described above, allocations of brokerage
are generally made by the Sub-Adviser's portfolio traders based
upon recommendations by the Sub-Adviser's portfolio manager. In
certain instances portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the sub-
advisory agreement and the procedures and rules described above.
In either case, brokerage is allocated under the supervision of the
Manager's executive officers and the Sub-Adviser. Transactions in
securities other than those for which an exchange is the primary
market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions
in listed securities or for certain fixed-income agency
transactions in the secondary market and otherwise only if it
appears likely that a better price or execution can be obtained.
When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any
transactions in the securities to which the option relates. Option
commissions may be relatively higher than those which would apply
to direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt
obligations are principal transactions at net prices. Instead of
using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker
unless the Sub-Adviser determines that a better price or execution
can be obtained by using a broker. Purchases of these securities
from underwriters include a commission or concession paid by the
issuer to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The 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 Sub-
Adviser 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 Sub-Adviser in a
non-research capacity (such as bookkeeping or other administrative
functions), then only the percentage or component that provides
assistance to the Sub-Adviser in the investment decision-making
process may be paid for in commission dollars. The Board of
Trustees has permitted the Manager and Sub-Adviser to use
concessions on fixed price offerings to obtain research in the same
manner as is permitted in agency transactions. The Board has also
permitted the Manager and Sub-Adviser to use stated commissions on
secondary fixed-income agency trades to obtain research where the
broker has represented to Manager and Sub-Adviser 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 as the stated
commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope
and supplement the research activities of the Sub-Adviser by making
available additional views for consideration and comparisons, and
enabling the Sub-Adviser to obtain market information for the
valuation of securities held in the Fund's portfolio or being
considered for purchase. The Board, including the independent
Trustees of the Trust (those Trustees of the Trust who are not
"interested persons," as defined in the Investment Company Act, and
who have no direct or indirect financial interest in the operation
of the Distribution Plans described below) or in any agreements
relating to those Plans, annually reviews information furnished by
the Sub-Adviser as to the commissions paid to brokers furnishing
such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of
such services.
Pursuant to the sub-advisory agreement, the Sub-Adviser is
authorized, in arranging the purchase and sale of the Fund's
portfolio securities, to employ or deal with such members of the
securities exchanges, brokers or dealers as may in the its best
judgement implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (that is, prompt and reliable
execution at the most favorable security price obtainable) of the
Fund's portfolio transactions. The Sub-Adviser shall select
broker-dealers to effect the Fund's portfolio transactions on the
basis of its estimate of their ability to obtain best execution of
particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio
transaction(s) will be judged by the Sub-Adviser on the basis of
all relevant factors and considerations.
Securities held by the Fund may also be held by Sub-Adviser in
its investment accounts and by other investment companies for which
it acts as investment adviser. If the same security is purchased
or sold for the Fund and such investment accounts or companies at
or about the same time, such purchases or sales normally will be
combined, to the extent practicable, and will be allocated as
nearly as practicable on a pro rata basis in proportion to the
amounts to be purchased and sold. The main factors to be
considered will be the investment objectives of the respective
portfolios, the relative size of portfolio holdings of the same or
comparable security, availability of cash for investment by the
various portfolios and the size of their respective investment
commitments. It is believed that the ability of the Fund to
participate in larger volume transactions will, in most cases,
produce better execution for the Fund. In some cases, however,
this procedure could have a detrimental effect on the price and
amount of a security available to the Fund or the price at which a
security may be sold. It is the opinion of the Trust's management
that such execution advantage and the desirability of retaining the
Sub-Adviser in that capacity outweigh the disadvantages, if any,
which might result from this procedure.
Paul Hallingby, Jr. is a director of MassMutual and a General
Partner of Bear Stearns & Co., Inc. ("Bear Stearns"). For its
fiscal years ended December 31, 1994, 1995 and 1996, the Fund paid
brokerage fees to Bear Stearns of $3,546, $4,254 and $6,096,
respectively. For the fiscal year ended December 31, 1996, the
Fund placed 15.64% of its transactions involving payment of
commissions with Bear Stearns, for which it was paid 8.40% of the
Fund's aggregate brokerage fees for that period.
During the fiscal years ended December 31, 1994, 1995 and
1996, total brokerage commissions paid by the Fund (not including
spreads or concessions on principal transactions on a net trade
basis) were $18,630, $62,009 and $72,570, respectively. During the
fiscal year ended December 31, 1996, no brokerage commissions were
paid to dealers for research services (including special research,
statistical information and execution).
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return", "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 the Fund may be advertised. An explanation of how total
returns are calculated for each class and the components of those
calculations is set forth below.
The Fund's advertisement 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 total returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Total returns for any given past period are not a
prediction or representation by the Fund of future rates of return
on its shares. The total returns of Class A, Class B and Class C
shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to
a particular class.
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The "cumulative total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, the payment of the applicable contingent deferred sales
charge (of 5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% for 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 1.0% contingent
deferred sales charge is applied to the investment result for the
one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The
"average annual total returns" on an investment in Class A shares
of the Fund for the one and five-year periods ended December 31,
1996 and for the period from December 22, 1986 (the date the Fund
became an open-end Fund) to December 31, 1996, were 12.53%, 12.54%
and 12.00%, respectively. The cumulative "total return" on Class
A shares for the latter period was 211.58%. The average annual
total return for the one year period ended December 31, 1996 and
the cumulative total return for the fiscal period from May 1, 1993,
through December 31, 1996 on an investment in Class B shares of the
Fund were 13.87% and 60.99%, respectively. The average annual
total return for the one year period ended December 31, 1996 and
the cumulative total return for the fiscal period from October 2,
1995 through December 31, 1996, the cumulative total return on an
investment in Class C shares of the Fund were ______% and 25.37%,
respectively.
Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a cumulative "total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The cumulative "total return at
net asset value" on the Fund's Class A shares for the fiscal year
ended December 31, 1996, and for the period from December 22, 1986
to December 31, 1996 were 12.67% and 230.59%, respectively. The
cumulative total return at net asset value on the Fund's Class B
shares for the fiscal year ended December 31, 1996, and for the
fiscal period from May 1, 1993 through December 31, 1996 were
14.44% and 63.99%. The cumulative total return at net asset value
on the Fund's Class C shares for the fiscal year ended December 31,
1996, and for the fiscal October 2, 1995 through December 31, 1996
were ____% and 25.37%, respectively.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B or Class C shares of the Fund, with the return on
other investment alternatives, investors should understand that the
Fund is an equity fund seeking long-term growth of capital and
income and its return may fluctuate more than that on certificates
of deposit, savings accounts, U.S. Treasury bills and other fixed-
income investments that may be insured or guaranteed.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund's
classes is ranked against (i) all other funds, excluding money
market funds, and (ii) all other equity funds. The Lipper
performance rankings are based on total return that includes the
reinvestment of capital gains distributions and income dividends
but does not take sales charges or taxes into consideration.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B and Class C 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
returns. The Fund is ranked among international stock funds.
Investment return measures a fund's or class' one, three, five and
ten-year average annual total returns (depending on the inception
of the fund or 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' 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 the 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' 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.
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.
The performance of the Fund's Class A, Class B or Class C
shares may also be compared in publications to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services. The total return on an investment
in the Fund's Class A, Class B or Class C shares may be compared
with performance for the same period of one or more of the
following indices: the Standard & Poor's 500 Index ("S & P 500") or
the Dow-Jones Industrial Average ("Dow"), which are widely-
recognized indices of U.S. stock market performance. Such indices
consist of unmanaged groups of common stocks. Each index includes
a factor for the reinvestment of dividends but does not reflect
expenses or taxes. The performance of the Fund's Class A, Class B
or Class C shares may also be compared in publications to (i) the
performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Distribution and Service Plans
The Fund has adopted a Service Plan for its Class A shares and
Distribution and Service Plans for its Class B and Class C shares
under Rule 12b-1 of the investment Company Act pursuant to which
the Fund will make payments to the Distributor in connection with
the servicing and/or distribution of the shares of each class, as
described in the Prospectus. Each Plan has been approved by the
vote of (i) the Board of Trustees of the Fund, including a majority
of the Independent Trustees, as required by the Rule, 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 C shares, that required shareholder vote was cast by the
Manager as the sole shareholder of Class C shares at that time.
The Class A and Class B Plans are "reimbursement-type" Plans,
which means that they provide for the reimbursement of the
distributor's actual expenses incurred in connection with the
service/and or distribution of the Fund's shares of those classes.
The Class C Plan is a "compensation-type" plan, which means that it
provides for the compensation of the distributor for the service
and distribution of the Fund's shares of that class.
Each plan provides for the payment of a Service Fee which the
Distributor may pay to brokers, dealers and other persons or
entities ("Recipients") for providing personal services and account
maintenance services to accounts and shareholders that hold shares
of the Fund. The Service Fee is described more fully below under
Class A Plan. The Class B and Class C Plans also provide for the
payment of an asset-based sales charge of up to 0.75% of the
average annual net assets of Class B and Class C shares,
respectively. Asset-based sales charge payments are designed to
permit an investor to purchase Class B or Class C shares of the
Fund without the payment of a front-end sales load and at the same
time permit the Distributor to compensate Recipients in connection
with the sale of those shares. The asset-based sales charges are
described more fully below under Class B Plan and Class C Plan.
Under each Plan, the Manager and the Distributor, in their
sole discretion, may from time to time use their own resources, at
no cost to the Fund, to make payments to Recipients for
distribution and administrative services they perform. In the case
of the Manager, those payments may be made from profits from the
advisory fee it receives from the Fund. The Distributor and the
Manager may in their sole discretion increase or decrease the
amount of these payments. Under each Plan, the Fund's Board of
Trustees may change the amount paid to a Recipient, but may not
permit payment of an amount in excess of the maximum payment set
forth above. The Board may establish minimum assets levels to be
held by a Recipient, and may also establish a minimum holding
period for Recipients in each case to entitle a Recipient to
receive any payments under a Plan. The Board of Trustees has
established the payment level at the maximum provided for in each
Plan and has not set any minimum holding periods or minimum asset
levels.
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.
While the plans are in effect, the Treasurer of the Fund must
provide separate written reports to the Fund's Board of Trustees at
least quarterly describing the amount of payments made pursuant to
each Plan and the purposes for which the payments were made. The
Class B report also must include the Distributor's distribution
costs for the quarter, and such costs for previous quarters that
have been carried forward. The Class A and Class B reports also
must include the identity of each Recipient that received any
payment. These reports are subject to the review and approval of
the Independent Trustees.
A Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by a vote of the holders of a
"majority" (as defined by the Investment Company Act) of the
outstanding voting securities of that Class. No amendment to a
Plan which increases materially the amount to be paid under the
Plan may be made unless the amendment is approved by the
shareholders of the class affected by the amendment. All material
amendments must be approved by the Board of Trustees. Unless
terminated earlier, each Plan continues in effect from year to year
but only so 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. For the fiscal year ended
December 31, 1996, payments under the Plan for Class A shares
totaled $350,768, all of which was paid by the Distributor to
Recipients including $216,769 that was paid to an affiliate of the
Distributor. Payments made under the Class B Plan during the
fiscal year ended December 31, 1996 totaled $332,226, of which
$277,247 was retained by the Distributor and $11,278 paid to an
affiliate of with the Distributor. For the fiscal period of
October 2, 1995 through December 31, 1996, payments under the Class
C Plan totaled $9,020, of which $8,196 was retained by the
Distributor.
Class A Plan
The Class A Plan provides for the payment of a Service Fee,
not to exceed 0.25% of the average annual net assets of the class,
for personal services and the maintenance of accounts holding Class
A shares.
Class B Plan
The Class B Plan provides for the payment of a Service Fee of
up to 0.25% of the annual net assets of that class. This Service
Fee is virtually identical to the Service Fee described in Class A
Plan above. The Class B Plan allows the Service Fee payments made
by the Distributor to be paid to Recipients in advance for the
first year such shares are outstanding, and thereafter on a
quarterly basis based on the average daily net asset value of
shares held in accounts at Recipients or by their customers, as
described in the Prospectus. Although the Class B Plan does not
require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients
in this manner. An exchange of shares does not entitle a Recipient
to an advance Service Fee payment. If shares are redeemed during
the first year they are outstanding, the Recipient is obligated to
repay to the Distributor a pro rata portion of the advance payment
for those shares.
The Class B Plan also provides for the payment of an asset-
based sales charge of up to 0.75% of the annual net assets of the
Class B shares. The asset-based sales charge paid to the
Distributor under the Class B Plan is intended to allow the
Distributor to recoup the cost of sales commission paid to
authorized Recipients at the time of sale, plus financing costs.
The Class B Plan provides that the Distributor may use the
asset-based sales charge to recover its distribution expenses in
connection with the distribution of Class B shares which include
sales commissions and Service Fees paid to Recipients, financing
costs with respect to distribution payments, compensation and
expenses of personnel employed by the Distributor to support
distribution of Class B shares, and the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" expenses.
The Distributor's actual Class B distribution expenses for any
given year may exceed the aggregate of payments received under the
Class B Plan and from recoveries of contingent deferred sales
charges. The Distributor anticipates that it will take a number of
years for it to recoup its Class B distribution expenses. The
Class B Plan allows such expenses to be carried forward and paid in
future years. The Class B shares will be charged only for interest
expenses, carrying charges or other financing costs that are
directly related to the carry forward of actual distribution
expenses.
Class C Plan
The Class C Plan provides for the payment of a Service Fee of
up to 0.25% of the annual net assets of each class. This Service
Fee is virtually identical to the Service Fee described in Class A
Plan above. The Class C Plan allows the Service Fee payments made
by the Distributor to be paid to Recipients in advance for the
first year such shares are outstanding, and thereafter on a
quarterly basis based on the average daily net asset value of
shares held in accounts at Recipients or by their customers, as
described in the Prospectus. Although the Class C Plan does not
require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients
in this manner. An exchange of shares does not entitle a Recipient
to an advance Service Fee payment. If shares are redeemed during
the first year they are outstanding, the Recipient is obligated to
repay to the Distributor a pro rata portion of the advance payment
for those shares.
The Class C Plan also provides for the payment of an asset-
based sales charge of 0.75% of the annual net assets of the Class
B shares. 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 that the amount paid by the Fund.
The Distributor's services to the Class C shareholders of the
Fund include paying sales commissions and Service Fee payments to
Recipients, providing personnel to support distribution of shares,
and bearing other costs of distribution including the costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky" expenses.
The Class C asset-based sales charge paid during the first
year is retained by the Distributor and thereafter paid to the
Recipient as an ongoing commission on Class C shares that have been
outstanding for a year or more.
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 another. The
Distributor normally will not accept (i) any order for $500,000 or
more of Class B shares or (ii) any order for $1 million of Class C
shares, on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of
the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on 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.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to unaffiliated
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the number of shares of that class that are outstanding.
The Exchange normally closes at 4:00 P.M., New York time, but may
close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's
most recent annual holiday schedule (which is subject to change)
states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. Trading may
occur in debt securities and in foreign securities when the
Exchange is closed, including weekends and holidays, or after the
close of the Exchange on a regular business day. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges or in foreign over-the-
counter markets that may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed. Because the
Fund's net asset value will not be calculated on those days, the
Fund's net asset value per share may be significantly affected on
such days when shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for
the valuation of the Trust's securities generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing bid
prices that day); (ii) securities traded on a foreign securities
exchange are valued generally at the last sales price available to
the pricing service approved by the Trust's Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded; at its last trading session on or immediately
preceding the valuation date, or at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued at the mean between the "bid" and
"ask" prices determined by a portfolio pricing service approved by
the Trust's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (iv) debt instruments having a maturity of more than 397
days when issued, and non-money market type instruments having a
maturity of one year or less when issued, which have a remaining
maturity of 60 days or less are valued at the mean between the
"bid" and "ask" prices determined by a pricing service approved by
the Trust's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of no
more than 397 days when issued that have a remaining maturity of 60
days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vi) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
If the Manager is unable to locate two market makers willing to
give quotes (see (ii), (iii) and (iv) above), the security may be
priced at the mean between the bid and ask prices provided by
a single active market maker (which in certain cases may be the
bid price if no ask price is available).
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 Exchange
will not be reflected in the Fund's calculation of net asset value
unless the Board of Trustees, the Manager, and/or the Sub-Adviser,
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 in the London
foreign exchange market closing price that day, as provided by a
reliable bank, dealer or pricing service.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds, when
last sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity,
and other special factors involved. the Manager and/or the Sub-
Advisor may use pricing services approved by the Board of Trustees
to price U.S. Government Securities, mortgage-backed securities,
foreign government securities and corporate bonds. The Manager and
/or Sub-Advisor will monitor the accuracy of such pricing services
which may include comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Calls, puts and Futures held by the Fund are valued at the
last sales price on the principal exchange on which they are
traded, or on NASDAQ, as applicable, as determined by a pricing
service approved by the Board of Trustees or by the Manager. If
there were no sales that day, the value shall be the last sale
price on the preceding trading day if it is within the spread of
the closing bid and asked prices on the principal exchange or on
NASDAQ on the valuation date, or, if not, value shall be the
closing bid price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between bid
and asked prices obtained by the Manager from two active market
makers (which in certain cases may be the bid price if no asked
price is available).
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy shares. Dividends will
begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and expenses realized by the Distributor, dealers and
brokers making such sales. No sales charge is imposed in certain
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, aunts, uncles, nieces and nephews, parents, parents-
in-law, sons- and daughters-in-law, siblings, a sibling's spouse
and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California
Municipal Fund
Oppenheimer Intermediate
Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street
California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania
Municipal Fund
Oppenheimer New Jersey
Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital
Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
<PAGE>
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Developing Markets Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals*
Limited Term New York Municipal Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Life Span Balanced Fund
Oppenheimer Life Span Growth Fund
Oppenheimer Life Span Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
* Shares of the Fund are not presently exchangeable for shares of
these funds.<PAGE>
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
<PAGE>
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market
Funds. Under certain circumstances described herein, redemption
proceeds of Money Market Fund shares may be subject to a
contingent deferred sales charge.
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month
period (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under
the Letter to obtain the reduced sales charge rate on purchases of
Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of
Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales
charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual 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.
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 shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A
initial or contingent deferred sales charge or (ii) Class B shares
of one of the other Oppenheimer funds that were acquired subject to
a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"Exchange Privilege," and the escrow will be transferred to that
other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How to Sell Shares"
in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly
automatic purchases of shares of up to four other 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.
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. 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.
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
"employee benefit plan" means any plan or arrangement, whether or
not "qualified" 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.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
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 has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Trust'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 these shares is
less than $1,000 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.
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 Trust 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 Value Per Share" and that valuation will be made as of
the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge, or the 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
sales charge. This privilege does not apply to Class C shares. The
reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which
shares of the Fund are exchangeable as described below, at the net
asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for
such privilege at the time of reinvestment. Any capital gain that
was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or
all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code,
if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the
Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That
would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge 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 A, 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 this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons
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 and profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers 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 the required redemption documents in proper
form, with the signature(s) of the registered owners guaranteed on
the redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. 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 Sales 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.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and thereafter shares acquired
with reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all
such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or AccountLink payments of the proceeds of
Plan withdrawals will normally be transmitted three business days
prior to the date selected for receipt of the payment (the receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A shares, but
certain other Oppenheimer funds do not presently offer either or
both of Class B or Class C shares.
All Oppenheimer funds offer Class A Class B and Class C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and
Oppenheimer Main Street California 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 Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds. Exchanges to Class M shares of Oppenheimer Bond Fund for
Growth are permitted from Class A shares of Oppenheimer Money
Market Fund, Inc. or Oppenheimer Cash Reserves that were acquired
by exchange from Class M shares. Otherwise no exchanges of any
class of any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of OppenheimerFunds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). Shares of this Fund acquired by
reinvestment of dividends or distributions from any other of the
Oppenheimer funds or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the
Oppenheimer funds. 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. No
contingent deferred sales charge is imposed on exchanges of shares
of any class purchased subject to a contingent deferred sales
charge. However, when Class A shares acquired by exchange of Class
A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of
the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 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 A, 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 A, Class B or 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 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 or obtain, open an account in, and
acknowledge receipt of a prospectus for, 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 request from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains And Taxes
Dividends and Distributions. Dividends, distributions and the
proceeds of the redemption of Fund shares represented by checks
returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a
return on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends 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 for 45
days or less. To the extent the Fund's dividends are derived from
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. It
is expected that for the most part the Fund's dividends will not
qualify, because of the nature of the investments held by the Fund
in its portfolio.
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 Trust's Board and Manager might determine in a particular year
that it would be in the best interest of shareholders for the Fund
not to make such distributions at the required levels and to pay
the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds (except Oppenheimer Cash Reserves) listed in
"Reduced Sales Charges" above at net asset value without sales
charge. To elect this option, a 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
certain of the Oppenheimer funds may be invested in shares of this
Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities 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 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>
INDEPENDENT AUDITORS' REPORT
=====================================================================
===========
The Board of Trustees and Shareholders of Oppenheimer Value Stock
Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Value Stock
Fund as of December 31, 1996, the related statement of operations for
the year then ended, the statements of changes in net assets for the
years ended December 31, 1996 and 1995 and the financial highlights
for the period January 1, 1992 to December 31, 1996. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December
31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material respects, the
financial position of Oppenheimer Value Stock Fund at December 31,
1996, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1997
5 Oppenheimer Value Stock Fund
<PAGE> 6
STATEMENT OF INVESTMENTS December 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=====================================================================
==============================================================
<S> <C> <C>
COMMON STOCKS--94.7%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
BASIC MATERIALS--7.7%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
CHEMICALS--4.1%
Du Pont (E.I.) De Nemours & Co. 21,500 $
2,029,062
- ------------------------------------------------------------------------------------------------------------------
- ------------
Lubrizol Corp. (The) 40,400
1,252,400
- ------------------------------------------------------------------------------------------------------------------
- -----------
Nalco Chemical Co. 52,500
1,896,562
- ------------------------------------------------------------------------------------------------------------------
- -----------
Rohm & Haas Co. 31,000
2,530,375
------------
7,708,399
- ------------------------------------------------------------------------------------------------------------------
- ------------------
PAPER--3.6%
Temple-Inland, Inc. 40,000
2,165,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
Westvaco Corp. 64,500
1,854,375
- ------------------------------------------------------------------------------------------------------------------
- -----------
Weyerhaeuser Co. 58,800
2,785,650
------------
6,805,025
- ------------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER CYCLICALS--11.2%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
AUTOS & HOUSING--5.6%
Ford Motor Co. 73,100
2,330,062
- ------------------------------------------------------------------------------------------------------------------
- -----------
Genuine Parts Co. 55,000
2,447,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Goodyear Tire & Rubber Co. 73,000
3,750,375
- ------------------------------------------------------------------------------------------------------------------
- -----------
Stanley Works (The) 80,000
2,160,000
------------
10,687,937
- ------------------------------------------------------------------------------------------------------------------
- ------------------
LEISURE & ENTERTAINMENT--1.3%
Eastman Kodak Co. 31,800
2,551,950
- ------------------------------------------------------------------------------------------------------------------
- ------------------
MEDIA--1.4%
McGraw-Hill, Inc. 57,000
2,629,125
- ------------------------------------------------------------------------------------------------------------------
- -----------------
RETAIL: GENERAL--2.9%
May Department Stores Cos. 46,500
2,173,875
- ------------------------------------------------------------------------------------------------------------------
- -----------
Sears Roebuck & Co. 31,000
1,429,875
- ------------------------------------------------------------------------------------------------------------------
- -----------
VF Corp. 27,500 1,856,250
------------
5,460,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER NON-CYCLICALS--19.8%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
BEVERAGES--1.8%
Brown-Forman Corp., Cl. B 40,900
1,871,175
- ------------------------------------------------------------------------------------------------------------------
- -----------
PepsiCo, Inc. 54,000
1,579,500
------------
3,450,675
- ------------------------------------------------------------------------------------------------------------------
- ------------------
FOOD--5.5%
Albertson's, Inc. 76,000
2,707,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
American Stores Co. 20,500
837,937
- ------------------------------------------------------------------------------------------------------------------
- -----------
ConAgra, Inc. 40,000
1,990,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
CPC International, Inc. 37,000
2,867,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Pioneer Hi-Bred International, Inc. 29,500
2,065,000
------------
10,467,937
- ------------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/DRUGS--7.0%
Bristol-Myers Squibb Co. 57,500
6,253,125
- ------------------------------------------------------------------------------------------------------------------
- -----------
Cytogen Corp.(1) 79 434
- ------------------------------------------------------------------------------------------------------------------
- ----------
Pfizer, Inc. 22,500 1,864,687
- ------------------------------------------------------------------------------------------------------------------
- -----------
Pharmacia & Upjohn, Inc. 58,000
2,298,250
- ------------------------------------------------------------------------------------------------------------------
- -----------
Schering-Plough Corp. 45,500
2,946,125
------------
13,362,621
</TABLE>
6 Oppenheimer Value Stock Fund
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C>
HEALTHCARE/SUPPLIES &
SERVICES--1.4%
Becton, Dickinson & Co. 62,000 $
2,689,250
- ------------------------------------------------------------------------------------------------------------------
- ------------------
HOUSEHOLD GOODS--1.3%
Kimberly-Clark Corp. 25,500
2,428,875
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TOBACCO--2.8%
American Brands, Inc. 59,000
2,927,875
- ------------------------------------------------------------------------------------------------------------------
- -----------
UST, Inc. 75,000 2,428,125
------------
5,356,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------
ENERGY--10.0%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
ENERGY SERVICES &
PRODUCERS--1.1%
Kerr-McGee Corp. 28,500
2,052,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
OIL-INTEGRATED--8.9%
Amoco Corp. 49,500
3,984,750
- ------------------------------------------------------------------------------------------------------------------
- -----------
Atlantic Richfield Co. 13,700
1,815,250
- ------------------------------------------------------------------------------------------------------------------
- -----------
Chevron Corp. 45,000
2,925,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
Mobil Corp. 23,500
2,872,875
- ------------------------------------------------------------------------------------------------------------------
- -----------
Occidental Petroleum Corp. 80,500
1,881,687
- ------------------------------------------------------------------------------------------------------------------
- -----------
Union Pacific Resources Group, Inc. 55,500
1,623,375
- ------------------------------------------------------------------------------------------------------------------
- -----------
Unocal Corp. 44,100
1,791,563
------------
16,894,500
- ------------------------------------------------------------------------------------------------------------------
- ------------------
FINANCIAL--15.3%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
BANKS--6.0%
Bank of New York Co., Inc. (The) 110,000
3,712,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Comerica, Inc. 26,000
1,361,750
- ------------------------------------------------------------------------------------------------------------------
- -----------
CoreStates Financial Corp. 52,000
2,697,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Norwest Corp. 36,500
1,587,750
- ------------------------------------------------------------------------------------------------------------------
- -----------
Wachovia Corp. 36,240
2,047,560
------------
11,407,060
- ------------------------------------------------------------------------------------------------------------------
- ------------------
DIVERSIFIED FINANCIAL--1.5%
American Express Co. 50,000
2,825,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
INSURANCE--7.8%
Allstate Corp. 23,748
1,374,416
- ------------------------------------------------------------------------------------------------------------------
- -----------
Jefferson-Pilot Corp. 26,325
1,490,653
- ------------------------------------------------------------------------------------------------------------------
- -----------
Marsh & McLennan Cos., Inc. 35,000
3,640,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
MBIA, Inc. 33,500
3,391,875
- ------------------------------------------------------------------------------------------------------------------
- -----------
Safeco Corp. 99,500
3,924,031
- ------------------------------------------------------------------------------------------------------------------
- -----------
Unitrin, Inc. 17,400 970,050
------------
14,791,025
- ------------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL--15.2%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRICAL EQUIPMENT--8.4%
AMP, Inc. 100,300
3,849,013
- ------------------------------------------------------------------------------------------------------------------
- -----------
General Electric Co. 51,500
5,092,063
- ------------------------------------------------------------------------------------------------------------------
- -----------
Grainger (W.W.), Inc. 32,000
2,568,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
Honeywell, Inc. 28,000
1,841,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
Hubbell, Inc., Cl. B 61,994
2,681,241
------------
16,031,317
- ------------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL SERVICES--0.8%
Donnelley (R.R.) & Sons Co. 48,000
1,506,000
</TABLE>
7 Oppenheimer Value Stock Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C>
MANUFACTURING--4.6%
Dover Corp. 41,500 $
2,085,375
General Signal Corp. 5,500
235,125
- ------------------------------------------------------------------------------------------------------------------
- -----------
Harsco Corp. 23,000
1,575,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Minnesota Mining & Manufacturing Co. 43,500
3,605,063
- ------------------------------------------------------------------------------------------------------------------
- -----------
Parker-Hannifin Corp. 30,400
1,178,000
------------
8,679,063
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TRANSPORTATION--1.4%
Norfolk Southern Corp. 31,000
2,712,500
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TECHNOLOGY--11.0%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
AEROSPACE/DEFENSE--1.8%
Boeing Co. 16,500
1,755,188
- ------------------------------------------------------------------------------------------------------------------
- -----------
Raytheon Co. 700 33,687
- ------------------------------------------------------------------------------------------------------------------
- -----------
TRW, Inc. 32,000
1,584,000
------------
3,372,875
- ------------------------------------------------------------------------------------------------------------------
- ------------------
COMPUTER HARDWARE--4.9%
International Business Machines Corp. 22,500
3,397,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
Pitney Bowes, Inc. 54,500
2,970,250
- ------------------------------------------------------------------------------------------------------------------
- -----------
Xerox Corp. 57,000
2,999,625
------------
9,367,375
- ------------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRONICS--2.1%
Hewlett-Packard Co. 80,000
4,020,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TELECOMMUNICATIONS-
TECHNOLOGY--2.2%
AT&T Corp. 52,500
2,283,750
- ------------------------------------------------------------------------------------------------------------------
- -----------
Frontier Corp. 85,400
1,932,175
------------
4,215,925
- ------------------------------------------------------------------------------------------------------------------
- ------------------
UTILITIES--4.5%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRIC UTILITIES--1.7%
NIPSCO Industries, Inc. 25,500
1,010,438
- ------------------------------------------------------------------------------------------------------------------
- -----------
SCANA Corp. 48,500
1,297,375
- ------------------------------------------------------------------------------------------------------------------
- -----------
Teco Energy, Inc. 36,600
882,975
------------
3,190,788
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TELEPHONE UTILITIES--2.8%
Ameritech Corp. 28,000
1,697,500
- ------------------------------------------------------------------------------------------------------------------
- -----------
GTE Corp. 46,000
2,093,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
Southern New England Telecommunications Corp. 42,000
1,632,750
------------
5,423,250
------------
Total Common Stocks (Cost $114,380,928)
180,086,472
<CAPTION>
FACE
AMOUNT
=====================================================================
===============================================================
<S> <C> <C>
REPURCHASE AGREEMENT--4.4%
- ------------------------------------------------------------------------------------------------------------------
- ------------------
Repurchase agreement with Goldman, Sachs & Co., 6.52%, dated 12/31/96,
to be repurchased at $8,303,006 on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%--7.50%, 7/15/99--8/15/05, with a value of $8,490,302 (Cost $8,300,000)
$8,300,000 8,300,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------
TOTAL INVESTMENTS, AT VALUE (COST $122,680,928)
99.1% 188,386,472
- ------------------------------------------------------------------------------------------------------------------
- ------------------
OTHER ASSETS NET OF LIABILITIES 0.9
1,740,662
------------- -------------
NET ASSETS 100.0%
$190,127,134
=============
=============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
8 Oppenheimer Value Stock Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES December 31, 1996
<TABLE>
=====================================================================
===============================================================
<S> <C>
ASSETS
Investments, at value (cost $122,680,928)--see accompanying statement
$188,386,472
- ------------------------------------------------------------------------------------------------------------------
- ------------
Cash 317,473
- ------------------------------------------------------------------------------------------------------------------
- ------------
Receivables:
Investments sold 2,379,534
Shares of beneficial interest sold
639,204
Interest and dividends 409,199
- ------------------------------------------------------------------------------------------------------------------
- ------------
Other 7,941
------------
Total assets 192,139,823
=====================================================================
===============================================================
LIABILITIES
Payables and other liabilities:
Dividends 1,360,756
Shares of beneficial interest redeemed
359,460
Distribution and service plan fees
118,631
Shareholder reports 59,139
Investments purchased
33,730
Transfer and shareholder servicing agent fees
9,163
Trustees' fees 1,067
Other 70,743
------------
Total liabilities 2,012,689
=====================================================================
===============================================================
NET ASSETS
$190,127,134
============
=====================================================================
===============================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $122,783,317
- ------------------------------------------------------------------------------------------------------------------
- ------------
Undistributed net investment income
23,659
- ------------------------------------------------------------------------------------------------------------------
- ------------
Accumulated net realized gain on investment transactions
1,614,614
- ------------------------------------------------------------------------------------------------------------------
- ------------
Net unrealized appreciation on investments--Note 3
65,705,544
------------
Net assets $190,127,134
============
=====================================================================
===============================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $148,128,771 and 7,286,952 shares of beneficial interest outstanding)
$20.33
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$21.57
- ------------------------------------------------------------------------------------------------------------------
- ------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $40,142,493 and 1,988,443 shares of beneficial interest outstanding)
$20.19
- ------------------------------------------------------------------------------------------------------------------
- ------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $1,855,870 and 91,685 shares of beneficial interest outstanding)
$20.24
See accompanying Notes to Financial Statements.
</TABLE>
9 Oppenheimer Value Stock Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended December 31, 1996
<TABLE>
=====================================================================
===============================================================
<S> <C>
INVESTMENT INCOME
Dividends $ 4,410,082
- ------------------------------------------------------------------------------------------------------------------
- ------------
Interest 818,192
------------
Total income 5,228,274
=====================================================================
===============================================================
EXPENSES
Management fees--Note 4
1,315,853
- ------------------------------------------------------------------------------------------------------------------
- ------------
Distribution and service plan fees--Note 4:
Class A 350,768
Class B 332,226
Class C 9,020
- ------------------------------------------------------------------------------------------------------------------
- ------------
Transfer and shareholder servicing agent fees--Note 4
238,593
- ------------------------------------------------------------------------------------------------------------------
- ------------
Shareholder reports 69,568
- ------------------------------------------------------------------------------------------------------------------
- ------------
Legal and auditing fees 13,775
- ------------------------------------------------------------------------------------------------------------------
- ------------
Custodian fees and expenses
10,407
- ------------------------------------------------------------------------------------------------------------------
- ------------
Trustees' fees and expenses
6,536
- ------------------------------------------------------------------------------------------------------------------
- ------------
Registration and filing fees:
Class B 2,267
Class C 465
- ------------------------------------------------------------------------------------------------------------------
- ------------
Other 55,776
------------
Total expenses 2,405,254
=====================================================================
===============================================================
NET INVESTMENT INCOME
2,823,020
=====================================================================
===============================================================
REALIZED AND UNREALIZED
GAIN
Net realized gain on investments
7,161,305
- ------------------------------------------------------------------------------------------------------------------
- ------------
Net change in unrealized appreciation or depreciation on investments
21,456,991
------------
Net realized and unrealized gain
28,618,296
=====================================================================
===============================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$31,441,316
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Value Stock Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
=====================================================================
======================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 2,823,020 $
2,504,015
- ------------------------------------------------------------------------------------------------------------------
- ---
Net realized gain 7,161,305 2,126,048
- ------------------------------------------------------------------------------------------------------------------
- ---
Net change in unrealized appreciation or depreciation 21,456,991
29,893,727
------------- -------------
Net increase in net assets resulting from operations 31,441,316
34,523,790
=====================================================================
======================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,534,251) (2,195,920)
Class B (366,547) (239,821)
Class C (13,143) (429)
- ------------------------------------------------------------------------------------------------------------------
- ---
Distributions from net realized gain:
Class A (4,334,550) (1,793,905)
Class B (1,169,914) (351,137)
Class C (53,029) (1,561)
=====================================================================
======================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (6,902,321) 17,673,851
Class B 9,380,312 11,681,792
Class C 1,632,938 129,003
=====================================================================
======================================================
NET ASSETS
Total increase 27,080,811 59,425,663
- ------------------------------------------------------------------------------------------------------------------
- ---
Beginning of period 163,046,323
103,620,660
------------- -------------
End of period [including undistributed (overdistributed) net
investment income of $23,659 and $(16,697), respectively] $190,127,134
$163,046,323
------------- -------------
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Value Stock Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994
=====================================================================
========================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.84 $14.16 $14.41
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .34 .32 .31
Net realized and unrealized gain 3.11 3.90 .16
------ ------ ------
Total income (loss) from investment operations 3.45 4.22 .47
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.30) (.31)
Dividends in excess of net investment income -- -- (.01)
Distributions from net realized gain (.61) (.24) (.40)
------ ------ ------
Total dividends and distributions to shareholders (.96) (.54) (.72)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $20.33 $17.84 $14.16
------ ------ ------
=====================================================================
=========================
TOTAL RETURN, AT NET ASSET VALUE(3) 19.39% 30.04%
3.28%
=====================================================================
=========================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $148,129 $136,270 $92,728
- ----------------------------------------------------------------------------------------------
Average net assets (in thousands) $144,498 $115,137 $90,158
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.73% 1.98% 2.16%
Expenses, before voluntary reimbursement 1.20% 1.28% 1.27%
Expenses, net of voluntary reimbursement N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 14.5% 11.8% 16.3%
Average brokerage commission rate(6) $0.0573 $0.0597 --
</TABLE>
1. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
12 Oppenheimer Value Stock Fund
<PAGE> 13
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------- --------------------------------------------------------------
- --------------------------
YEAR ENDED DECEMBER 31, YEAR
ENDED DECEMBER 31,
1993 1992 1996 1995 1994 1993(2) 1996
1995(1)
- ------------------------------------------------------------------------------------------------------------------
- -------------
<S> <C> <C> <C> <C> <C> <C>
<C>
$14.19 $13.57 $17.73 $14.09 $14.35 $14.60 $17.81
$17.12
- ------------------------------------------------------------------------------------------------------------------
- -------------
.29 .32 .19 .21 .17 .17 .22 .02
.98 .97 3.09 3.86 .19 .51 3.05 .97
- ------ ------- ------- ------- ------- ------- ------ ------
1.27 1.29 3.28 4.07 .36 .68 3.27 .99
- ------------------------------------------------------------------------------------------------------------------
- -------------
(.29) (.32) (.21) (.19) (.21) (.17) (.23) (.06)
-- -- -- -- (.01) --- --- ---
(.76) (.35) (.61) (.24) (.40) (.76) (.61) (.24)
- ------ ------- ------- ------- ------- ------- ------ ------
(1.05) (.67) (.82) (.43) (.62) (.93) (.84) (.30)
- ------------------------------------------------------------------------------------------------------------------
- ------------
$14.41 $14.19 $20.19 $17.73 $14.09 $14.35 $20.24
$17.81
======= ======= ======= ======= ======= =======
======= =======
=====================================================================
=========================================================
8.97% 9.61% 18.50% 29.03% 2.50% 4.63% 18.39%
5.89%
=====================================================================
=========================================================
$90,470 $59,376 $40,142 $26,647 $10,893 $5,158 $1,856
$130
- ------------------------------------------------------------------------------------------------------------------
- ------------
$80,229 $53,485 $33,258 $18,857 $7,834 $2,527 $904
$ 57
- ------------------------------------------------------------------------------------------------------------------
- ------------
1.97% 2.34% 0.96% 1.19% 1.45% 0.97%(4) 0.92%
0.56%(4)
1.24% 1.19% 1.97% 2.07% 2.01% 2.14%(4) 2.02%
2.37%(4)
N/A N/A N/A N/A N/A N/A N/A
N/A
- ------------------------------------------------------------------------------------------------------------------
- ------------
24.3% 12.3% 14.5% 11.8% 16.3% 24.3% 14.5%
11.8%
-- -- $0.0573 $0.0597 -- -- $0.0573
$0.0597
</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 December 31, 1996 were $28,498,803 and $23,590,977,
respectively.
6. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold.
See accompanying Notes to Financial Statements.
13 Oppenheimer Value Stock Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Value Stock Fund (the Fund) is a separate fund of
Oppenheimer Integrity Funds, a diversified, open-end management
investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek
long-term growth of capital and income primarily through investments
in stocks of well established companies. The Fund's investment
adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except
that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class
B shares will automatically convert to Class A shares six years after
the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are
valued at the last sale price of the day or, in the absence of sales,
at values based on the closing bid or the last sale price on the
prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures
established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a
remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any
premium or discount.
----------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if
the seller enters an insolvency proceeding, realization of the value
of the collateral by the Fund may be delayed or limited.
----------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses (other than those attributable to a specific class) and
gains and losses are allocated daily to each class of shares based
upon the relative proportion of net assets represented by such class.
Operating expenses directly attributable to a specific class are
charged against the operations of that class.
----------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income (loss) and net realized gain (loss) may differ for financial
statement and tax purposes. The character of the distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year that
the income or realized gain (loss) was recorded by the Fund.
During the year ended December 31, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended December 31, 1996, amounts have
been reclassified to reflect a decrease in paid-in capital of
$131,277. Overdistributed net investment income was decreased by the
same amount.
14 Oppenheimer Value Stock Fund
<PAGE> 15
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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. Realized gains and losses on
investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used
for federal income tax purposes.
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.
=====================================================================
===========
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 DECEMBER 31, 1996 YEAR ENDED
DECEMBER 31, 1995(1)
--------------------------------- --------------------------------
SHARES AMOUNT SHARES
AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,459,943 $ 28,270,600 1,806,348 $
29,186,663
Dividends and distributions reinvested 250,205 5,056,348 228,838
3,907,434
Redeemed (2,062,372) (40,229,269) (944,270)
(15,420,246)
------------- ------------- ------------- -------------
Net increase (decrease) (352,224) $(6,902,321) 1,090,916
$17,673,851
============= ============= =============
=============
- ----------------------------------------------------------------------------------------------------------------
Class B:
Sold 730,295 $13,930,290 982,843
$15,746,572
Dividends and distributions reinvested 71,393 1,445,827 32,137
551,627
Redeemed (315,951) (5,995,805) (285,236)
(4,616,407)
------------- ------------- ------------- -------------
Net increase 485,737 $9,380,312 729,744
$11,681,792
============= ============= =============
=============
- ------------------------------------------------------------------------------------------------------------------
Class C:
Sold 93,935 $1,815,265 7,236 $128,066
Dividends and distributions reinvested 3,157 64,356 112
1,972
Redeemed (12,697) (246,683) (58)
(1,035)
------------- ------------- ------------- -------------
Net increase 84,395 $1,632,938 7,290
$129,003
============= ============= =============
=============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B
shares and for the period from October 2, 1995 to December 31, 1995
for Class C shares.
=====================================================================
===========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At December 31, 1996, net unrealized appreciation on investments of
$65,705,544 was composed of gross appreciation of $65,833,030, and
gross depreciation of $127,486.
=====================================================================
===========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee
of 0.75% on the first $100 million of average annual net assets with
a reduction of 0.03% on each $200 million thereafter, to 0.66% on net
assets in excess of $500 million. The Manager has agreed to reimburse
the Fund if aggregate expenses (with specified exceptions) exceed the
most stringent applicable regulatory limit on Fund expenses.
For the year ended December 31, 1996, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$345,153, of which $192,834 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 $401,158 and $15,057, of which $67,248 and
$1,741, respectively, was paid to an affiliated broker/dealer. During
the year ended December 31, 1996, OFDI received contingent deferred
sales charges of $49,374 upon redemption of Class B shares as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and 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.
15 Oppenheimer Value Stock Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
===========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a Service Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may
not exceed 0.25% of the average annual net assets of Class A shares
of the Fund. OFDI uses the service fee to reimburse brokers, dealers,
banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended December 31, 1996, OFDI
paid $216,769 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class B shares to reimburse OFDI
for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares. OFDI
also receives a service fee of 0.25% per year to reimburse dealers
for providing personal services for accounts that hold Class B
shares. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business
day. During the year ended December 31, 1996, OFDI paid $11,278 to an
affiliated broker/dealer as reimbursement for Class B personal
service and maintenance expenses and retained $277,247 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 certain expenses it incurred
before the Plan was terminated. As of December 31, 1996, OFDI had
incurred unreimbursed expenses of $881,627 for Class B.
The Fund has adopted a compensation type Distribution
and Service Plan for Class C shares to compensate OFDI for its
services and costs in distributing Class C shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class C shares. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. During the
year ended December 31, 1996, OFDI retained $8,196 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 certain expenses it incurred before the Plan
was terminated. As of December 31, 1996, OFDI had incurred
unreimbursed expenses of $34,962 for Class C.
16 Oppenheimer Value Stock Fund
<PAGE> 17
<PAGE>
Appendix A: Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
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 80202-4918
<PAGE>
OPPENHEIMER DISCIPLINED VALUE FUND
Annual Report October 31, 1996
[PHOTO]Pool Party
"We have a lot of
IMPORTANT
goals, so we
need our money
to GROW solidly
over time."
[LOGO]OppenheimerFunds/r/
<PAGE>
- ----
NEWS
- ----------------
BEAT THE AVERAGE
- ----------------
Cumulative Total Return for the 5-Year Period Ended 9/30/96:
Oppenheimer Disciplined Value Fund
Class A (at net asset value)(1)
- -------
117.94%
- -------
Lipper Growth Funds Average
for 247 Growth Funds for the
5-Year Period Ended 9/30/96(3)
- ------
92.28%
- ------
The Fund's Class A shares were
ranked ****
among 1,684 (3-year),
1,014 (5-year) and 560
(10-year) equity funds for
the combined 3-, 5- and
10-year periods ended
9/30/96 by MORNINGSTAR
MUTUAL FUNDS.(4)
This Fund is for people who seek long-term growth and feel most
comfortable investing in well-established, yet UNDERVALUED
companies.
- ------------------------
HOW YOUR FUND IS MANAGED
- ------------------------
Oppenheimer Disciplined Value Fund seeks long-term growth
of capital through investment primarily in common stocks with low
price/earnings ratios and better-than-anticipated earnings. Current
income is a secondary consideration. The management team employs a
disciplined bottom-up approach to security
selection.
- -----------
PERFORMANCE
- -----------
Cumulative total return for the 12 months ended 9/30/96 for Class
A shares was 16.12%, without deducting sales charges. Cumulative
total return for Class B shares since inception on 10/1/95 was
16.83%, without deducting sales charges. Cumulative total return
for Class C shares since inception on 5/1/96 was 3.14%,
without deducting sales charges.(1)
Your Fund's average annual total returns for Class A shares for the
1-, 5- and 10-year periods ended 9/30/96 were 9.44%, 15.48% and
14.32%, respectively. For Class B shares, cumulative total return
since inception on 10/1/95 was 11.83%.
For Class C shares, cumulative total return since inception on
5/1/96 was
2.14%.(2)
- -------
OUTLOOK
- -------
"Although we cannot predict the future, we feel that market
valuations are extended and vulnerable to a correction. If a
correction occurs, we will look for further opportunities to
purchase out-of-favor stocks with positive earnings
surprises at lower prices."
Peter Antos, Michael Strathearn and Kenneth White
Portfolio Managers
October 31, 1996
Total returns include change in share price and reinvestment of
dividends and capital gains distributions in a hypothetical
investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS
THAN THE ORIGINAL COST. All classes of shares have the same
investment portfolio but different expenses. For more
complete information, please review the prospectus carefully before
you invest.
Prior to March 1, 1996, the Fund had a different investment
adviser. However, the prior portfolio management team is now
employed by OppenheimerFunds, Inc., the current adviser.
1. Includes change in net asset value per share without deducting
any sales charges. Such performance would have been lower if sales
charges were taken into account.
2. Class A returns include the current maximum initial sales charge
of 5.75%.
Class A shares were first publicly offered on 9/16/85. The Fund's
maximum sales charge for Class A shares was less during a portion
of some of the periods shown, and actual investment results will be
different as a result. Class B returns include the applicable
contingent deferred sales charge of 5% (since inception). Class C
returns include the applicable contingent deferred sales charge of
1%. An explanation of the different performance calculations is in
the Fund's prospectus. Class B and C shares are subject to an
annual .75% asset-based sales charge.3. Source: Lipper Analytical
Services, 9/30/96, an independent mutual fund monitoring service.
The average is shown for comparative purposes only. Funds
included in the index may have different investment policies and
risks than the Fund. Oppenheimer Disciplined Value Fund is
characterized by Lipper as a growth fund. Lipper performance is
based on total return and does not take sales charges into account.
4. Source: MORNINGSTAR MUTUAL FUNDS, 9/30/96. Morningstar rankings
are based on risk-adjusted investment return, after considering
sales charges and expenses. Investment return measures a fund's (or
class's) 3-, 5- and 10-year (depending on the inception of the
class or fund) average annual total returns in excess of
90-day U.S. Treasury bill returns. Risk measures a fund's (or
class's)performance below 90-day U.S. Treasury bill returns. Risk
and returns are combined to produce star rankings, reflecting
performance relative to the average fund in the fund's category.
The top 10% of funds in each investment class receive 5 stars; the
next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2
stars; and the bottom 10%, 1 star. The 4-star current ranking is a
weighted average of the 3-, 5- and 10-year rankings for the Fund's
Class A shares, which were 3, 4 and 4 stars, respectively, weighted
20%/30%/50%. The 1-year star ranking is 3 stars, but is not
included in Morningstar's overall ranking calculations. There were
1,684 funds in the 1-year period. Rankings are subject to change
monthly. The Fund's Class A, B and C shares have the same
investment portfolio but different expenses.
2 Oppenheimer Disciplined Value Fund
<PAGE>
[PHOTO]Bridget A. Macaskill
Bridget A. Macaskill
President
Oppenheimer
Disciplined Value Fund
DEAR SHAREHOLDER,
Following a summer of uncertainty surrounding the economy and
the stock market, the arrival of fall brought renewed vigor to
both. Most notable, the Dow Jones Industrial Average broke out of
its fluctuating pattern and burst through the once-unimaginable
6,000 mark, sending many stock prices to all-time highs. But as the
Dow began accelerating faster than the economy, a debate erupted
about how long this bull run could last.
Looking back, the autumn rally was clearly a result of three
mainfactors: solid corporate profits, low inflation and stabilized
interest rates, all of which attracted investors to Wall Street.
And though the stock market is currently highly valued, there
continue to be a number of positive economic influences that may
extend the market's uphill run.
We consider the leading catalyst to be the robust returns from
corporate America, where a strong economy boosted third-quarter
earnings. To date, we're still witnessing a cycle of events that
could maintain the appeal of these companies to investors. For
example, corporate streamlining efforts, such as spinoffs of
non-core businesses, and consolidation within industries are
helping to increase the cash flow of many firms. In return,
additional cash flows enable these companies to add shareholder
value by initiating stock repurchasing programs. As corporations
buy back record amounts of their own stocks, they are reducing the
supply and thereby raising the book value of their outstanding
shares, a move which further contributes to higher stock prices.
Additionally, the demand for stocks remains strong, largely
because, as many experts believe, investors are taking more
responsibility for their retirement investments. Indeed, as the
country's baby boomers near retirement, they are becoming
increasingly aware of the need to secure their own financial
future, because they expect less and less from standard company
pensions or Social Security. As a result, equity mutual funds have
become the fastest growing means by which these investors are
seeking to achieve their long-term goals.
While these signs appear favorable for many well-managed
companies, stock valuations remain at historically high levels,
causing us to become more cautious about the market overall. We do
not, however, expect to see a significant market decline. In fact,
we are confident that as long as corporate earnings stay healthy,
there will continue to be numerous investment opportunities
available to fill the demand for stocks. Nevertheless, it is
becoming more difficult to uncover true values and justify higher
prices. Therefore, we believe the correct approach to take at this
point is to carefully evaluate companies based on individual
merits, such as strong management, fundamental business policies
and long-term prospects for the future.
Your portfolio manager discusses the outlook for your Fund
in light of these broad issues on the following pages. Thank you
for your confidence in OppenheimerFunds. We look forward to helping
you reach your investment goals in the future.
/s/Bridget Macaskill
Bridget Macaskill
November 21, 1996
3 Oppenheimer Disciplined Value Fund
<PAGE>
PETER ANTOS
MICHAEL STRATHEARN
KENNETH WHITE
Portfolio Managers
An interview with your Fund's managers.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
Although we have continued our time-tested strategy of
targeting stocks with low price-to-earnings ratios and recent
positive earnings surprises, 1996 has not been a great year for the
Fund. In the past, this approach led us to undervalued stocks that
performed well over time. This year, however, investors were
anxious about the economic and political environments and were
willing to pay for more highly valued stocks that offered a greater
level of certainty. As a result, our type of undervalued stocks
were out of favor in this year's growing but volatile market.
While 1996 has not provided the best environment for the Fund, our
stockdiscipline which emphasizes low P/E,
positive-earnings-surprise, has a clearly superior record relative
to other funds in the same category over the past ten years. With
only a few periods of underperformance in the Fund's history, we
remain committed to this strategy and expect superior performance
going forward.
WHAT CHARACTERISTICS DO YOU LOOK FOR WHEN EVALUATING STOCKS?
We screen the universe for out-of-favor, undervalued stocks that
have had
recent positive earnings surprises. Unexpected by Wall Street
analysts, these surprise gains are leading indicators that
out-of-favor stocks may be ready to make a comeback. We manage from
the bottom up, looking at companies rather than sectors, to find
those investments with the most growth potential.
WHAT INVESTMENTS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
A few strong companies in the technology sector, specifically
personal computer manufacturers, provided the Fund with some real
winners. Early in the period, investors' feelings that the
marketplace was flooded with PCs, turned the market negative on the
sector. As prices dropped, we identified high quality companies
with positive earnings potential and bought stocks at low prices
that have since appreciated.
DID ANY INVESTMENTS NEGATIVELY IMPACT THE PORTFOLIO?
Although they performed well for the Fund in the last quarter of
1995, agricultural companies have underperformed this year. Because
of low worldwide supplies of grain and increasing food consumption
in developing countries, we had expected performance to remain
strong well into 1996. It appears, however, that these stocks had
moved too far, too fast late last year and since then have dropped
back to more realistic valuations.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Despite disappointing performance during this period, our
discipline has proven itself to be very strong over time. As a
result, we do not intend to alter our strategy, and will continue
to look for opportunities in undervalued companies. Although we
cannot predict the future, we feel that market valuations
are extended and vulnerable to a correction. If a correction
occurs, we will look for further opportunities to purchase
out-of-favor stocks with positive earnings surprises at lower
prices.
4 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
=========================================
STATEMENT OF INVESTMENTS October 31, 1996
FACE
MARKET VALUE
AMOUNT
SEE NOTE 1
=====================================================================
===========================================
==================
U.S. GOVERNMENT OBLIGATIONS - 13.8%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C> <C>
<C>
Federal Home Loan Bank Consolidated Disc. Nts., 5.50%, 11/1/96
$18,800,000
$ 18,800,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Federal Home Loan Mortgage Corp., 5.18%, 11/18/96 7,000,000
6,982,877
-------------
Total U.S. Government Obligations (Cost $25,782,877)
25,782,877
SHARES
=====================================================================
===========================================
==================
COMMON STOCKS - 85.7%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BASIC MATERIALS - 5.0%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CHEMICALS - 2.7%
- ------------------------------------------------------------------------------------------------------------------
- -----
Cabot Corp. 12,500
301,562
- ----------------------------------------------------------------------------------------------------------------
- -------
Potash Corp. of Saskatchewan, Inc. 31,300
2,218,387
- ----------------------------------------------------------------------------------------------------------------
- -------
Union Carbide Corp. 58,700
2,502,087
-------------
5,022,036
- ----------------------------------------------------------------------------------------------------------------
- ------------------
METALS - 1.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
UCAR International, Inc. (1) 45,400
1,776,275
- ----------------------------------------------------------------------------------------------------------------
- ------------------
PAPER - 1.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Fort Howard Corp. (1) 95,700
2,452,312
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER CYCLICALS - 9.4%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AUTOS & HOUSING - 0.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Black & Decker Corp. 37,300
1,394,087
- ----------------------------------------------------------------------------------------------------------------
- ------------------
LEISURE & ENTERTAINMENT - 2.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
AMR Corp. (1) 30,600
2,570,400
- ----------------------------------------------------------------------------------------------------------------
- -------
Northwest Airlines Corp., Cl. A (1) 43,500
1,440,937
-------------
4,011,337
- ----------------------------------------------------------------------------------------------------------------
- ------------------
RETAIL: GENERAL - 5.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
Eckerd Corp. (1) 77,700
2,156,175
- ----------------------------------------------------------------------------------------------------------------
- -------
Federated Department Stores, Inc. (1) 76,500
2,524,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Price/Costco, Inc. (1) 109,100
2,168,362
- ----------------------------------------------------------------------------------------------------------------
- -------
U.S. Industries, Inc. (1) 91,400
2,467,800
-------------
9,316,837
- ----------------------------------------------------------------------------------------------------------------
- ------------------
RETAIL: SPECIALTY - 1.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Toys 'R' Us, Inc. (1) 85,500
2,896,312
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER NON-CYCLICALS - 14.0%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BEVERAGES - 1.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Anheuser-Busch Cos., Inc. 72,900
2,806,650
- ----------------------------------------------------------------------------------------------------------------
- ------------------
FOOD - 5.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Stores Co. 77,400
3,202,425
- ----------------------------------------------------------------------------------------------------------------
- -------
Archer-Daniels-Midland Co. 143,390
3,118,732
- ----------------------------------------------------------------------------------------------------------------
- -------
Dole Food Co. 44,500
1,735,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Kroger Co. (1) 65,100
2,905,088
-------------
10,961,745
</TABLE>
5 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
=========================================
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/DRUGS - 1.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
Bristol-Myers Squibb Co. 26,900
$ 2,844,675
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/SUPPLIES & SERVICES - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Columbia/HCA Healthcare Corp. 56,700
2,027,025
- ----------------------------------------------------------------------------------------------------------------
- -------
OrNda Healthcorp (1) 92,400
2,517,900
-------------
4,544,925
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HOUSEHOLD GOODS - 2.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Premark International, Inc. 125,800
2,626,075
- ----------------------------------------------------------------------------------------------------------------
- -------
Tupperware Corp. 48,500
2,491,688
-------------
5,117,763
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ENERGY - 5.2%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
OIL-INTEGRATED - 5.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Amoco Corp. 32,200
2,439,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Chevron Corp. 61,500
4,043,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Mobil Corp. 28,500
3,327,375
-------------
9,810,150
- ----------------------------------------------------------------------------------------------------------------
- ------------------
FINANCIAL - 13.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BANKS - 7.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Bank of Boston Corp. 60,300
3,859,200
- ----------------------------------------------------------------------------------------------------------------
- -------
BankAmerica Corp. 48,700
4,456,050
- ----------------------------------------------------------------------------------------------------------------
- -------
Chase Manhattan Corp. (New) 9,000
771,750
- ----------------------------------------------------------------------------------------------------------------
- -------
NationsBank Corp. 25,500
2,403,375
- ----------------------------------------------------------------------------------------------------------------
- -------
PNC Bank Corp. 66,300
2,403,375
-------------
13,893,750
- ----------------------------------------------------------------------------------------------------------------
- ------------------
DIVERSIFIED FINANCIAL - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Crescent Real Estate Equities, Inc. 36,400
1,519,700
- ----------------------------------------------------------------------------------------------------------------
- -------
Salomon, Inc. 65,300
2,946,663
-------------
4,466,363
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INSURANCE - 3.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
AFLAC, Inc. 68,900
2,764,613
- ----------------------------------------------------------------------------------------------------------------
- -------
General Re Corp. 11,300
1,663,925
- ----------------------------------------------------------------------------------------------------------------
- -------
Travelers/Aetna Property Casualty Corp., Cl. A 91,300
2,739,000
-------------
7,167,538
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL - 12.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
MANUFACTURING - 11.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
AGCO Corp. 92,900
2,357,338
- ----------------------------------------------------------------------------------------------------------------
- -------
Case Corp. 62,200
2,892,300
- ----------------------------------------------------------------------------------------------------------------
- -------
Deere & Co. 61,000
2,546,750
- ----------------------------------------------------------------------------------------------------------------
- -------
General Signal Corp. 62,400
2,542,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Ingersoll-Rand Co. 58,600
2,439,225
- ----------------------------------------------------------------------------------------------------------------
- -------
Mark IV Industries, Inc. 50,902
1,100,756
- ----------------------------------------------------------------------------------------------------------------
- -------
Textron, Inc. 44,000
3,905,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Tyco International Ltd. 64,400
3,195,850
-------------
20,980,019
</TABLE>
6 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TRANSPORTATION - 1.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
PACCAR, Inc. 15,300
$ 852,975
- ----------------------------------------------------------------------------------------------------------------
- -------
Union Pacific Corp. 32,600
1,829,675
-------------
2,682,650
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TECHNOLOGY - 14.4%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AEROSPACE/DEFENSE - 9.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
General Dynamics Corp. 40,300
2,765,588
- ----------------------------------------------------------------------------------------------------------------
- -------
Goodrich (B.F.) Co. 42,300
1,792,463
- ----------------------------------------------------------------------------------------------------------------
- -------
Lockheed Martin Corp. 39,071
3,501,738
- ----------------------------------------------------------------------------------------------------------------
- -------
McDonnell Douglas Corp. 67,900
3,700,550
- ----------------------------------------------------------------------------------------------------------------
- -------
Rockwell International Corp. 44,600
2,453,000
- ----------------------------------------------------------------------------------------------------------------
- -------
TRW, Inc. 28,700
2,597,350
-------------
16,810,689
- ----------------------------------------------------------------------------------------------------------------
- ------------------
COMPUTER HARDWARE - 3.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Dell Computer Corp. (1) 25,200
2,050,650
- ----------------------------------------------------------------------------------------------------------------
- -------
Gateway 2000, Inc. (1) 21,600
1,016,550
- ----------------------------------------------------------------------------------------------------------------
- -------
Storage Technology Corp. (New) (1) 86,300
3,678,538
-------------
6,745,738
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRONICS - 1.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Atmel Corp. (1) 8,400
213,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Intel Corp. 23,500
2,582,063
- ----------------------------------------------------------------------------------------------------------------
- -------
Waters Corp. (1) 17,400
539,400
-------------
3,334,613
- ----------------------------------------------------------------------------------------------------------------
- ------------------
UTILITIES - 11.5%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRIC UTILITIES - 4.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Electric Power Co., Inc. 33,100
1,373,650
- ----------------------------------------------------------------------------------------------------------------
- -------
CalEnergy, Inc. (1) 48,000
1,392,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Entergy Corp. 77,700
2,175,600
- ----------------------------------------------------------------------------------------------------------------
- -------
FPL Group, Inc. 44,300
2,037,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Texas Utilities Co. 54,900
2,223,450
-------------
9,202,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
GAS UTILITIES - 5.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Columbia Gas System, Inc. (The) 86,600
5,260,950
- ----------------------------------------------------------------------------------------------------------------
- -------
PanEnergy Corp. 101,900
3,923,150
- ----------------------------------------------------------------------------------------------------------------
- -------
Questar Corp. 27,900
1,004,400
-------------
10,188,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TELEPHONE UTILITIES - 1.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
GTE Corp. 50,900
2,144,163
-------------
Total Common Stocks (Cost $134,182,459)
160,571,627
- ------------------------------------------------------------------------------------------------------------------
- -----
TOTAL INVESTMENTS, AT VALUE (COST $159,965,336)
99.5%
186,354,504
- ----------------------------------------------------------------------------------------------------------------
- -------
OTHER ASSETS NET OF LIABILITIES 0.5
999,004
------
-------------
NET ASSETS 100.0%
$187,353,508
======
=============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
7 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================================
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
=====================================================================
===========================================
==================
<S> <C>
<C>
ASSETS Investments, at value (cost $159,965,336) - see accompanying
statement
$186,354,504
- --------------------------------------------------------------------------------------------------
Cash
1,903,355
- --------------------------------------------------------------------------------------------------
Receivables:
Investments sold
855,619
Shares of capital stock sold
404,481
Interest and dividends
127,102
-------------
Total assets
189,645,061
=====================================================================
===========================================
==================
LIABILITIES Payables and other liabilities:
Investments purchased
2,107,323
Shares of capital stock redeemed
46,764
Distribution and service plan fees
32,317
Transfer and shareholder servicing agent fees
12,790
Directors' fees
7,976
Other
84,383
-------------
Total liabilities
2,291,553
=====================================================================
===========================================
==================
NET ASSETS
$187,353,508
=============
=====================================================================
===========================================
==================
COMPOSITION OF Par value of shares of capital stock
$ 9,534
NET ASSETS
- --------------------------------------------------------------------------------------------------
Additional paid-in capital
147,179,680
- --------------------------------------------------------------------------------------------------
Undistributed net investment income
479,425
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions
13,295,701
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Note 3
26,389,168
-------------
Net assets
$187,353,508
=============
=====================================================================
===========================================
==================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on
net assets of $180,784,352 and 9,201,201 shares of capital stock
outstanding)
$19.65
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$20.85
- --------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $5,854,228 and 296,100 shares of capital stock outstanding)
$19.77
- --------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $714,928 and 36,533 shares of capital stock outstanding)
$19.57
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================================================================
STATEMENT OF OPERATIONS FOR THE TEN MONTHS ENDED
OCTOBER 31, 1996(1)
=====================================================================
===========================================
==================
<S> <C>
<C>
INVESTMENT INCOME Dividends (net of foreign withholding taxes of $1,451)
$ 1,741,056
- --------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $1,612)
735,017
-------------
Total income
2,476,073
=====================================================================
===========================================
==================
EXPENSES Management fees - Note 4
719,186
- --------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A
275,407
Class B
24,189
Class C
1,717
- --------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4
154,397
- --------------------------------------------------------------------------------------------------
Custodian fees and expenses
41,841
- --------------------------------------------------------------------------------------------------
Legal and auditing fees
38,719
- --------------------------------------------------------------------------------------------------
Shareholder reports
32,274
- --------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A
14,944
Class B
1,470
Class C
211
- --------------------------------------------------------------------------------------------------
Accounting service fees
12,500
- --------------------------------------------------------------------------------------------------
Directors' fees and expenses - Note 1
7,976
- --------------------------------------------------------------------------------------------------
Other
1,613
-------------
Total expenses
1,326,444
=====================================================================
===========================================
==================
NET INVESTMENT INCOME
1,149,629
=====================================================================
===========================================
==================
REALIZED AND Net realized gain on investments
13,385,207
UNREALIZED GAIN
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
665,122
-------------
Net realized and unrealized gain
14,050,329
=====================================================================
===========================================
==================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 15,199,958
=============
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to October 31.
See accompanying Notes to Financial Statements.
9 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
===================================
STATEMENTS OF CHANGES IN NET ASSETS
TEN MONTHS
YEAR ENDED
ENDED OCTOBER 31,
DECEMBER 31,
1996(1)
1995
=====================================================================
===========================================
==================
<S> <C> <C>
<C>
OPERATIONS Net investment income $ 1,149,629
$ 1,501,707
- ---------------------------------------------------------------------------------------------------
Net realized gain 13,385,207
7,939,891
- ----------------------------------
Net change in unrealized appreciation or depreciation 665,122
20,902,301
- ----------------------------------
Net increase in net assets resulting
from operations 15,199,958
30,343,899
=====================================================================
===========================================
==================
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income:
TO SHAREHOLDERS Class A (669,566)
(1,491,101)
Class B (11,039)
(561)
Class C (1,428)
--
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (841,952)
(7,649,952)
Class B (19,962)
(42,834)
Class C (1,789)
--
=====================================================================
===========================================
==================
CAPITAL STOCK Net increase in net assets resulting from capital
TRANSACTIONS stock transactions - Note 2:
Class A 49,316,623
18,560,935
Class B 4,851,609
724,308
Class C 696,522
--
=====================================================================
===========================================
==================
NET ASSETS Total increase 68,518,976
40,444,694
- --------------------------------------------------------------------------------------------------
Beginning of period 118,834,532
78,389,838
- ----------------------------------
End of period (including undistributed net investment
income of $479,425 and $11,438, respectively) $187,353,508
$118,834,532
==================================
</TABLE>
1. The Fund changed its fiscal year end from
December 31 to October 31.
See accompanying Notes to Financial Statements.
10 Oppenheimer Disciplined Value Fund
<PAGE>
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS A
----------------------------------------------------------------------------
TEN MONTHS
ENDED
OCTOBER 31, YEAR ENDED DECEMBER 31,
1996(3) 1995 1994 1993 1992 1991
=====================================================================
==============================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $17.84 $14.20 $15.14 $14.20 $14.40 $11.62
- ------------------------------------------------------------------------------------------------------------------
- -
Income (loss) from investment
operations:
Net investment income .15 .25 .22 .30 .26 .25
Net realized and unrealized
gain (loss) 1.88 4.88 (.32) 2.64 1.44 4.00
- ------------------------------------------------------------------------------------------------------------------
- -
Total income (loss) from
investment operations 2.03 5.13 (.10) 2.94 1.70 4.25
- ------------------------------------------------------------------------------------------------------------------
- -
Dividends and distributions to
shareholders:
Dividends from net investment income (.10) (.25) (.22) (.30) (.26)
(.25)
Distributions from net realized gain (.12) (1.24) (.62) (1.70) (1.64) (1.22)
- ------------------------------------------------------------------------------------------------------------------
- -
Total dividends and distributions
to shareholders (.22) (1.49) (.84) (2.00) (1.90) (1.47)
- ------------------------------------------------------------------------------------------------------------------
- -
Net asset value, end of period $19.65 $17.84 $14.20 $15.14 $14.20
$14.40
=====================================================================
=====
=====================================================================
==============================================
TOTAL RETURN, AT NET ASSET VALUE(4) 11.41% 36.40% (0.65)%
20.91% 11.99% 36.91%
=====================================================================
==============================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $180,784 $118,118 $78,390 $64,495 $45,600
$40,716
- ------------------------------------------------------------------------------------------------------------------
- -
Average net assets (in thousands) $135,940 $ 98,063 $71,956 $54,682 $42,432
$36,087
- ------------------------------------------------------------------------------------------------------------------
- -
Ratios to average net assets:
Net investment income (loss) 1.01%(5) 1.53% 1.50% 1.95% 1.74%
1.74%
Expenses 1.13%(5) 1.22% 1.02% 1.05% 1.12%
1.19%
- ------------------------------------------------------------------------------------------------------------------
- -
Portfolio turnover rate(6) 73.9% 69.7% 98.5% 99.7% 141.7%
148.3%
Average brokerage commission rate(7) $0.0697 -- -- -- -- --
</TABLE>
1. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
2. For the period from October 1, 1995 (inception of offering) to December 31,
1995.
3. The Fund changed its fiscal year end from December 31 to October 31. On
March 18, 1996, OppenheimerFunds, Inc. became the investment adviser to the
Fund.
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.
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 October 31, 1996 were $128,801,684 and $90,147,069, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS B CLASS C
-------------------------------- ------------
TEN MONTHS PERIOD PERIOD
ENDED ENDED ENDED
OCTOBER 31, DECEMBER 31, OCTOBER 31,
1996(3) 1995(2) 1996(1)
=====================================================================
===================
PER SHARE OPERATING DATA:
<S> <C> <C> <C>
Net asset value, beginning of
period $18.08 $17.83 $18.79
- ----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .05 .02 .06
Net realized and unrealized
gain (loss) 1.83 1.40 .94
- ----------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.88 1.42 1.00
- ----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.07) (.02) (.10)
Distributions from net realized gain (.12) (1.15) (.12)
- ----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.19) (1.17) (.22)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $19.77 $18.08 $19.57
=================================================
=====================================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(4) 10.43% 8.04% 5.35%
=====================================================================
===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $5,854 $717 $715
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $2,903 $306 $342
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.22%(5) 0.21%(5) 0.04%(5)
Expenses 1.88%(5) 1.97%(5) 1.87%(5)
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(6) 73.9% 69.7% 73.9%
Average brokerage commission rate(7) $0.0697 -- $0.0697
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Disciplined Value Fund
<PAGE>
=============================
Notes to Financial Statements
=====================================================================
===========
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Disciplined Value Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. On August 15, 1996, the Board of Directors elected to change the
fiscal year end of the Fund from December to October. Accordingly, these
financial statements include information for the ten month period from
January 1, 1996 to October 31, 1996. The Fund's investment objective is to
seek capital appreciation by investing primarily in common stocks with low
price-earnings ratios and better-than-anticipated earnings. Until March 18,
1996, the Fund and the Company were named Connecticut Mutual Growth Account
and Connecticut Mutual Investment Accounts, Inc., respectively. On January
27, 1996, the policyholders of Connecticut Mutual Life Insurance Company
(CML) approved a merger of CML with Massachusetts Mutual Life Insurance
Company (MML). In connection with this change, effective March 18, 1996,
OppenheimerFunds, Inc. (the Manager) became the adviser of the Company. The
Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with respect
to matters affecting a single class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The
following is a summary of significant accounting policies consistently
followed by the Fund.
----------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last sale
price of the day or, in the absence of sales, at values based on the closing
bid or 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 Directors. Such securities which
cannot be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Directors 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.
----------------------------------------------------------------------------
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.
12 Oppenheimer Disciplined Value Fund
<PAGE>
=====================================================================
===========
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses are
allocated daily to each class of shares based upon the relative proportion
of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
----------------------------------------------------------------------------
DIRECTORS' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement
plan for the Fund's independent directors. Benefits are based on years of
service and fees paid to each director during the years of service. During
the ten months ended October 31, 1996, a provision of $7,976 was made for
the Fund's projected benefit obligations, resulting in an accumulated
liability of $7,976.
----------------------------------------------------------------------------
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.
----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
----------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain (loss) was recorded by
the Fund.
During the ten month period ended October 31, 1996, the Fund adjusted the
classification of investment income and capital gain (loss) to shareholders
to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. During
the ten month period ended October 31, 1996, amounts have been reclassified
to reflect an increase in paid-in capital of $648, a decrease in accumulated
net realized gain of $1,039, and an increase in undistributed net investment
income of $391.
----------------------------------------------------------------------------
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. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
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.
13 Oppenheimer Disciplined Value Fund
<PAGE>
=========================================
Notes to Financial Statements (Continued)
=====================================================================
===========
2. SHARES OF CAPITAL STOCK
The Fund has authorized 450 million of $0.001 par value shares of capital
stock. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
TEN MONTHS ENDED OCTOBER 31, 1996(2) YEAR ENDED
DECEMBER 31, 1995(1)
------------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 3,132,678 $ 59,597,763 1,242,427 $ 20,678,025
Dividends and distributions
reinvested 79,955 1,491,345 513,302 9,039,419
Redeemed (630,553) (11,772,485) (657,052)
(11,156,509)
---------- ------------- ---------- -------------
Net increase 2,582,080 $ 49,316,623 1,098,677 $ 18,560,935
========== ============= ==========
=============
--------------------------------------------------------------------------------------------------------------
Class B:
Sold 261,924 $ 4,955,930 37,415 $ 684,870
Dividends and distributions
reinvested 1,535 28,899 2,434 43,392
Redeemed (6,999) (133,220) (209) (3,954)
---------- ------------- ---------- -------------
Net increase 256,460 $ 4,851,609 39,640 $ 724,308
========== ============= ==========
=============
--------------------------------------------------------------------------------------------------------------
Class C:
Sold 36,414 $ 694,306 -- $ --
Dividends and distributions
reinvested 172 3,206 -- --
Redeemed (53) (990) -- --
---------- ------------- ---------- -------------
Net increase 36,533 $ 696,522 -- $ --
========== ============= ==========
=============
</TABLE>
1. For the year ended December 31, 1995 for Class A shares and for the
period from October 1, 1995 (inception of offering) to December 31, 1995 for
Class B shares.
2. For the ten months ended October 31, 1996 for Class A and Class B shares
and for the period from May 1,1996 (inception of offering) to October 31,
1996 for Class C shares. The Fund changed its fiscal year end from December
31 to October 31.
=====================================================================
===========
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1996, net unrealized appreciation on investments of
$26,389,168 was composed of gross appreciation of $27,298,502, and gross
depreciation of $909,334.
=====================================================================
===========
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 0.625% of the
first $300 million of average annual net assets, 0.500% of the next $100
million and 0.450% of net assets in excess of $400 million. Prior to
March 18, 1996, management fees were paid to G. R. Phelps & Co. (the former
Manager) at an annual rate of 0.625% of the Fund's average net assets. The
Manager has agreed to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable regulatory limit
on Fund expenses.
For the period ended October 31, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $534,988, of which $341,543
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 $149,781 and $6,734, of which $79,814 and
$4,696, respectively, were paid to an affiliated broker/dealer. During the
period ended October 31, 1996, OFDI received contingent deferred sales
charges of $3,336 upon redemption of Class B shares as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
14 Oppenheimer Disciplined Value Fund
<PAGE>
=====================================================================
=======
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
(CONTINUED)
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 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 period ended October 31,
1996, OFDI paid $191,634 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted a compensation type Distribution and Service Plan for
Class B shares to compensate OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares. OFDI
also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class B shares. Both fees
are computed on the average annual net assets of Class B shares, determined
as of the close of each regular business day. During the period ended
October 31, 1996, OFDI retained $20,026 as compensation 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 Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. As of October 31, 1996,
OFDI had incurred unreimbursed expenses of $153,254 for Class B.
The Fund has adopted a compensation type Distribution and Service Plan for
Class C shares to compensate OFDI for its services and costs in distributing
Class C shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C shares. OFDI
also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class C shares. Both fees
are computed on the average annual net assets of Class C shares, determined
as of the close of each regular business day. During the period ended
October 31, 1996, OFDI retained $1,623 as reimbursement 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 Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. As of October 31, 1996,
OFDI had incurred unreimbursed expenses of $11,314 for Class C.
15 Oppenheimer Disciplined Value Fund
<PAGE>
Independent Auditors' Report
=====================================================================
===========
The Board of Directors and Shareholders of Oppenheimer Disciplined Value Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Disciplined Value Fund (formerly Connecticut Mutual
Growth Account) as of October 31, 1996, and the related statement of operations,
the statement of changes in net assets and the financial highlights for the ten
month period then ended. 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
audit. The statement of changes in net assets for the year ended December 31,
1995 and the financial highlights for the five years ended December 31, 1995
were audited by other auditors whose report dated February 9, 1996 expressed an
unqualified opinion on this information.
We conducted our audit 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 as of October 31, 1996 by
correspondence with the custodian and brokers; and where confirmations 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Disciplined Value Fund as of October 31, 1996, and the results of
its operations, the changes in its net assets, and the financial highlights for
the ten month period ended October 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1996
16 Oppenheimer Disciplined Value Fund
<PAGE>
Federal Income Tax Information (Unaudited)
=================================================================
===============
In early 1997 shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during
calendar year 1996. Regulations of the U.S. Treasury Department
require the Fund to report this information to the Internal Revenue
Service.
Dividends paid by the Fund during the ten months ended October
31, 1996 which are not designated as capital gain distributions
should be multiplied by 48.50% to arrive at the net amount eligible
for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders
in reporting distributions received from the Fund to the Internal
Revenue Service.
Because of the complexity of the federal regulations which may
affect your individual tax return and the many variations in state
and local tax regulations, we recommend that you consult your tax
adviser for specific guidance.
17 Oppenheimer Disciplined Value Fund
<PAGE>
Oppenheimer Disciplined Value Fund
A Series of Oppenheimer Series Fund, Inc.
=================================================================
OFFICERS AND DIRECTORS Leon Levy, Chairman of the Board of
Directors
Donald W. Spiro, Vice Chairman of the
Board of Directors
Bridget A. Macaskill, Director and
President
Robert G. Galli, Director
Benjamin Lipstein, Director
Elizabeth B. Moynihan, Director
Kenneth A. Randall, Director
Edward V. Regan, Director
Russell S. Reynolds, Jr., Director
Sidney M. Robbins, Director
Pauline Trigere, Director
Clayton K. Yeutter, Director
Peter M. Antos, Vice President
Robert C. Doll, Jr., Vice President
Stephen F. Libera, Vice President
Michael C. Strathearn, Vice President
Kenneth B. White, Vice President
Arthur J. Zimmer, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
=================================================================
===============
INVESTMENT ADVISER OppenheimerFunds, Inc.
=================================================================
===============
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
=================================================================
===============
TRANSFER AND OppenheimerFunds Services
SHAREHOLDER SERVICING
AGENT
=================================================================
===============
CUSTODIAN OF State Street Bank and Trust Company
PORTFOLIO SECURITIES
=================================================================
===============
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
=================================================================
===============
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov
& Wein
This is a copy of a report to shareholders of Oppenheimer
Disciplined Value Fund. This report must be preceded or accompanied
by a Prospectus of Oppenheimer Disciplined Value Fund. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of
any bank, are not guaranteed by any bank, and are not insured by
the FDIC or any other agency, and involve investment risks,
including possible loss of the principal amount invested.
18 Oppenheimer Disciplined Value Fund
<PAGE>
- -----------------------
OPPENHEIMERFUNDS FAMILY
- -----------------------
=================================================================
===============
OppenheimerFunds offers over 50 funds designed to fit virtually
very investment goal. Whether you're investing for retirement,
children's education or tax-free income, we have the funds
to help you seek your objective.
When you invest with OppenheimerFunds, you can feel comfor-
table knowing that you are investing with a respected financial
institution with over 35 years of experience in helping people
just like you reach their financial goals. And you're investing
with a leader in global, growth stock and flexible fixed-income
investments--with over 3 million shareholder accounts and more
than $55 billion under OppenheimerFunds' management and that of
our affiliates.
At OppenheimerFunds, we don't charge a fee to exchange
shares. And you can exchange shares easily by mail or by
telephone.(1) For more information on Oppenheimer funds, please
contact your financial adviser or call us at 1-800-525-7048 for a
prospectus. You may also write us at the address shown on the
back cover. As always, please read the prospectus carefully
before you invest.
=================================================================
===============
STOCK FUNDS Developing Markets Fund Growth Fund
Global Emerging Growth Fund Global Fund
Enterprise Fund(2) Quest Global Value
Fund
International Growth Fund Disciplined Value Fund
Discovery Fund Oppenheimer Fund
Quest Small Cap Value Fund Value Stock Fund
Gold & Special Minerals Fund Quest Value Fund
Target Fund
=================================================================
===============
STOCK & BOND Main Street Income & Growth Fund Equity Income Fund
FUNDS Quest Opportunity Value Fund Disciplined Allocation
Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income &
Growth Fund
Global Growth & Income Fund Bond Fund for Growth
=================================================================
BOND FUNDS International Bond Fund Bond Fund
High Yield Fund U.S. Government
Trust
Champion Income Fund Limited-Term
Government Fund
Strategic Income Fund
=================================================================
===============
MUNICIPAL California Municipal Fund(3) Insured Municipal
Fund
FUNDS Florida Municipal Fund(3) Intermediate Municipal
Fund
New Jersey Municipal Fund(3)
New York Municipal Fund(3) Rochester Division
Pennsylvania Municipal Fund(3) Rochester Fund
Municipals
Municipal Bond Fund Limited Term New York
Municipal Fund
=================================================================
===============
MONEY MARKET Money Market Fund Cash Reserves
FUNDS(4)
=================================================================
===============
LIFESPAN Growth Fund Income Fund
Balanced Fund
1. Exchange privileges are subject to change or
termination. Shares may be exchanged only for shares of the same
class of eligible funds.
2. Effective 4/1/96, the Fund is closed to new investors.
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured
nor guaranteed by the U.S. government and there can be no
assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Oppenheimer funds are distributed by OppenheimerFunds
Distributor, Inc., Two World Trade Center, New York, NY
10048-0203.
-c-Copyright 1996 OppenheimerFunds, Inc. All rights
reserved.
19 Oppenheimer Disciplined Value Fund
<PAGE>
[BACK COVER}
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
- --------------
1-800-525-7048
- --------------
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
- --------------
1-800-852-8457
- --------------
PHONELINK
24 hours a day, automated
information and transactions
- --------------
1-800-533-3310
- --------------
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
- --------------
1-800-843-4461
- --------------
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
- --------------
1-800-835-3104
- --------------
RA0375.001.1096 December 31, 1996
- -----------------------------------------------------------------
- -------------
"HOW MAY I HELP YOU?" [PHOTO]Customer Service
Representative
Customer Service Representative
OppenheimerFunds Services
As an Oppenheimer funds shareholder, you have some special
privileges. Whether it's automatic investment plans, informative
newsletters and hotlines, or ready account access, you can benefit
from services designed to make investing simple. And when you need
help, our Customer Service Representatives are only a toll-free
phone call away. They can provide information about your account
and handle administrative requests. You can reach them at our
General Information number.
When you want to make a transaction, you can do it easily by
calling our toll-free Telephone Transactions number. And, by
enrolling in AccountLink, a convenient service that "links" your
Oppenheimer funds accounts and your bank checking or savings
account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7
days a week. PhoneLink gives you access to a variety of fund,
account, and market information. Of course, you can always speak
with a Customer Service Representative during the General
Information hours shown at the left.
You can count on us whenever you need assistance. That's why
the International Customer Service Association, an independent,
nonprofit organization made up of over 3,200 customer service
management professionals from around the country, honored the
Oppenheimer funds' transfer agent, OppenheimerFunds Services, with
their Award of Excellence in 1993.
So call us today--we're here to help.
- -----------------------------------------------------------------
- -------------
[LOGO] OPPENHEIMERFUNDS-R-
- --------------
OppenheimerFunds Distributor, Inc.
Bulk Rate
P.O. Box 5270
U.S. Postage
Denver, CO 80217-5270
PAID
Permit No. 469
Denver, CO
- --------------
<PAGE> 1
[PHOTO]
OPPENHEIMER VALUE STOCK FUND
Annual Report December 31, 1996
"We want to invest
for growth
in companies that
pay dividends,
but we want their
stocks at a
good price."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
THIS FUND IS FOR PEOPLE WHO SEEK LONG-TERM GROWTH AND CURRENT
INCOME BY INVESTING IN UNDERVALUED STOCKS OF WELL-ESTABLISHED
COMPANIES.
NEWS
BEAT THE AVERAGE
Total Return for the 3-Year Period
Ended 12/31/96:
Oppenheimer Value Stock Fund
Class A (at net asset value)(1)
60.36%
Lipper Growth & Income Funds
Average for 330 Funds for the
3-Year Period Ended 12/31/96(3)
56.85%
"THE FUND'S CLASS B SHARES
ARE RANKED **** AMONG
1,826 DOMESTIC EQUITY FUNDS
FOR THE 3-YEAR PERIOD ENDED
12/31/96 BY MORNINGSTAR
MUTUAL FUNDS.(4)
HOW YOUR FUND IS MANAGED
Oppenheimer Value Stock Fund's basic investment strategy is to "buy
low, sell high." The Fund's managers invest in stocks they believe
are priced below their intrinsic value, and sell stocks when they
think they're overvalued. This strategy offers the potential for
long-term capital appreciation through
investment in well-established companies.
PERFORMANCE
Total returns for the 12 months ended 12/31/96 for Class A, B and
C shares were 19.39%, 18.50% and 18.39%, respectively, without
deducting sales charges.(1)
Your Fund's average annual total returns for Class A shares
for the 1-, 5- and 10-year periods ended 12/31/96 were 12.53%,
12.54% and 12.24%, respectively. For Class B shares, average annual
total returns for the 1-year period ended 12/31/96 and since
inception on 5/1/93 were 13.50% and 13.87%, respectively. For Class
C shares, average annual total returns for the 1-year period ended
12/31/96 and since inception on 10/2/95 were 17.39% and 19.88%,
respectively.(2)
OUTLOOK
"We believe that by aiming to participate in the gains of a rising
market and to conserve asset value in a less positive environment,
the Fund should show superior returns over the long term."
James MacAllen, Portfolio Manager
David L. Babson and Co., Inc., the Fund's Sub-Adviser
December 31, 1996
Total returns include change in share price and reinvestment of
dividends and capital gains distributions in a hypothetical
investment for the periods shown.
IN REVIEWING THE PERFORMANCE AND RANKINGS, PLEASE REMEMBER PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO
THAT AN INVESTOR'S SHARES,WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THE ORIGINAL COST. For more complete information, please
review the prospectus carefully before you invest. On
1/1/97, the Fund's prior sub-adviser merged into its present
sub-adviser.
1. Includes change in net asset value per share without deducting
any sales charges. Such performance would have been lower if sales
charges were taken into account.
2. Class A returns include the current maximum initial sales charge
of 5.75%.
Prior to 3/29/91, the Fund's maximum sales charge rate for Class A
shares was lower, so that actual results would have been higher.
Class B returns include the applicable contingent deferred sales
charge of 5% (1-year) and 3% (since inception). Class C returns
include the 1% contingent deferred sales charge for the 1-year
result. An explanation of the different performance calculations is
in the Fund's prospectus.
3. Source: Lipper Analytical Services, 12/31/96. The Lipper average
is shown for comparative purposes only. Funds included in the
average may have different investment policies and risks than the
Fund. Oppenheimer Value Stock Fund is characterized by Lipper as a
growth & income fund. Lipper performance is based on total return
and does not take sales charges into account.
4. Source: Morningstar Mutual Funds, 12/31/96. Morningstar rankings
are based on risk-adjusted investment return, after considering
sales charges and expenses. Investment return measures a fund's (or
class's) 1-, 3-, 5- and 10-year (depending on the inception of the
class or fund) average annual total returns in excess of 90-day
U.S. Treasury bill returns. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and
returns are combined to produce star rankings, reflecting
performance relative to the average fund in a fund's category. The
top 10% of funds in each investment class receive 5 stars; the next
22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%; 2 stars;
and the bottom 10%, 1 star. The 4-star current ranking is based on
the 3-year ranking for the Fund's Class B shares, which was
4 stars. The 1-year star ranking is 3 stars, but is not included in
Morningstar's overall ranking calculations. There were 2,959 funds
for the 1-year period. Rankings are subject to change monthly. The
Fund's Class A, B and C shares have the same investment portfolio
but different expenses.
2 Oppenheimer Value Stock Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Value Stock Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Value Stock Fund
DEAR SHAREHOLDER,
As 1996 has drawn to a close, we can look back and say that the
past year has certainly been one for the record books. But it has
not necessarily been easy for the faint of heart. During the first
five months of the year, the stock market reported tremendous
gains, thanks in part to strong corporate earnings,
low inflation and stabilized interest rates. However, on the trail
of a six-year bull market and with indices reporting all-time
highs, many experts felt a correction was inevitable.
The stock market volatility that jolted investors in June
and July did not come as a complete surprise, but remarkably
enough, by the end of September the stock market had rebounded and
resumed its record-setting pace. During the fourth quarter, the Dow
passed 6,500, both the S&P 500 and the technology-laden
NASDAQ posted all-time highs, and the Russell 2000 came very close
to hitting record levels.
What does the new year have in store for the stock market
and its investors? Of course, no one can predict the events of 1997
with complete accuracy. Instead, the experts rely on several
economic indicators to offer clues about the market's direction.
For example, the rate of unemployment has dropped to its lowest
level in seven years and wage growth continues to make gains. As a
result, consumer confidence is at its highest level since 1989.
What these events suggest to many experts is the likelihood
of higher inflation in 1997, countered by a possible increase in
short-term interest rates. However, an opposing view is that
economic growth will taper off sufficiently early in the year,
calming fears of rising inflation and interest rate increases.
Although the Federal Reserve appeared to agree with this
reasoning in the third and fourth quarters of 1996, this may not be
true in the future.
The one thing we can accurately predict is that,
regardless of the scenario, OppenheimerFunds will continue to
monitor significant events and act appropriately. To that end, we
view our outlook for the market as cautiously optimistic. Whichever
direction interest rates move, we expect the market's volatile
trading pattern to continue in the coming months. But while our
watchword may be "caution," in the near term, we are still finding
plenty of attractive investment opportunities today, both in the
United States and abroad. We believe the correct approach is to
carefully evaluate companies based on individual merits, such as
strong management, fundamental business policies and long-term
prospects for the future. Based on this strategy and the resilient
performance the stock market has demonstrated in the past, our
long-term view remains positive.
Your portfolio managers discuss the outlook for your Fund
in light of these broad issues on the following pages. Thank you
for your confidence in OppenheimerFunds. We look forward to helping
you reach your investment goals in the future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
January 22, 1997
3 Oppenheimer Value Stock Fund
<PAGE> 4
JAMES MACALLEN
Portfolio Manager
Q + A
An interview with your Fund's managers.
HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
Oppenheimer Value Stock Fund's conservative structure caused it to
lag behind the stock market for the full year, but its pattern of
performance was consistent with its low-risk strategy. The Fund
participated in the continuing advance of stock prices, and in
those few months when the market paused, the Fund retained its
value better than the stock market overall. With the market
now entering the seventh year since the most recent bull market
began, we believe that this strategy of seeking to maintain
relatively low portfolio risk will be beneficial to the Fund in
future periods.
WHAT INVESTMENTS HAVE MADE POSITIVE CONTRIBUTIONS TO
PERFORMANCE?
The Fund's results benefited from strong performance by several of
the largest holdings. The financial holdings were outstanding
performers, particularly banks. Contributing to bank stock gains
were an accom-modative Fed policy, continued good loan loss
experience and the relentless trend toward industry
consolidations.(1)
WERE THERE ANY INVESTMENTS THAT DIDN'T PERFORM AS YOU'D EXPECTED?
The telephone industry was a disappointment in 1996. The major
factor was the tele-communications deregulation bill which was
signed into law in the spring. This provides for the eventual
opening up of the industry to competition. And as companies prepare
for this, increased marketing spending will restrain earnings
growth. Early in 1996, the Fund had a relatively small commitment
to this industry, but we steadily increased its weighting during
the year as we found companies with competitive advantages which
were undervalued relative to the market. In the long run, the
surviving companies will prosper due to strong growth of telecom
traffic.
WHAT AREAS OF THE MARKET ARE YOU CURRENTLY TARGETING?
We are trying to minimize risk in the portfolio as the eco-nomic
expansion continues and stock valuations remain on the high side.
We are reducing some stocks whose prices are fully valued, and
adding to stocks that we feel are currently underpriced and can
offer good long-term return through a combination of capital
appreciation and current income. In fact, well-positioned electric
utilities appear attractive and we are modestly increasing our
commitment to them.
WHAT IS YOUR OUTLOOK FOR THE FUND?
We are optimistic about the long-term outlook for stocks in
general, and the Fund in particular. After a long period of
exceptional stock market returns such as we have seen recently, a
pause in the market's upward trend would not be a surprise.
However, we recognize that there are risks in equity investing
as well as returns, and the conservative nature of the Fund is
intended to hold up well during a weak stock market. We believe
that by aiming to participate in the gains of a rising market and
to conserve asset value in a less positive environment, the Fund
should show superior returns over the long term.
1. The Fund's portfolio is subject to change.
4 Oppenheimer Value Stock Fund
<PAGE> 5
FINANCIALS
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
STATEMENT OF INVESTMENTS 6
STATEMENT OF ASSETS AND LIABILITIES 9
STATEMENT OF OPERATIONS 10
STATEMENTS OF CHANGES IN NET ASSETS 11
FINANCIAL HIGHLIGHTS 12
NOTES TO FINANCIAL STATEMENTS 14
INDEPENDENT AUDITORS' REPORT 17
FEDERAL INCOME TAX INFORMATION 18
</TABLE>
5 Oppenheimer Value Stock Fund
<PAGE> 6
STATEMENT OF INVESTMENTS December 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
=====================================================================
===========================================
===================
<S> <C>
<C>
COMMON STOCKS--94.7%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
BASIC MATERIALS--7.7%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CHEMICALS--4.1%
Du Pont (E.I.) De Nemours & Co. 21,500
$ 2,029,062
- ----------------------------------------------------------------------------------------------------------------
- --------------
Lubrizol Corp. (The) 40,400
1,252,400
- ----------------------------------------------------------------------------------------------------------------
- -------------
Nalco Chemical Co. 52,500
1,896,562
- ----------------------------------------------------------------------------------------------------------------
- -------------
Rohm & Haas Co. 31,000
2,530,375
------------
7,708,399
- ----------------------------------------------------------------------------------------------------------------
- --------------------
PAPER--3.6%
Temple-Inland, Inc. 40,000
2,165,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
Westvaco Corp. 64,500
1,854,375
- ----------------------------------------------------------------------------------------------------------------
- -------------
Weyerhaeuser Co. 58,800
2,785,650
------------
6,805,025
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CONSUMER CYCLICALS--11.2%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
AUTOS & HOUSING--5.6%
Ford Motor Co. 73,100
2,330,062
- ----------------------------------------------------------------------------------------------------------------
- -------------
Genuine Parts Co. 55,000
2,447,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Goodyear Tire & Rubber Co. 73,000
3,750,375
- ----------------------------------------------------------------------------------------------------------------
- -------------
Stanley Works (The) 80,000
2,160,000
------------
10,687,937
- ----------------------------------------------------------------------------------------------------------------
- --------------------
LEISURE & ENTERTAINMENT--1.3%
Eastman Kodak Co. 31,800
2,551,950
- ----------------------------------------------------------------------------------------------------------------
- --------------------
MEDIA--1.4%
McGraw-Hill, Inc. 57,000
2,629,125
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RETAIL: GENERAL--2.9%
May Department Stores Cos. 46,500
2,173,875
- ----------------------------------------------------------------------------------------------------------------
- -------------
Sears Roebuck & Co. 31,000
1,429,875
- ----------------------------------------------------------------------------------------------------------------
- -------------
VF Corp. 27,500
1,856,250
------------
5,460,000
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CONSUMER NON-CYCLICALS--19.8%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
BEVERAGES--1.8%
Brown-Forman Corp., Cl. B 40,900
1,871,175
- ----------------------------------------------------------------------------------------------------------------
- -------------
PepsiCo, Inc. 54,000
1,579,500
------------
3,450,675
- ----------------------------------------------------------------------------------------------------------------
- --------------------
FOOD--5.5%
Albertson's, Inc. 76,000
2,707,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
American Stores Co. 20,500
837,937
- ----------------------------------------------------------------------------------------------------------------
- -------------
ConAgra, Inc. 40,000
1,990,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
CPC International, Inc. 37,000
2,867,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Pioneer Hi-Bred International, Inc. 29,500
2,065,000
------------
10,467,937
- ----------------------------------------------------------------------------------------------------------------
- --------------------
HEALTHCARE/DRUGS--7.0%
Bristol-Myers Squibb Co. 57,500
6,253,125
- ----------------------------------------------------------------------------------------------------------------
- -------------
Cytogen Corp.(1) 79
434
- ----------------------------------------------------------------------------------------------------------------
- ------------
Pfizer, Inc. 22,500
1,864,687
- ----------------------------------------------------------------------------------------------------------------
- -------------
Pharmacia & Upjohn, Inc. 58,000
2,298,250
- ------------------------------------------------------------------------------------------------------------------
- -----------
Schering-Plough Corp. 45,500
2,946,125
------------
13,362,621
</TABLE>
6 Oppenheimer Value Stock Fund
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------------
<S> <C>
<C>
HEALTHCARE/SUPPLIES &
SERVICES--1.4%
Becton, Dickinson & Co. 62,000
$ 2,689,250
- ----------------------------------------------------------------------------------------------------------------
- --------------------
HOUSEHOLD GOODS--1.3%
Kimberly-Clark Corp. 25,500
2,428,875
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TOBACCO--2.8%
American Brands, Inc. 59,000
2,927,875
- ----------------------------------------------------------------------------------------------------------------
- -------------
UST, Inc. 75,000
2,428,125
------------
5,356,000
- ----------------------------------------------------------------------------------------------------------------
- --------------------
ENERGY--10.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
ENERGY SERVICES &
PRODUCERS--1.1%
Kerr-McGee Corp. 28,500
2,052,000
- ----------------------------------------------------------------------------------------------------------------
- -------------------
OIL-INTEGRATED--8.9%
Amoco Corp. 49,500
3,984,750
- ----------------------------------------------------------------------------------------------------------------
- -------------
Atlantic Richfield Co. 13,700
1,815,250
- ----------------------------------------------------------------------------------------------------------------
- -------------
Chevron Corp. 45,000
2,925,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
Mobil Corp. 23,500
2,872,875
- ----------------------------------------------------------------------------------------------------------------
- -------------
Occidental Petroleum Corp. 80,500
1,881,687
- ----------------------------------------------------------------------------------------------------------------
- -------------
Union Pacific Resources Group, Inc. 55,500
1,623,375
- ----------------------------------------------------------------------------------------------------------------
- -------------
Unocal Corp. 44,100
1,791,563
------------
16,894,500
- ----------------------------------------------------------------------------------------------------------------
- --------------------
FINANCIAL--15.3%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
BANKS--6.0%
Bank of New York Co., Inc. (The) 110,000
3,712,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Comerica, Inc. 26,000
1,361,750
- ----------------------------------------------------------------------------------------------------------------
- -------------
CoreStates Financial Corp. 52,000
2,697,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Norwest Corp. 36,500
1,587,750
- ----------------------------------------------------------------------------------------------------------------
- -------------
Wachovia Corp. 36,240
2,047,560
------------
11,407,060
- ----------------------------------------------------------------------------------------------------------------
- --------------------
DIVERSIFIED FINANCIAL--1.5%
American Express Co. 50,000
2,825,000
- ----------------------------------------------------------------------------------------------------------------
- -------------------
INSURANCE--7.8%
Allstate Corp. 23,748
1,374,416
- ----------------------------------------------------------------------------------------------------------------
- -------------
Jefferson-Pilot Corp. 26,325
1,490,653
- ----------------------------------------------------------------------------------------------------------------
- -------------
Marsh & McLennan Cos., Inc. 35,000
3,640,000
- ------------------------------------------------------------------------------------------------------------------
- -----------
MBIA, Inc. 33,500
3,391,875
- ----------------------------------------------------------------------------------------------------------------
- -------------
Safeco Corp. 99,500
3,924,031
- ----------------------------------------------------------------------------------------------------------------
- -------------
Unitrin, Inc. 17,400
970,050
------------
14,791,025
- ----------------------------------------------------------------------------------------------------------------
- --------------------
INDUSTRIAL--15.2%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
ELECTRICAL EQUIPMENT--8.4%
AMP, Inc. 100,300
3,849,013
- ----------------------------------------------------------------------------------------------------------------
- -------------
General Electric Co. 51,500
5,092,063
- ----------------------------------------------------------------------------------------------------------------
- -------------
Grainger (W.W.), Inc. 32,000
2,568,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
Honeywell, Inc. 28,000
1,841,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
Hubbell, Inc., Cl. B 61,994
2,681,241
------------
16,031,317
- ----------------------------------------------------------------------------------------------------------------
- --------------------
INDUSTRIAL SERVICES--0.8%
Donnelley (R.R.) & Sons Co. 48,000
1,506,000
</TABLE>
7 Oppenheimer Value Stock Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------------
<S> <C>
<C>
MANUFACTURING--4.6%
Dover Corp. 41,500
$ 2,085,375
General Signal Corp. 5,500
235,125
- ----------------------------------------------------------------------------------------------------------------
- -------------
Harsco Corp. 23,000
1,575,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Minnesota Mining & Manufacturing Co. 43,500
3,605,063
- ----------------------------------------------------------------------------------------------------------------
- -------------
Parker-Hannifin Corp. 30,400
1,178,000
------------
8,679,063
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TRANSPORTATION--1.4%
Norfolk Southern Corp. 31,000
2,712,500
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TECHNOLOGY--11.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
AEROSPACE/DEFENSE--1.8%
Boeing Co. 16,500
1,755,188
- ----------------------------------------------------------------------------------------------------------------
- -------------
Raytheon Co. 700
33,687
- ----------------------------------------------------------------------------------------------------------------
- -------------
TRW, Inc. 32,000
1,584,000
------------
3,372,875
- ----------------------------------------------------------------------------------------------------------------
- --------------------
COMPUTER HARDWARE--4.9%
International Business Machines Corp. 22,500
3,397,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
Pitney Bowes, Inc. 54,500
2,970,250
- ----------------------------------------------------------------------------------------------------------------
- -------------
Xerox Corp. 57,000
2,999,625
------------
9,367,375
- ----------------------------------------------------------------------------------------------------------------
- --------------------
ELECTRONICS--2.1%
Hewlett-Packard Co. 80,000
4,020,000
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TELECOMMUNICATIONS-
TECHNOLOGY--2.2%
AT&T Corp. 52,500
2,283,750
- ----------------------------------------------------------------------------------------------------------------
- -------------
Frontier Corp. 85,400
1,932,175
------------
4,215,925
- ----------------------------------------------------------------------------------------------------------------
- --------------------
UTILITIES--4.5%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
ELECTRIC UTILITIES--1.7%
NIPSCO Industries, Inc. 25,500
1,010,438
- ----------------------------------------------------------------------------------------------------------------
- -------------
SCANA Corp. 48,500
1,297,375
- ----------------------------------------------------------------------------------------------------------------
- -------------
Teco Energy, Inc. 36,600
882,975
------------
3,190,788
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TELEPHONE UTILITIES--2.8%
Ameritech Corp. 28,000
1,697,500
- ----------------------------------------------------------------------------------------------------------------
- -------------
GTE Corp. 46,000
2,093,000
- ----------------------------------------------------------------------------------------------------------------
- -------------
Southern New England Telecommunications Corp. 42,000
1,632,750
------------
5,423,250
------------
Total Common Stocks (Cost $114,380,928)
180,086,472
<CAPTION>
FACE
AMOUNT
=====================================================================
===========================================
====================
<S> <C>
<C>
REPURCHASE AGREEMENT--4.4%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Repurchase agreement with Goldman, Sachs & Co., 6.52%, dated 12/31/96,
to be repurchased at $8,303,006 on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%--7.50%, 7/15/99--8/15/05, with a value of $8,490,302 (Cost $8,300,000)
$8,300,000
8,300,000
- ----------------------------------------------------------------------------------------------------------------
- --------------------
TOTAL INVESTMENTS, AT VALUE (COST $122,680,928)
99.1%
188,386,472
- ----------------------------------------------------------------------------------------------------------------
- --------------------
OTHER ASSETS NET OF LIABILITIES 0.9
1,740,662
-------------
-------------
NET ASSETS 100.0%
$190,127,134
=============
=============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
8 Oppenheimer Value Stock Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES December 31, 1996
<TABLE>
=====================================================================
===========================================
====================
<S>
<C>
ASSETS
Investments, at value (cost $122,680,928)--see accompanying statement
$188,386,472
- ----------------------------------------------------------------------------------------------------------------
- --------------
Cash
317,473
- ----------------------------------------------------------------------------------------------------------------
- --------------
Receivables:
Investments sold
2,379,534
Shares of beneficial interest sold
639,204
Interest and dividends
409,199
- ----------------------------------------------------------------------------------------------------------------
- --------------
Other
7,941
------------
Total assets
192,139,823
=====================================================================
===========================================
====================
LIABILITIES
Payables and other liabilities:
Dividends
1,360,756
Shares of beneficial interest redeemed
359,460
Distribution and service plan fees
118,631
Shareholder reports
59,139
Investments purchased
33,730
Transfer and shareholder servicing agent fees
9,163
Trustees' fees
1,067
Other
70,743
------------
Total liabilities
2,012,689
=====================================================================
===========================================
====================
NET ASSETS
$190,127,134
============
=====================================================================
===========================================
====================
COMPOSITION OF
NET ASSETS
Paid-in capital
$122,783,317
- ----------------------------------------------------------------------------------------------------------------
- --------------
Undistributed net investment income
23,659
- ----------------------------------------------------------------------------------------------------------------
- --------------
Accumulated net realized gain on investment transactions
1,614,614
- ----------------------------------------------------------------------------------------------------------------
- --------------
Net unrealized appreciation on investments--Note 3
65,705,544
------------
Net assets
$190,127,134
============
=====================================================================
===========================================
====================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $148,128,771 and 7,286,952 shares of beneficial interest outstanding)
$20.33
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$21.57
- ----------------------------------------------------------------------------------------------------------------
- --------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $40,142,493 and 1,988,443 shares of beneficial interest outstanding)
$20.19
- ----------------------------------------------------------------------------------------------------------------
- --------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $1,855,870 and 91,685 shares of beneficial interest outstanding)
$20.24
See accompanying Notes to Financial Statements.
</TABLE>
9 Oppenheimer Value Stock Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended December 31, 1996
<TABLE>
=====================================================================
===========================================
====================
<S>
<C>
INVESTMENT INCOME
Dividends
$ 4,410,082
- ----------------------------------------------------------------------------------------------------------------
- --------------
Interest
818,192
------------
Total income
5,228,274
=====================================================================
===========================================
====================
EXPENSES
Management fees--Note 4
1,315,853
- ----------------------------------------------------------------------------------------------------------------
- --------------
Distribution and service plan fees--Note 4:
Class A
350,768
Class B
332,226
Class C
9,020
- ----------------------------------------------------------------------------------------------------------------
- --------------
Transfer and shareholder servicing agent fees--Note 4
238,593
- ----------------------------------------------------------------------------------------------------------------
- --------------
Shareholder reports
69,568
- ----------------------------------------------------------------------------------------------------------------
- --------------
Legal and auditing fees
13,775
- ----------------------------------------------------------------------------------------------------------------
- --------------
Custodian fees and expenses
10,407
- ----------------------------------------------------------------------------------------------------------------
- --------------
Trustees' fees and expenses
6,536
- ----------------------------------------------------------------------------------------------------------------
- --------------
Registration and filing fees:
Class B
2,267
Class C
465
- ------------------------------------------------------------------------------------------------------------------
- ------------
Other
55,776
------------
Total expenses
2,405,254
=====================================================================
===========================================
====================
NET INVESTMENT INCOME
2,823,020
=====================================================================
===========================================
====================
REALIZED AND UNREALIZED
GAIN
Net realized gain on investments
7,161,305
- ----------------------------------------------------------------------------------------------------------------
- --------------
Net change in unrealized appreciation or depreciation on investments
21,456,991
------------
Net realized and unrealized gain
28,618,296
=====================================================================
===========================================
====================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$31,441,316
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Value Stock Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
=====================================================================
===========================================
===========
<S> <C> <C>
OPERATIONS
Net investment income $ 2,823,020 $
2,504,015
- ----------------------------------------------------------------------------------------------------------------
- -----
Net realized gain 7,161,305
2,126,048
- ----------------------------------------------------------------------------------------------------------------
- -----
Net change in unrealized appreciation or depreciation 21,456,991
29,893,727
-------------
- -------------
Net increase in net assets resulting from operations 31,441,316
34,523,790
=====================================================================
===========================================
===========
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,534,251)
(2,195,920)
Class B (366,547)
(239,821)
Class C (13,143)
(429)
- ----------------------------------------------------------------------------------------------------------------
- -----
Distributions from net realized gain:
Class A (4,334,550)
(1,793,905)
Class B (1,169,914)
(351,137)
Class C (53,029)
(1,561)
=====================================================================
===========================================
===========
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (6,902,321)
17,673,851
Class B 9,380,312
11,681,792
Class C 1,632,938
129,003
=====================================================================
===========================================
===========
NET ASSETS
Total increase 27,080,811
59,425,663
- ----------------------------------------------------------------------------------------------------------------
- -----
Beginning of period 163,046,323
103,620,660
-------------
- -------------
End of period [including undistributed (overdistributed) net
investment income of $23,659 and $(16,697), respectively] $190,127,134
$163,046,323
-------------
- -------------
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Value Stock Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994
=====================================================================
========================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.84 $14.16 $14.41
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .34 .32 .31
Net realized and unrealized gain 3.11 3.90 .16
------ ------ ------
Total income (loss) from investment operations 3.45 4.22 .47
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.30) (.31)
Dividends in excess of net investment income -- -- (.01)
Distributions from net realized gain (.61) (.24) (.40)
------ ------ ------
Total dividends and distributions to shareholders (.96) (.54) (.72)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $20.33 $17.84 $14.16
------ ------ ------
=====================================================================
=========================
TOTAL RETURN, AT NET ASSET VALUE(3) 19.39% 30.04%
3.28%
=====================================================================
=========================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $148,129 $136,270 $92,728
- ----------------------------------------------------------------------------------------------
Average net assets (in thousands) $144,498 $115,137 $90,158
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.73% 1.98% 2.16%
Expenses, before voluntary reimbursement 1.20% 1.28% 1.27%
Expenses, net of voluntary reimbursement N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 14.5% 11.8% 16.3%
Average brokerage commission rate(6) $0.0573 $0.0597 --
</TABLE>
1. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
12 Oppenheimer Value Stock Fund
<PAGE> 13
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------- --------------------------------------------------------------
- --------------------------
YEAR ENDED DECEMBER 31, YEAR
ENDED
DECEMBER 31,
1993 1992 1996 1995 1994 1993(2) 1996
1995(1)
- ----------------------------------------------------------------------------------------------------------------
- ---------------
<S> <C> <C> <C> <C> <C> <C>
<C>
$14.19 $13.57 $17.73 $14.09 $14.35 $14.60 $17.81
$17.12
- ----------------------------------------------------------------------------------------------------------------
- ---------------
.29 .32 .19 .21 .17 .17 .22
.02
.98 .97 3.09 3.86 .19 .51 3.05
.97
- ------ ------- ------- ------- ------- ------- ------
------
1.27 1.29 3.28 4.07 .36 .68 3.27
.99
- ----------------------------------------------------------------------------------------------------------------
- ---------------
(.29) (.32) (.21) (.19) (.21) (.17) (.23)
(.06)
-- -- -- -- (.01) --- ---
---
(.76) (.35) (.61) (.24) (.40) (.76) (.61)
(.24)
- ------ ------- ------- ------- ------- ------- ------
------
(1.05) (.67) (.82) (.43) (.62) (.93) (.84)
(.30)
- ----------------------------------------------------------------------------------------------------------------
- --------------
$14.41 $14.19 $20.19 $17.73 $14.09 $14.35 $20.24
$17.81
======= ======= ======= ======= ======= =======
=======
=======
=====================================================================
===========================================
==============
8.97% 9.61% 18.50% 29.03% 2.50% 4.63% 18.39%
5.89%
=====================================================================
===========================================
==============
$90,470 $59,376 $40,142 $26,647 $10,893 $5,158 $1,856
$130
- ----------------------------------------------------------------------------------------------------------------
- --------------
$80,229 $53,485 $33,258 $18,857 $7,834 $2,527 $904
$ 57
- ----------------------------------------------------------------------------------------------------------------
- --------------
1.97% 2.34% 0.96% 1.19% 1.45% 0.97%(4) 0.92%
0.56%(4)
1.24% 1.19% 1.97% 2.07% 2.01% 2.14%(4) 2.02%
2.37%(4)
N/A N/A N/A N/A N/A N/A N/A
N/A
- ----------------------------------------------------------------------------------------------------------------
- --------------
24.3% 12.3% 14.5% 11.8% 16.3% 24.3% 14.5%
11.8%
-- -- $0.0573 $0.0597 -- -- $0.0573
$0.0597
</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 December 31, 1996 were $28,498,803 and $23,590,977,
respectively.
6. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold.
See accompanying Notes to Financial Statements.
13 Oppenheimer Value Stock Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Value Stock Fund (the Fund) is a separate fund of
Oppenheimer Integrity Funds, a diversified, open-end management
investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek
long-term growth of capital and income primarily through investments
in stocks of well established companies. The Fund's investment
adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except
that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class
B shares will automatically convert to Class A shares six years after
the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are
valued at the last sale price of the day or, in the absence of sales,
at values based on the closing bid or the last sale price on the
prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures
established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a
remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any
premium or discount.
----------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if
the seller enters an insolvency proceeding, realization of the value
of the collateral by the Fund may be delayed or limited.
----------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses (other than those attributable to a specific class) and
gains and losses are allocated daily to each class of shares based
upon the relative proportion of net assets represented by such class.
Operating expenses directly attributable to a specific class are
charged against the operations of that class.
----------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income (loss) and net realized gain (loss) may differ for financial
statement and tax purposes. The character of the distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year that
the income or realized gain (loss) was recorded by the Fund.
During the year ended December 31, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended December 31, 1996, amounts have
been reclassified to reflect a decrease in paid-in capital of
$131,277. Overdistributed net investment income was decreased by the
same amount.
14 Oppenheimer Value Stock Fund
<PAGE> 15
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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. Realized gains and losses on
investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used
for federal income tax purposes.
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.
=====================================================================
===========
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 DECEMBER 31, 1996 YEAR ENDED
DECEMBER 31,
1995(1)
---------------------------------
- --------------------------------
SHARES AMOUNT SHARES
AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,459,943 $ 28,270,600 1,806,348 $
29,186,663
Dividends and distributions reinvested 250,205 5,056,348 228,838
3,907,434
Redeemed (2,062,372) (40,229,269) (944,270)
(15,420,246)
------------- ------------- -------------
- -------------
Net increase (decrease) (352,224) $(6,902,321) 1,090,916
$17,673,851
============= ============= =============
=============
- ----------------------------------------------------------------------------------------------------------------
Class B:
Sold 730,295 $13,930,290 982,843
$15,746,572
Dividends and distributions reinvested 71,393 1,445,827 32,137
551,627
Redeemed (315,951) (5,995,805) (285,236)
(4,616,407)
------------- ------------- -------------
- -------------
Net increase 485,737 $9,380,312 729,744
$11,681,792
============= ============= =============
=============
- ------------------------------------------------------------------------------------------------------------------
Class C:
Sold 93,935 $1,815,265 7,236
$128,066
Dividends and distributions reinvested 3,157 64,356 112
1,972
Redeemed (12,697) (246,683) (58)
(1,035)
------------- ------------- -------------
- -------------
Net increase 84,395 $1,632,938 7,290
$129,003
============= ============= =============
=============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B
shares and for the period from October 2, 1995 to December 31, 1995
for Class C shares.
=====================================================================
===========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At December 31, 1996, net unrealized appreciation on investments of
$65,705,544 was composed of gross appreciation of $65,833,030, and
gross depreciation of $127,486.
=====================================================================
===========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee
of 0.75% on the first $100 million of average annual net assets with
a reduction of 0.03% on each $200 million thereafter, to 0.66% on net
assets in excess of $500 million. The Manager has agreed to reimburse
the Fund if aggregate expenses (with specified exceptions) exceed the
most stringent applicable regulatory limit on Fund expenses.
For the year ended December 31, 1996, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$345,153, of which $192,834 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 $401,158 and $15,057, of which $67,248 and
$1,741, respectively, was paid to an affiliated broker/dealer. During
the year ended December 31, 1996, OFDI received contingent deferred
sales charges of $49,374 upon redemption of Class B shares as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and 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.
15 Oppenheimer Value Stock Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
===========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a Service Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may
not exceed 0.25% of the average annual net assets of Class A shares
of the Fund. OFDI uses the service fee to reimburse brokers, dealers,
banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended December 31, 1996, OFDI
paid $216,769 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class B shares to reimburse OFDI
for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares. OFDI
also receives a service fee of 0.25% per year to reimburse dealers
for providing personal services for accounts that hold Class B
shares. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business
day. During the year ended December 31, 1996, OFDI paid $11,278 to an
affiliated broker/dealer as reimbursement for Class B personal
service and maintenance expenses and retained $277,247 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 certain expenses it incurred
before the Plan was terminated. As of December 31, 1996, OFDI had
incurred unreimbursed expenses of $881,627 for Class B.
The Fund has adopted a compensation type Distribution
and Service Plan for Class C shares to compensate OFDI for its
services and costs in distributing Class C shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class C shares. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. During the
year ended December 31, 1996, OFDI retained $8,196 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 certain expenses it incurred before the Plan
was terminated. As of December 31, 1996, OFDI had incurred
unreimbursed expenses of $34,962 for Class C.
16 Oppenheimer Value Stock Fund
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
=====================================================================
===========
The Board of Trustees and Shareholders of Oppenheimer Value Stock
Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Value Stock
Fund as of December 31, 1996, the related statement of operations for
the year then ended, the statements of changes in net assets for the
years ended December 31, 1996 and 1995 and the financial highlights
for the period January 1, 1992 to December 31, 1996. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December
31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material respects, the
financial position of Oppenheimer Value Stock Fund at December 31,
1996, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1997
17 Oppenheimer Value Stock Fund
<PAGE> 18
FEDERAL INCOME TAX INFORMATION (Unaudited)
=====================================================================
===========
In early 1997, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar
year 1996. Regulations of the U.S. Treasury Department require the
Fund to report this information to the Internal Revenue Service.
Distributions of $0.7266, $0.6828 and $0.6882 per
share were paid to Class A, Class B and Class C shareholders,
respectively, on December 26, 1996, of which, for each class of
shares, $0.5394 was designated as a "capital gain distribution" for
federal income tax purposes. Whether received in stock or cash, the
capital gain distribution should be treated by shareholders as a gain
from the sale of capital assets held for more than one year
(long-term capital gains).
Dividends paid by the Fund during the fiscal year
ended December 31, 1996 which are not designated as capital gain
distributions should be multiplied by 100% to arrive at the net
amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist
shareholders in reporting distributions received from the Fund to the
Internal Revenue Service. Because of the complexity of the federal
regulations which may affect your individual tax return and the many
variations in state and local tax regulations, we recommend that you
consult your tax adviser for specific guidance.
18 Oppenheimer Value Stock Fund
<PAGE> 19
OPPENHEIMER VALUE STOCK FUND
A Series of Oppenheimer Integrity Funds
=================================================================
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer and Assistant
Secretary
Andrew J. Donohue, Vice President and Secretary
James W. MacAllen, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
=================================================================
===============
INVESTMENT ADVISER
OppenheimerFunds, Inc.
=================================================================
===============
SUB-ADVISER
David L. Babson & Co., Inc.
=================================================================
===============
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
=================================================================
===============
TRANSFER AND SHAREHOLDER
SERVICING AGENT
OppenheimerFunds Services
=================================================================
===============
CUSTODIAN OF
PORTFOLIO SECURITIES
The Bank of New York
=================================================================
===============
INDEPENDENT AUDITORS
Deloitte & Touche LLP
=================================================================
===============
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer
Value Stock Fund. This report must be preceded or accompanied by a
Prospectus of Oppenheimer Value Stock Fund. For material
information concerning the Fund, see the Prospectus. Shares of
Oppenheimer funds are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the FDIC or any
other agency, and involve investment risks, including possible loss
of the principal amount invested.
19 Oppenheimer Value Stock Fund
<PAGE> 20
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0325.001.1296 February 28, 1997
[PHOTO]
Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
As an Oppenheimer fund shareholder, you have some special
privileges. Whether it's automatic investment plans, informative
newsletters and hotlines, or ready account access, you can benefit
from services designed to make investing simple.
And when you need help, our Customer Service
Representatives are only a toll-free phone call away. They can
provide information about your account and handle administrative
requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily
by calling our toll-free Telephone Transactions number. And, by
enrolling in AccountLink, a convenient service that "links" your
Oppenheimer funds accounts and your bank checking or savings
account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information
with OppenheimerFunds PhoneLink service, available 24 hours a day,
7 days a week. PhoneLink gives you access to a variety of fund,
account, and market information. Of course, you can always speak
with a Customer Service Representative during the General
Information hours shown at the left.
You can count on us whenever you need assistance. That's
why the International Customer Service Association, an independent,
nonprofit organization made up of over 3,200 customer service
management professionals from around the country, honored the
Oppenheimer funds' transfer agent, OppenheimerFunds Services, with
their Award of Excellence in 1993.
So call us today--we're here to help.
[OPPENHEIMERFUNDS LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
- -----------------------------------
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
- -----------------------------------
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES DECEMBER
31, 1996 (UNAUDITED)
OPPENHEIMER FUNDS - OPPENHEIMER DISCIPLINED VALUE FUND AND
OPPENHEIMER VALUE STOCK FUND
PRO FORMA
OPPENHEIMER OPPENHEIMER
COMBINED
DISCIPLINED VALUE VALUE STOCK PROFORMA
OPPENHEIMER
FUND FUND (1) ADJUSTMENTS
DISCIPLINED VALUE FUND
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost * )
(including repurchase agreements **) $199,794,081 $188,386,472
$388,180,553
Cash 93,760 317,473 411,233
Receivables:
Interest and dividends 239,150 409,199 648,349
Shares of beneficial interest sold 109,599 639,204
748,803
Investments sold 8,845 2,379,534 2,388,379
Other 9,244 7,941 17,185
------------------------------------------------------------------------
Total assets 200,254,679 192,139,823 -
392,394,502
------------------------------------------------------------------------
LIABILITIES:
Payables and other liabilities:
Investments purchased 1,499,655 33,730
1,533,385
Dividends - 1,360,756 1,360,756
Shares of beneficial interest redeemed 48 359,460
359,508
Trustees' fees - 1,067 1,067
Distributions and service plan fees 96,953 118,631
215,584
Shareholder reports 39,286 59,139 98,425
Transfer and shareholder servicing agent fees 7,913 9,163
17,076
Other 66,053 70,743 136,796
------------------------------------------------------------------------
Total liabilities 1,709,908 2,012,689 - 3,722,597
------------------------------------------------------------------------
NET ASSETS $198,544,771 $190,127,134 $ 0
$388,671,905
------------------------------------------------------------------------
------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Par value of shares of capital stock $ 10,226 $ 0 $
10,226
Paid-in capital 160,598,578 122,783,317
283,381,895
Undistributed net investment income 321,884 23,659
345,543
Accumulated net realized gain on investment
transactions 3,913,378 1,614,614 5,527,992
Net unrealized appreciation on investments 33,700,705 65,705,544
99,406,249
------------------------------------------------------------------------
NET ASSETS $198,544,771 $190,127,134 $ 0
$388,671,905
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES DECEMBER
31, 1996 (UNAUDITED)
OPPENHEIMER FUNDS - OPPENHEIMER DISCIPLINED VALUE FUND AND
OPPENHEIMER VALUE STOCK FUND
PRO FORMA
OPPENHEIMER OPPENHEIMER
COMBINED
DISCIPLINED VALUE VALUE STOCK PRO
FORMA OPPENHEIMER
FUND FUND (1) ADJUSTMENTS
DISCIPLINED VALUE FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
Class A Shares:
Net asset value and redemption price per
share (based on net assets of $190,234,571,
$148,128,771, and $338,363,342 and 9,799,816,
7,286,952 and 17,431,386 shares of beneficial
interest outstanding for Oppenheimer
Disciplined Value Fund, Oppenheimer Value
Stock Fund and Combined Oppenheimer Disciplined
Value Fund, respectively) $19.41 $20.33
$19.41
Maximum offering price per share (net asset
value plus sales charge of 5.75% offering price) $20.59 $21.57
$20.59
Class B Shares:
Net asset value and redemption price per share
(based on net assets of $7,355,534, $40,142,493,
and $47,498,027 and 376,390, 1,988,443 and 2,430,765
shares of beneficial interest outstanding for
Oppenheimer Disciplined Value Fund, Oppenheimer
Value Stock Fund and Combined Oppenheimer
Disciplined Value Fund, respectively) $19.54 $20.19
$19.54
Class C Shares:
Net asset value and redemption price per share
(based on net assets of $953,716, $1,855,870, and
$2,809,586 and 49,329, 91,685 and 145,339 shares
of beneficial interest outstanding for Oppenheimer
Disciplined Value Fund, Oppenheimer Value Stock
Fund and Combined Oppenheimer Disciplined Value
Fund, respectively) $19.33 $20.24
$19.33
Class Y Shares:
Net asset value and redemption price per share
(based on net assets of $950.40, $0.00, and $950.40
and 48.972, 0 and 48.972 shares of beneficial
interest outstanding for Oppenheimer Disciplined
Value Fund, Oppenheimer Value Stock Fund and
Combined Oppenheimer Value Fund, respectively) $19.41 $0.00
$19.41
*Cost $166,093,376 $122,680,928
$288,774,304
(1) Oppenheimer Value Stock Fund Class A shares will be exchanged for Oppenheimer
Disciplined Value Fund Class A shares.
Oppenheimer Value Stock Fund Class B shares will be exchanged for Oppenheimer
Disciplined Value Fund Class B shares.
Oppenheimer Value Stock Fund Class C shares will be exchanged for Oppenheimer
Disciplined Value Fund Class C shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1996 (UNAUDITED)
OPPENHEIMER FUNDS - OPPENHEIMER DISCIPLINED VALUE FUND AND
OPPENHEIMER VALUE STOCK FUND
PRO FORMA
OPPENHEIMER OPPENHEIMER
COMBINED
DISCIPLINED VALUE VALUE STOCK PRO FORMA
OPPENHEIMER
FUND FUND ADJUSTMENTS
DISCIPLINED VALUE FUND
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 1,977,244 $ 818,192 $ 2,795,436
Dividends 1,350,337 4,410,082 5,760,419
---------------------------------------------------------------------------
Total income 3,327,581 5,228,274 - 8,555,855
---------------------------------------------------------------------------
EXPENSES:
Management fees 924,150 1,315,853 (227,412)(1)
2,012,591
Distribution and service plan fees:
Class A 336,919 350,768 687,687
Class B 35,245 332,226 367,471
Class C 3,160 9,020 1,577(2) 13,757
Transfer and shareholder servicing agent fees 184,376 238,593
422,969
Custodian fees and expenses 42,366 10,407 52,773
Legal and auditing fees 44,721 13,775 58,496
Shareholder reports 45,478 69,568 115,046
Trustee and Directors' fees and expenses 12,916 6,536 19,452
Registration and filing fees:
Class A 18,796 - 18,796
Class B 2,009 2,267 4,276
Class C 295 465 760
Accounting service fees 15,000 - 15,000
Other 13,127 55,776 68,903
---------------------------------------------------------------------------
Total expenses 1,678,558 2,405,254 (225,835) 3,857,977
---------------------------------------------------------------------------
NET INVESTMENT INCOME 1,649,023 2,823,020 225,835
4,697,878
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 17,426,704 7,161,305
24,588,009
---------------------------------------------------------------------------
Net realized gain 17,426,704 7,161,305 - 24,588,009
---------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments 7,976,660 21,456,991
29,433,651
---------------------------------------------------------------------------
Net change 7,976,660 21,456,991 - 29,433,651
---------------------------------------------------------------------------
Net realized and unrealized gain 25,403,364 28,618,296 -
54,021,660
---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $27,052,387 $31,441,316 $ 225,835
$58,719,538
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Calculated in accordance with the investment advisory agreement of Oppenheimer Disciplined
Value Fund of 0.625%
of the first $300 millon of avg. net assets, .50% of the next $100 million, and .45 of net assets
in excess of $400 million. This assumes that the management fee structure had been in place for
the entire period.
(2) Inception date of May 1, 1996. This assumes that the 12b-1 plan had been in place for the
entire period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENT OF INVESTMENTS December
31, 1996 (Unaudited)
Oppenheimer Disciplined Value Fund and Oppenheimer Value Stock Fund
FACE AMOUNT MARKET VALUE
-----------------------------------------
- --------------------------------------------
Oppenheimer Oppenheimer Oppenheimer
Oppenheimer
Disciplined Value Stock Pro Forma Disciplined Value Stock
Pro Forma
Value Fund Fund Combined Value Fund Fund
Combined
- ------------------------------------------------------------------------------------------------------------------
- -----------------
- ------------------------------------------------------------------------------------------------------------------
- -----------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- -----------------
U.S. GOVERNMENT OBLIGATIONS - 6.2%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
Federal Home Loan Mortgage Corp.,
5.29%, 1/14/97 $ 5,000,000 $ -- $ 5,000,000 $ 4,990,376 $ --
$ 4,990,376
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Federal Home Loan Mortgage Corp.,
5.70%, 1/2/97 19,200,000 -- 19,200,000 19,196,533 --
19,196,533
--------------------------------------------
Total U.S. Government Obligations
(Cost $24,186,910) 24,186,909 --
24,186,909
SHARES
- ------------------------------------------------------------------------------------------------------------------
- -----------------
- ------------------------------------------------------------------------------------------------------------------
- -----------------
COMMON STOCKS - 91.6%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
BASIC MATERIALS - 5.6%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
CHEMICALS - 3.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Du Pont (E.I.) De Nemours & Co. -- 21,500 21,500 --
2,029,062 2,029,062
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Goodrich (B.F.) Co. 40,400 -- 40,400 1,636,200 --
1,636,200
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Lubrizol Corp. (The) -- 40,400 40,400 -- 1,252,400
1,252,400
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Nalco Chemical Co. -- 52,500 52,500 -- 1,896,562
1,896,562
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Potash Corp. of Saskatchewan, Inc. 25,300 -- 25,300 2,150,500 --
2,150,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Rohm & Haas Co. -- 31,000 31,000 -- 2,530,375
2,530,375
--------------------------------------------
3,786,700 7,708,399
11,495,099
- ------------------------------------------------------------------------------------------------------------------
- -----------------
PAPER - 2.6%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Fort Howard Corp. (1) 119,500 -- 119,500 3,308,656 --
3,308,656
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Temple-Inland, Inc. -- 40,000 40,000 -- 2,165,000
2,165,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Westvaco Corp. -- 64,500 64,500 -- 1,854,375
1,854,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Weyerhaeuser Co. -- 58,800 58,800 -- 2,785,650
2,785,650
--------------------------------------------
3,308,656 6,805,025
10,113,681
- ------------------------------------------------------------------------------------------------------------------
- -----------------
CONSUMER CYCLICALS - 9.4%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
AUTOS & HOUSING - 3.2%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Crescent Real Estate Equities, Inc. 34,800 -- 34,800 1,835,700 --
1,835,700
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Ford Motor Co. -- 73,100 73,100 -- 2,330,062
2,330,062
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Genuine Parts Co. -- 55,000 55,000 -- 2,447,500
2,447,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Goodyear Tire & Rubber Co. -- 73,000 73,000 -- 3,750,375
3,750,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Stanley Works (The) -- 80,000 80,000 -- 2,160,000
2,160,000
--------------------------------------------
1,835,700 10,687,937
12,523,637
- ------------------------------------------------------------------------------------------------------------------
- -----------------
LEISURE & ENTERTAINMENT - 1.9%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
AMR Corp. (1) 29,200 -- 29,200 2,573,250 --
2,573,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Eastman Kodak Co. -- 31,800 31,800 -- 2,551,950
2,551,950
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Galoob Toys, Inc. 12,800 -- 12,800 179,200 --
179,200
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Northwest Airlines Corp., Cl. A (1) 51,100 -- 51,100 1,999,287 --
1,999,287
--------------------------------------------
4,751,737 2,551,950
7,303,687
- ------------------------------------------------------------------------------------------------------------------
- -----------------
MEDIA - 0.7%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
McGraw-Hill, Inc. -- 57,000 57,000 -- 2,629,125
2,629,125
- ------------------------------------------------------------------------------------------------------------------
- -----------------
RETAIL: GENERAL - 2.8%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Federated Department Stores, Inc. (1) 84,800 -- 84,800 2,893,800
- -- 2,893,800
- ------------------------------------------------------------------------------------------------------------------
- ---------------
May Department Stores Cos. -- 46,500 46,500 -- 2,173,875
2,173,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Price/Costco, Inc. (1) 104,200 -- 104,200 2,618,025 --
2,618,025
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Sears Roebuck & Co. -- 31,000 31,000 -- 1,429,875
1,429,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
VF Corp. -- 27,500 27,500 -- 1,856,250
1,856,250
--------------------------------------------
5,511,825 5,460,000
10,971,825
- ------------------------------------------------------------------------------------------------------------------
- -----------------
RETAIL: SPECIALTY - 0.8%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Toys 'R' Us, Inc. (1) 98,900 -- 98,900 2,967,000 --
2,967,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
CONSUMER NON-CYCLICALS - 16.1%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
BEVERAGES - 1.6%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Anheuser-Busch Cos., Inc. 69,600 -- 69,600 2,784,000 --
2,784,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Brown-Forman Corp., Cl. B -- 40,900 40,900 -- 1,871,175
1,871,175
- ------------------------------------------------------------------------------------------------------------------
- ---------------
PepsiCo, Inc. -- 54,000 54,000 -- 1,579,500
1,579,500
--------------------------------------------
2,784,000 3,450,675
6,234,675
- ------------------------------------------------------------------------------------------------------------------
- -----------------
FOOD - 5.1%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Albertson's, Inc. -- 76,000 76,000 -- 2,707,500
2,707,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
American Stores Co. 83,900 20,500 104,400 3,429,412
837,937 4,267,349
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Archer-Daniels-Midland Co. 136,890 -- 136,890 3,011,580 --
3,011,580
- ------------------------------------------------------------------------------------------------------------------
- ---------------
ConAgra, Inc. -- 40,000 40,000 -- 1,990,000
1,990,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
CPC International, Inc. -- 37,000 37,000 -- 2,867,500
2,867,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Kroger Co. (1) 62,200 -- 62,200 2,892,300 --
2,892,300
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Pioneer Hi-Bred International, Inc. -- 29,500 29,500 -- 2,065,000
2,065,000
--------------------------------------------
9,333,292 10,467,937
19,801,229
- ------------------------------------------------------------------------------------------------------------------
- -----------------
HEALTHCARE/DRUGS - 4.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Bristol-Myers Squibb Co. 18,500 57,500 76,000 2,011,875
6,253,125 8,265,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Cytogen Corp. (1) -- 79 79 -- 434
434
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Pfizer, Inc. -- 22,500 22,500 -- 1,864,687
1,864,687
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Pharmacia & Upjohn, Inc. -- 58,000 58,000 -- 2,298,250
2,298,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Schering-Plough Corp. -- 45,500 45,500 -- 2,946,125
2,946,125
--------------------------------------------
2,011,875 13,362,621
15,374,496
- ------------------------------------------------------------------------------------------------------------------
- -----------------
HEALTHCARE/SUPPLIES & SERVICES - 2.2%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Becton, Dickinson & Co. -- 62,000 62,000 -- 2,689,250
2,689,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Columbia/HCA Healthcare Corp. 54,100 -- 54,100 2,204,575
- -- 2,204,575
- ------------------------------------------------------------------------------------------------------------------
- ---------------
OrNda Healthcorp (1) 88,200 -- 88,200 2,579,850 --
2,579,850
- ------------------------------------------------------------------------------------------------------------------
- ---------------
WellPoint Health Networks, Inc. 35,100 -- 35,100 1,206,562 --
1,206,562
--------------------------------------------
5,990,987 2,689,250
8,680,237
- ------------------------------------------------------------------------------------------------------------------
- -----------------
HOUSEHOLD GOODS - 1.8%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Kimberly-Clark Corp. -- 25,500 25,500 -- 2,428,875
2,428,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Premark International, Inc. 137,500 -- 137,500 3,059,375 --
3,059,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Tupperware Corp. 27,100 -- 27,100 1,453,237 --
1,453,237
--------------------------------------------
4,512,612 2,428,875
6,941,487
- ------------------------------------------------------------------------------------------------------------------
- -----------------
TOBACCO - 1.4%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
American Brands, Inc. -- 59,000 59,000 -- 2,927,875
2,927,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
UST, Inc. -- 75,000 75,000 -- 2,428,125
2,428,125
--------------------------------------------
-- 5,356,000 5,356,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
ENERGY - 8.1%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
ENERGY SERVICES & PRODUCERS - 0.5%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Kerr-McGee Corp. -- 28,500 28,500 -- 2,052,000
2,052,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
OIL-INTEGRATED - 7.6%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Amoco Corp. 35,700 49,500 85,200 2,873,850
3,984,750 6,858,600
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Atlantic Richfield Co. -- 13,700 13,700 -- 1,815,250
1,815,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Chevron Corp. 58,700 45,000 103,700 3,815,500
2,925,000 6,740,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Exxon Corp. 29,800 -- 29,800 2,920,400 --
2,920,400
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Mobil Corp. 23,700 23,500 47,200 2,897,325 2,872,875
5,770,200
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Occidental Petroleum Corp. -- 80,500 80,500 -- 1,881,687
1,881,687
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Union Pacific Resources Group, Inc. -- 55,500 55,500 --
1,623,375 1,623,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Unocal Corp. -- 44,100 44,100 -- 1,791,563
1,791,563
--------------------------------------------
12,507,075 16,894,500
29,401,575
- ------------------------------------------------------------------------------------------------------------------
- -----------------
FINANCIAL - 16.0%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
BANKS - 7.4%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Bank of Boston Corp. 60,300 -- 60,300 3,874,275 --
3,874,275
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Bank of New York Co., Inc. (The) -- 110,000 110,000 --
3,712,500 3,712,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
BankAmerica Corp. 50,200 -- 50,200 5,007,450 --
5,007,450
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Chase Manhattan Corp. (New) 29,800 -- 29,800 2,659,650 --
2,659,650
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Comerica, Inc. -- 26,000 26,000 -- 1,361,750
1,361,750
- ------------------------------------------------------------------------------------------------------------------
- ---------------
CoreStates Financial Corp. -- 52,000 52,000 -- 2,697,500
2,697,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
NationsBank Corp. 29,700 -- 29,700 2,903,175 --
2,903,175
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Norwest Corp. -- 36,500 36,500 -- 1,587,750
1,587,750
- ------------------------------------------------------------------------------------------------------------------
- ---------------
PNC Bank Corp. 73,000 -- 73,000 2,746,625 --
2,746,625
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Wachovia Corp. -- 36,240 36,240 -- 2,047,560
2,047,560
--------------------------------------------
17,191,175 11,407,060
28,598,235
- ------------------------------------------------------------------------------------------------------------------
- -----------------
DIVERSIFIED FINANCIAL - 1.2%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
American Express Co. -- 50,000 50,000 -- 2,825,000
2,825,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Salomon, Inc. 36,300 -- 36,300 1,710,638 --
1,710,638
--------------------------------------------
1,710,638 2,825,000
4,535,638
- ------------------------------------------------------------------------------------------------------------------
- -----------------
INSURANCE - 7.4%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
AFLAC, Inc. 65,800 -- 65,800 2,812,950 --
2,812,950
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Allstate Corp. -- 23,748 23,748 -- 1,374,416
1,374,416
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Conseco, Inc. 34,300 -- 34,300 2,186,625 --
2,186,625
- ------------------------------------------------------------------------------------------------------------------
- ---------------
General Re Corp. 15,900 -- 15,900 2,508,225 --
2,508,225
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Jefferson-Pilot Corp. -- 26,325 26,325 -- 1,490,653
1,490,653
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Marsh & McLennan Cos., Inc. -- 35,000 35,000 --
3,640,000 3,640,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
MBIA, Inc. -- 33,500 33,500 -- 3,391,875
3,391,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Safeco Corp. -- 99,500 99,500 -- 3,924,031
3,924,031
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Travelers Group, Inc. 62,500 -- 62,500 2,835,938 --
2,835,938
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Travelers/Aetna Property Casualty
Corp., Cl. A 104,200 -- 104,200 3,686,075 --
3,686,075
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Unitrin, Inc. -- 17,400 17,400 -- 970,050
970,050
--------------------------------------------
14,029,813 14,791,025
28,820,838
- ------------------------------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL - 16.5%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
ELECTRICAL EQUIPMENT - 5.4%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
AMP, Inc. -- 100,300 100,300 -- 3,849,013
3,849,013
- ------------------------------------------------------------------------------------------------------------------
- ---------------
General Electric Co. -- 51,500 51,500 -- 5,092,063
5,092,063
- ------------------------------------------------------------------------------------------------------------------
- ---------------
General Signal Corp. 59,600 -- 59,600 2,547,900 --
2,547,900
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Grainger (W.W.), Inc. -- 32,000 32,000 -- 2,568,000
2,568,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Honeywell, Inc. -- 28,000 28,000 -- 1,841,000
1,841,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Hubbell, Inc., Cl. B -- 61,994 61,994 -- 2,681,241
2,681,241
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Rockwell International Corp. 42,600 -- 42,600 2,593,275 --
2,593,275
--------------------------------------------
5,141,175 16,031,317
21,172,492
- ------------------------------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL SERVICES - 0.8%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
DT Industries, Inc. 49,200 -- 49,200 1,722,000 --
1,722,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Donnelley (R.R.) & Sons Co. -- 48,000 48,000 -- 1,506,000
1,506,000
--------------------------------------------
1,722,000 1,506,000
3,228,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
MANUFACTURING - 8.3%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
AGCO Corp. 88,700 -- 88,700 2,539,038 --
2,539,038
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Case Corp. 59,400 -- 59,400 3,237,300 --
3,237,300
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Deere & Co. 77,500 -- 77,500 3,148,438 --
3,148,438
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Dover Corp. -- 41,500 41,500 -- 2,085,375
2,085,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
General Signal Corp. -- 5,500 5,500 -- 235,125
235,125
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Harsco Corp. -- 23,000 23,000 -- 1,575,500
1,575,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Ingersoll-Rand Co. 55,900 -- 55,900 2,487,550 --
2,487,550
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Mark IV Industries, Inc. 48,602 -- 48,602 1,099,620 --
1,099,620
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Minnesota Mining & Manufacturing Co. -- 43,500 43,500 --
3,605,063 3,605,063
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Parker-Hannifin Corp. -- 30,400 30,400 -- 1,178,000
1,178,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Textron, Inc. 46,000 -- 46,000 4,335,500 --
4,335,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Tyco International Ltd. 52,100 -- 52,100 2,754,788 --
2,754,788
- ------------------------------------------------------------------------------------------------------------------
- ---------------
U.S. Industries, Inc. 113,400 -- 113,400 3,898,125 --
3,898,125
--------------------------------------------
23,500,359 8,679,063
32,179,422
- ------------------------------------------------------------------------------------------------------------------
- -----------------
TRANSPORTATION - 2.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Norfolk Southern Corp. -- 31,000 31,000 -- 2,712,500
2,712,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
PACCAR, Inc. 37,600 -- 37,600 2,556,800 --
2,556,800
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Union Pacific Corp. 41,400 -- 41,400 2,489,175 --
2,489,175
--------------------------------------------
5,045,975 2,712,500
7,758,475
- ------------------------------------------------------------------------------------------------------------------
- -----------------
TECHNOLOGY - 11.8%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
AEROSPACE/DEFENSE - 4.2%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Boeing Co. -- 16,500 16,500 -- 1,755,188
1,755,188
- ------------------------------------------------------------------------------------------------------------------
- ---------------
General Dynamics Corp. 38,500 -- 38,500 2,714,250 --
2,714,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Lockheed Martin Corp. 37,271 -- 37,271 3,410,297 --
3,410,297
- ------------------------------------------------------------------------------------------------------------------
- ---------------
McDonnell Douglas Corp. 64,800 -- 64,800 4,147,200 --
4,147,200
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Raytheon Co. -- 700 700 -- 33,687
33,687
- ------------------------------------------------------------------------------------------------------------------
- ---------------
TRW, Inc. 54,800 32,000 86,800 2,712,600 1,584,000
4,296,600
--------------------------------------------
12,984,347 3,372,875
16,357,222
- ------------------------------------------------------------------------------------------------------------------
- -----------------
COMPUTER HARDWARE - 4.5%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Dell Computer Corp. (1) 48,200 -- 48,200 2,560,625 --
2,560,625
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Gateway 2000, Inc. (1) 28,500 -- 28,500 1,526,531 --
1,526,531
- ------------------------------------------------------------------------------------------------------------------
- ---------------
International Business Machines Corp. -- 22,500 22,500 --
3,397,500 3,397,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Pitney Bowes, Inc. -- 54,500 54,500 -- 2,970,250
2,970,250
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Storage Technology Corp. (New) (1) 91,000 -- 91,000 4,333,875
- -- 4,333,875
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Xerox Corp. -- 57,000 57,000 -- 2,999,625
2,999,625
--------------------------------------------
8,421,031 9,367,375
17,788,406
- ------------------------------------------------------------------------------------------------------------------
- -----------------
ELECTRONICS - 2.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Hewlett-Packard Co. -- 80,000 80,000 -- 4,020,000
4,020,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Intel Corp. 22,400 -- 22,400 2,933,000 --
2,933,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Waters Corp. (1) 24,000 -- 24,000 729,000 --
729,000
--------------------------------------------
3,662,000 4,020,000
7,682,000
- ------------------------------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.1%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
AT&T Corp. -- 52,500 52,500 -- 2,283,750
2,283,750
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Frontier Corp. -- 85,400 85,400 -- 1,932,175
1,932,175
--------------------------------------------
-- 4,215,925 4,215,925
- ------------------------------------------------------------------------------------------------------------------
- -----------------
UTILITIES - 8.1%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
ELECTRIC UTILITIES - 3.1%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
American Electric Power Co., Inc. 31,600 -- 31,600 1,299,550 --
1,299,550
- ------------------------------------------------------------------------------------------------------------------
- ---------------
CalEnergy, Inc. (1) 45,800 -- 45,800 1,540,025 --
1,540,025
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Entergy Corp. 74,200 -- 74,200 2,059,050 --
2,059,050
- ------------------------------------------------------------------------------------------------------------------
- ---------------
FPL Group, Inc. 42,300 -- 42,300 1,945,800 --
1,945,800
- ------------------------------------------------------------------------------------------------------------------
- ---------------
NIPSCO Industries, Inc. -- 25,500 25,500 -- 1,010,438
1,010,438
- ------------------------------------------------------------------------------------------------------------------
- ---------------
SCANA Corp. -- 48,500 48,500 -- 1,297,375
1,297,375
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Teco Energy, Inc. -- 36,600 36,600 -- 882,975
882,975
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Texas Utilities Co. 52,400 -- 52,400 2,135,300 --
2,135,300
--------------------------------------------
8,979,725 3,190,788
12,170,513
- ------------------------------------------------------------------------------------------------------------------
- -----------------
GAS UTILITIES - 3.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Columbia Gas System, Inc. 88,600 -- 88,600 5,637,175 --
5,637,175
- ------------------------------------------------------------------------------------------------------------------
- ---------------
PanEnergy Corp. 97,300 -- 97,300 4,378,500 --
4,378,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Questar Corp. 46,000 -- 46,000 1,690,500 --
1,690,500
--------------------------------------------
11,706,175 -- 11,706,175
- ------------------------------------------------------------------------------------------------------------------
- -----------------
TELEPHONE UTILITIES - 2.0%
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Ameritech Corp. -- 28,000 28,000 -- 1,697,500
1,697,500
- ------------------------------------------------------------------------------------------------------------------
- ---------------
GTE Corp. 48,600 46,000 94,600 2,211,300 2,093,000
4,304,300
- ------------------------------------------------------------------------------------------------------------------
- ---------------
Southern New England
Telecommunications Corp. -- 42,000 42,000 -- 1,632,750
1,632,750
--------------------------------------------
2,211,300 5,423,250
7,634,550
--------------------------------------------
Total Common Stocks (Cost $141,906,466,
Cost $114,380,928, Combined $256,287,394) 175,607,172
180,086,472 355,693,644
FACE AMOUNT
- ------------------------------------------------------------------------------------------------------------------
- -----------------
- ------------------------------------------------------------------------------------------------------------------
- -----------------
REPURCHASE AGREEMENT - 2.1%
- ------------------------------------------------------------------------------------------------------------------
- -----------------
Repurchase agreement with Goldman,
Sachs & Co., 6.52%, dated 12/31/96,
to be repurchased at $8,303,006
on 1/2/97, collateralized by U.S.
Treasury Nts., 5.50%-7.50%,
7/15/99-8/15/05, with a value of
$8,490,302 (Cost $8,300,000) $ -- $8,300,000 $8,300,000 --
8,300,000 8,300,000
- ------------------------------------------------------------------------------------------------------------------
- ---------------
TOTAL INVESTMENTS, AT VALUE (COST
$166,093,376, COST $122,680,928,
COMBINED $288,774,304) 100.6% 99.1% 99.9% 199,794,081
188,386,472 388,180,553
- ------------------------------------------------------------------------------------------------------------------
- ---------------
LIABILITIES IN EXCESS OF OTHER ASSETS/
OTHER ASSETS NET OF LIABILITIES (0.6) 0.9 0.1 (1,249,310)
1,740,662 491,352
-------------------------------------------------------
- -----------------------------
NET ASSETS 100.0% 100.0% 100.0% $198,544,771
$190,127,134 $388,671,905
-------------------------------------------------------
- -----------------------------
-------------------------------------------------------
- -----------------------------
</TABLE>
1. Non-income producing security.
<PAGE>
OPPENHEIMER SERIES FUND, INC.
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article IV of Registrant's Declaration of
Trust filed as Exhibit 24(b)(1) to Registrant's 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 16. Exhibits
1. Amended and Restated Articles of Incorporation dated January
6, 1995: Filed with Registrant's Post-Effective Amendment No.
28, 3/1/96, and Incorporated herein by reference.
1.1 Articles Supplementary dated September, 1995: Filed with
Registrant's Post-Effective Amendment No. 28, 3/1/96, and
incorporated herein by reference.
1.2 Articles Supplementary dated May, 1995: Filed with
Registrant's Post-Effective Amendment No. 28, 3/1/96, and
incorporated herein by reference.
1.3 Articles Supplementary dated November 15, 1996: Filed with
Registrant's Post-Effective Amendment No. 31, 12/16/96, and
incorporated herein by reference.
2. By-Laws: Filed with Registrant's Post-Effective Amendment No.
28, 3/1/96, and incorporated herein by reference.
3. Not Applicable
4. Agreement and Plan of Reorganization: See Exhibit A to Part A
of the Registration Statement.
5. (a) Oppenheimer Disciplined Allocation Fund Specimen Class
A Share Certificate: Filed with Registrant's Post-
Effective Amendment No.31, 12/16/96, and incorporated
herein by reference.
(b) Oppenheimer Disciplined Allocation Fund Specimen Class B
Share Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(c) Oppenheimer Disciplined Allocation Fund Specimen Class
C Share Certificate: Filed with Registrant's Post-
Effective Amendment No.31, 12/16/96, and incorporated
herein by reference.
(d) Oppenheimer Disciplined Value Fund Specimen Class A Share
Certificate: Filed Filed with Registrant's Post-
Effective Amendment No.31, 12/16/96, and incorporated
herein by reference.
(e) Oppenheimer Disciplined Value Fund Specimen Class B Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(f) Oppenheimer Disciplined Value Fund Specimen Class C Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(g) Oppenheimer Disciplined Value Fund Specimen Class Y Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(h) Oppenheimer LifeSpan Balanced Fund Specimen Class A Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(i) Oppenheimer LifeSpan Balanced Fund Specimen Class B Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(j) Oppenheimer LifeSpan Balanced Fund Specimen Class C Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(k) Oppenheimer LifeSpan Growth Fund Specimen Class A Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(l) Oppenheimer LifeSpan Growth Fund Specimen Class B Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(m) Oppenheimer LifeSpan Growth Fund Specimen Class C Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(n) Oppenheimer LifeSpan Income Fund Specimen Class A Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(o) Oppenheimer LifeSpan Income Fund Specimen Class B Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
(p) Oppenheimer LifeSpan Income Fund Specimen Class C Share
Certificate: Filed with Registrant's Post-Effective
Amendment No.31, 12/16/96, and incorporated herein by
reference.
6. Investment Advisory Agreement between the Registrant, on
behalf of Connecticut Mutual Total Return Account and
OppenheimerFunds, Inc. and schedule of omitted substantially
similar documents: Filed with Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by
reference.
6.1 Investment Subadvisory Agreement between OppenheimerFunds,
Inc. and Pilgrim, Baxter & Associates, Ltd. (for CMIA LifeSpan
Balanced Account) and schedule of omitted substantially
similar documents: Filed with Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by
reference.
6.2 Investment Subadvisory Agreement between OppenheimerFunds,
Inc. and BEA Associates (for CMIA LifeSpan Balanced Account)
and schedule of omitted substantially similar documents:
Filed with Registrant's Post-Effective Amendment No. 29,
4/30/96, and incorporated herein by reference.
6.3 Investment Subadvisory Agreement between OppenheimerFunds,
Inc. and Babson-Stewart Ivory International (for CMIA LifeSpan
Balanced Account) and schedule of omitted substantially
similar documents: Filed with Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by
reference.
7. General Distributor's Agreement between Registrant on behalf
of Oppenheimer Disciplined Allocation Fund OppenheimerFunds
Distributor, Inc. and schedule of omitted substantially
similar documents: Filed with Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by
reference.
7.1 General Distributor's Agreement between Registrant on behalf
of Oppenheimer Disciplined Value Fund: Filed with
Registrant's Post-Effective Amendment No. 29, 4/30/96, and
incorporated herein by reference.
8. Not Applicable
9. Master Custodian Agreement between Registrant, on behalf of
each series of the Registrant (except the Municipal Accounts),
and State Street Bank and Trust Company: Filed with
Registrant's Post-Effective Amendment No. 28, 3/1/96, and
incorporated herein by reference.
9.1 Amendment (LifeSpan Funds) to Custodian Agreement between
Registrant and State Street Bank and Trust Company: Filed with
Registrant's Post-Effective Amendments No. 28, 3/1/96, and
incorporated herein by reference.
10. (i) Service Plan and Agreement between Oppenheimer Disciplined
Allocation Fund and OppenheimerFunds Distributor, Inc. for
Class A Shares and schedule of substantially similar omitted
documents: Filed with the Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by
reference.
(ii) Distribution and Service Plan and Agreement with
OppenheimerFunds Distributor, Inc. for Class B Shares of
Oppenheimer Disciplined Allocation Fund and schedule of
substantially similar omitted documents: Filed with the
Registrant's Post-Effective Amendment No. 29, 4/30/96, and
incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement with
OppenheimerFunds Distributor, Inc. for Class C Shares of
Oppenheimer Disciplined Allocation Fund and schedule of
substantially similar omitted documents: Filed with the
Registrant's Post-Effective Amendment No. 29, 4/30/96, and
incorporated herein by reference.
(iv) Service Plan and Agreement between Oppenheimer
Disciplined Value Fund and OppenheimerFunds Distributor, Inc.
for Class A shares: Filed with Registrant's Post-Effective
Amendment No. 31, 12/16/96, and incorporated herein by
reference.
(v) Distribution and Service Plan and Agreement with
OppenheimerFunds Distributor, Inc. for Class B shares of
Oppenheimer Disciplined Value Fund: Filed with Registrant's
Post-Effective Amendment No. 31, 12/16/96, and incorporated
herein by reference.
(vi) Distribution and Service Plan and Agreement with
OppenheimerFunds Distributor, Inc. for Class C shares of
Oppenheimer Disciplined Value Fund: Filed with Registrant's
Post-Effective Amendment No. 31, 12/16/96, and incorporated
herein by reference.
11. Opinion and Consent of Counsel dated 2/28/96: Filed as an
exhibit to 24f-2 notice.
12. Tax Opinion Relating to the Reorganization: Draft Opinion
filed herewith.
13. Not Applicable.
14. Consent of Independent Auditors: Filed herewith.
15. Not Applicable.
16. Powers of Attorney:
17. (i) Declaration of Registrant's Predecessor under Rule 24f-2:
Filed herewith.
(ii) (a) Financial Data Schedules of Registrant: Filed
herewith.
(b) Financial Data Schedules of Value Stock Fund: Filed
herewith.
<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 City of New York and State of New York on the 9th day of
April, 1997.
OPPENHEIMER DISCIPLINED VALUE FUND
BY: /s/ Bridget A. Macaskill*
Bridget A. Macaskill, President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
_______________ ______ ____________
<S> <C> <C>
/s/ Leon Levy Chairman of the April 9, 1997
Leon Levy* Board of Trustees
/s/ George Bowen Chief Financial April 9, 1997
George Bowen* and Accounting
Officer and Treasurer
/s/ Bridget A. Macaskill Principal Executive April 9, 1997
Bridget A. Macaskill* Officer, President
and Trustee
/s/ Robert G. Galli Trustee April 9, 1997
Robert G. Galli*
/s/ Benjamin Lipstein Trustee April 9, 1997
Benjamin Lipstein*
/s/ Elizabeth B. Moynihan Trustee April 9, 1997
Elizabeth B. Moynihan*
/s/ Kenneth A. Randall Trustee April 9, 1997
Kenneth A. Randall*
/s/ Edward V. Regan Trustee April 9, 1997
Edward V. Regan*
/s/ Russell S. Reynolds Trustee April 9, 1997
Russell S. Reynolds, Jr.*
/s/ Donald W. Spiro Trustee April 9, 1997
Donald W. Spiro*
/s/ Pauline Trigere Trustee April 9, 1997
Pauline Trigere*
/s/ Clayton K. Yeutter Trustee April 9, 1997
Clayton K. Yeutter*
</TABLE>
*By:
/s/ Robert G. Zack
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER DISCIPLINED VALUE FUND
Index to Exhibits
-----------------
Exhibit No. Description
- ----------- -----------
16(12) Draft Tax Opinion Relating to the
Reorganization
16(14) Independent Auditors' Consent
16(17)(i) Declaration of Registrant's Predecessor
Under Rule 24f-2
16(17)(ii)(a) Financial Data Schedules of Registrant
16(17)(ii)(b) Financial Data Schedules of Value Stock
Fund
merge\375ptc
DRAFT
[Letterhead of Deloitte & Touche LLP]
______________, 1997
Oppenheimer Value Stock Fund
6803 South Tucson Way
Englewood, Colorado 80112
Oppenheimer Disciplined Value Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Dear Sirs:
We have reviewed the Agreement and Plan of Reorganization between
Oppenheimer Value Stock Fund (the "Fund") and Oppenheimer
Disciplined Value Fund ("Disciplined Value") which is attached as
Exhibit A to the Proxy Statement and Prospectus of the Fund
included as part of Disciplined Value's Registration Statement on
Form N-14 filed under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission on ________, 1997 (the
"Agreement"), concerning the acquisition by Disciplined Value of
substantially all of the assets of the Fund solely for voting
shares of beneficial interest in Disciplined Value, followed by the
distribution of Disciplined Value shares to the shareholders of the
Fund in complete liquidation of the Fund.
In connection with the rendering of this opinion, we have reviewed
the Agreement, the most recent audited financial statements and
related documents and other materials as we deemed relevant to the
rendering of this opinion. Based upon all of the foregoing and the
representations made by the Fund and Disciplined Value, attached
hereto, in our opinion, the federal tax consequences of the
transaction will be as follows:
1. The transactions contemplated by the Agreement will qualify as
a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code").
2. The Fund and Disciplined Value will each qualify as a "party
to a reorganization" within the meaning of Section 368(b)(2)
of the Code.
3. No gain or loss will be recognized by the shareholders of the
Fund upon the distribution of shares of beneficial interest in
Disciplined Value to the shareholders of the Fund, pursuant to
Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by the Fund by reason of the transfer of its assets
solely in exchange for Class A, Class B and Class C shares of
Disciplined Value, respectively.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Disciplined Value by reason of the transfer of
the Fund's assets solely in exchange for Class A, Class B and
Class C shares of Disciplined Value, respectively.
6. The stockholders of the Fund will have the same tax basis and
holding period for the shares of beneficial interest in
Disciplined Value that they receive as they had for the stock
of the Fund that they previously held, pursuant to Sections
358(a) and 1223(1), respectively, of the Code.
7. The securities transferred by the Fund to Disciplined Value
will have the same tax basis and holding period in the hands
of Disciplined Value as they had for the Fund, pursuant to
Sections 362(b) and 1223(1), respectively, of the Code.
Very truly yours
MERGE\375OPIN
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Oppenheimer
Disciplined Value Fund on Form N-14 of our report dated January 22,
1997 appearing in the December 31, 1996 Annual Report of
Oppenheimer Value Stock Fund, and to the reference to our firm
under the heading "Tax Aspects of the Reorganization" appearing in
such Registration Statement.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche, LLP
Denver, Colorado
April 9, 1997
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Oppenheimer Disciplined Value Fund on Form N-14 of our
report dated January 22, 1997 appearing in the 1996 Annual Report
of Oppenheimer Disciplined Value Fund.
/s/ KPMG Peat Marwick
- --------------------------
KPMG Peat Marwick, LLP
Denver, Colorado
April 9, 1997
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
1. Name and address of issuer:
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, NY 10048-0203
2. Name of each series or class of funds for which this notice
is filed:
Oppenheimer Disciplined Value Fund, Class A
3. Investment Company Act File Number: 811-3346
Securities Act File Number: 2-75276
4. Last day of fiscal year for which this notice is filed:
10/31/96
5. Check box if this notice is being filed more than 180 days
after the close of the issuer's fiscal year for purposes of
reporting securities sold after the close of the fiscal year
but before termination of the issuer's 24f-2 declaration:
/ /
6. Date of termination of issuer's declaration under rule 24f-
2(a)(1), if applicable (see instruction a.6):
7. Number and amount of securities of the same class or series
which had been registered under the Securities Act of 1933
other than pursuant to rule 24f-2 in a prior fiscal year,
but
which remained unsold at the beginning of the fiscal year:
-0-
8. Number and amount of securities registered during the fiscal
year other than pursuant to rule 24f-2: -0-
9. Number and aggregate sale price of securities sold during
the fiscal year:
3,132,678 $60,132,751
10. Number and aggregate sale price of securities sold during
the fiscal year in reliance upon registration pursuant to rule
24f-2:
3,132,678 $60,132,751
11. Number and aggregate sale price of securities issued during
the fiscal year in connection with dividend reinvestment
plans, if applicable (see Instruction B.7):
79,955 $1,491,345
12. Calculation of registration fee:
(i) Aggregate sale price of securities sold
during the fiscal year in reliance on
rule 24f-2 (from Item 10): $60,132,751
------------
(ii) Aggregate price of shares issued in
connection with dividend reinvestment
plans (from Item 11, if applicable): +$1,491,345
------------
(iii) Aggregate price of shares redeemed or
repurchased during the fiscal year
(if applicable): -$11,772,485
------------
(iv) Aggregate price of shares redeemed or
repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): + -0-
------------
(v) Net aggregate price of securities sold
and issued during the fiscal year in
reliance on rule 24f-2 (line (i), plus
line (ii), less line (iii), plus line
(iv)) (if applicable): $49,851,611
------------
(vi) Multiplier prescribed by Section 6(b)
of the Securities Act of 1933 or other
applicable law or regulation (see
Instruction C.6): x 1/3300
------------
(vii) Fee due (line (i) or line (v) multiplied
by line (vi)): $15,107
------------
Instruction: Issuers should complete line (ii), (iii), (iv), and
(v) only if the form is being filed within 60 days
after the close of the issuer's fiscal year. See
Instructions C.3.
13. Check box if fees are being remitted to the Commission's
lockbox depository as described in section 3a of the
Commission's Rule of Informal and Other Procedures (17 CFR
202.3a).
/X/
Date of mailing or wire transfer of filing fees to the
Commission's lockbox depository:
December 19, 1996; Fed Wire #3281
SIGNATURES
This report has been signed below by the following persons on
behalf of the issuer and in the capacities and on the dates
indicated.
Oppenheimer Series Fund, Inc.
By: /s/ Robert J. Bishop
-------------------------------------
Robert J. Bishop, Assistant Treasurer
Date: 12/23/96
cc: Ronald Feiman, Esq.
Katherine Feld
Gloria LaFond
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 West 47th Street
New York, N.Y. 10036
Telephone: (212) 626-0800
Telecopier (212) 626-0799
December 20, 1996
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
In connection with the public offering of Class A shares
of beneficial interest, no par value (the "Shares") of Oppenheimer
Disciplined Value Fund, a series of the Oppenheimer Series Fund,
Inc. (the "Fund"), we have examined such records and documents and
have made such further investigation and examination as we deemed
necessary for the purpose of this opinion.
It is our opinion that the Shares, the registration of
which is made definite by the accompanying Rule 24f-2 Notice of the
Fund, were legally issued, fully paid and non-assessable by the
Fund to the extent set forth in its Prospectus forming part of its
Registration Statement under the Securities Act of 1933, as
amended.
We hereby consent to the filing of this opinion with said
Notice.
Very truly yours,
/s/GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
1. Name and address of issuer:
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, NY 10048-0203
2. Name of each series or class of funds for which this notice is
filed:
Oppenheimer Disciplined Value Fund, Class B
3. Investment Company Act File Number: 811-3346
Securities Act File Number: 2-75276
4. Last day of fiscal year for which this notice is filed:
10/31/96
5. Check box if this notice is being filed more than 180 days
after the close of the issuer's fiscal year for purposes of
reporting securities sold after the close of the fiscal year
but before termination of the issuer's 24f-2 declaration:
/ /
6. Date of termination of issuer's declaration under rule 24f-
2(a)(1), if applicable (see instruction a.6):
7. Number and amount of securities of the same class or series
which had been registered under the Securities Act of 1933
other than pursuant to rule 24f-2 in a prior fiscal year, but
which remained unsold at the beginning of the fiscal year: -0-
8. Number and amount of securities registered during the fiscal
year other than pursuant to rule 24f-2: -0-
9. Number and aggregate sale price of securities sold during the
fiscal year:
261,924 $4,955,930
10. Number and aggregate sale price of securities sold during the
fiscal year in reliance upon registration pursuant to rule
24f-2:
261,924 $4,955,930
11. Number and aggregate sale price of securities issued during
the fiscal year in connection with dividend reinvestment
plans, if applicable (see Instruction B.7):
1,535 $28,899
12. Calculation of registration fee:
(i) Aggregate sale price of securities sold
during the fiscal year in reliance on
rule 24f-2 (from Item 10): $4,955,930
------------
(ii) Aggregate price of shares issued in
connection with dividend reinvestment
plans (from Item 11, if applicable): +$28,899
------------
(iii) Aggregate price of shares redeemed or
repurchased during the fiscal year
(if applicable): -$133,220
------------
(iv) Aggregate price of shares redeemed or
repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): + -0-
------------
(v) Net aggregate price of securities sold
and issued during the fiscal year in
reliance on rule 24f-2 (line (i), plus
line (ii), less line (iii), plus line
(iv)) (if applicable): $4,851,609
------------
(vi) Multiplier prescribed by Section 6(b)
of the Securities Act of 1933 or other
applicable law or regulation (see
Instruction C.6): x 1/3300
------------
(vii) Fee due (line (i) or line (v) multiplied
by line (vi)): $1,470
------------
Instruction: Issuers should complete line (ii), (iii), (iv), and
(v) only if the form is being filed within 60 days
after the close of the issuer's fiscal year. See
Instructions C.3.
13. Check box if fees are being remitted to the Commission's
lockbox depository as described in section 3a of the
Commission's Rule of Informal and Other Procedures (17 CFR
202.3a).
/X/
Date of mailing or wire transfer of filing fees to the
Commission's lockbox depository:
December 19, 1996; Fed Wire #3282
SIGNATURES
This report has been signed below by the following persons on
behalf of the issuer and in the capacities and on the dates
indicated.
Oppenheimer Series Fund, Inc.
By: /s/ Robert J. Bishop
-------------------------------------
Robert J. Bishop, Assistant Treasurer
Date: 12/23/96
cc: Ronald Feiman, Esq.
Katherine Feld
Gloria LaFond
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 West 47th Street
New York, N.Y. 10036
Telephone: (212) 626-0800
Telecopier (212) 626-0799
December 20, 1996
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
In connection with the public offering of Class B shares
of beneficial interest, no par value (the "Shares") of Oppenheimer
Disciplined Value Fund, a series of the Oppenheimer Series Fund,
Inc. (the "Fund"), we have examined such records and documents and
have made such further investigation and examination as we deemed
necessary for the purpose of this opinion.
It is our opinion that the Shares, the registration of
which is made definite by the accompanying Rule 24f-2 Notice of the
Fund, were legally issued, fully paid and non-assessable by the
Fund to the extent set forth in its Prospectus forming part of its
Registration Statement under the Securities Act of 1933, as
amended.
We hereby consent to the filing of this opinion with said
Notice.
Very truly yours,
/s/GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
1. Name and address of issuer:
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, NY 10048-0203
2. Name of each series or class of funds for which this notice is
filed:
Oppenheimer Disciplined Value Fund, Class C
3. Investment Company Act File Number: 811-3346
Securities Act File Number: 2-75276
4. Last day of fiscal year for which this notice is filed:
10/31/96
5. Check box if this notice is being filed more than 180 days
after the close of the issuer's fiscal year for purposes of
reporting securities sold after the close of the fiscal year
but before termination of the issuer's 24f-2 declaration:
/ /
6. Date of termination of issuer's declaration under rule 24f-
2(a)(1), if applicable (see instruction a.6):
7. Number and amount of securities of the same class or series
which had been registered under the Securities Act of 1933
other than pursuant to rule 24f-2 in a prior fiscal year, but
which remained unsold at the beginning of the fiscal year: -0-
8. Number and amount of securities registered during the fiscal
year other than pursuant to rule 24f-2: -0-
9. Number and aggregate sale price of securities sold during the
fiscal year:
36,414 $694,306
10. Number and aggregate sale price of securities sold during the
fiscal year in reliance upon registration pursuant to rule
24f-2:
36,414 $694,306
11. Number and aggregate sale price of securities issued during
the fiscal year in connection with dividend reinvestment
plans, if applicable (see Instruction B.7):
172 $3,206
12. Calculation of registration fee:
(i) Aggregate sale price of securities sold
during the fiscal year in reliance on
rule 24f-2 (from Item 10): $694,306
------------
(ii) Aggregate price of shares issued in
connection with dividend reinvestment
plans (from Item 11, if applicable): +$3,206
------------
(iii) Aggregate price of shares redeemed or
repurchased during the fiscal year
(if applicable): -$990
------------
(iv) Aggregate price of shares redeemed or
repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): + -0-
------------
(v) Net aggregate price of securities sold
and issued during the fiscal year in
reliance on rule 24f-2 (line (i), plus
line (ii), less line (iii), plus line
(iv)) (if applicable): $696,522
------------
(vi) Multiplier prescribed by Section 6(b)
of the Securities Act of 1933 or other
applicable law or regulation (see
Instruction C.6): x 1/3300
------------
(vii) Fee due (line (i) or line (v) multiplied
by line (vi)): $211
------------
Instruction: Issuers should complete line (ii), (iii), (iv), and
(v) only if the form is being filed within 60 days
after the close of the issuer's fiscal year. See
Instructions C.3.
13. Check box if fees are being remitted to the Commission's
lockbox depository as described in section 3a of the
Commission's Rule of Informal and Other Procedures (17 CFR
202.3a).
/X/
Date of mailing or wire transfer of filing fees to the
Commission's lockbox depository:
December 19, 1996; Fed Wire #3283
SIGNATURES
This report has been signed below by the following persons on
behalf of the issuer and in the capacities and on the dates
indicated.
Oppenheimer Series Fund, Inc.
By: Robert J. Bishop
-------------------------------------
Robert J. Bishop, Assistant Treasurer
Date: 12/23/96
cc: Ronald Feiman, Esq.
Katherine Feld
Gloria LaFond
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 West 47th Street
New York, N.Y. 10036
Telephone: (212) 626-0800
Telecopier (212) 626-0799
December 20, 1996
Oppenheimer Series Fund, Inc.
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
In connection with the public offering of Class C shares
of beneficial interest, no par value (the "Shares") of Oppenheimer
Disciplined Value Fund, a series of the Oppenheimer Series Fund,
Inc. (the "Fund"), we have examined such records and documents and
have made such further investigation and examination as we deemed
necessary for the purpose of this opinion.
It is our opinion that the Shares, the registration of
which is made definite by the accompanying Rule 24f-2 Notice of the
Fund, were legally issued, fully paid and non-assessable by the
Fund to the extent set forth in its Prospectus forming part of its
Registration Statement under the Securities Act of 1933, as
amended.
We hereby consent to the filing of this opinion with said
Notice.
Very truly yours,
/s/GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 356865
<NAME> Oppenheimer Disciplined Value Fund - A
<SERIES>
<NUMBER> 5
<NAME> Oppenheimer Series Fund, Inc.
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 159,965,336
<INVESTMENTS-AT-VALUE> 186,354,504
<RECEIVABLES> 1,387,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,903,355
<TOTAL-ASSETS> 189,645,061
<PAYABLE-FOR-SECURITIES> 2,107,323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184,230
<TOTAL-LIABILITIES> 2,291,553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,189,214
<SHARES-COMMON-STOCK> 9,201,201
<SHARES-COMMON-PRIOR> 6,619,121
<ACCUMULATED-NII-CURRENT> 479,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,295,701
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,389,168
<NET-ASSETS> 180,784,352
<DIVIDEND-INCOME> 1,741,056
<INTEREST-INCOME> 735,017
<OTHER-INCOME> 0
<EXPENSES-NET> 1,326,444
<NET-INVESTMENT-INCOME> 1,149,629
<REALIZED-GAINS-CURRENT> 13,385,207
<APPREC-INCREASE-CURRENT> 665,122
<NET-CHANGE-FROM-OPS> 15,199,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 669,566
<DISTRIBUTIONS-OF-GAINS> 841,952
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,132,678
<NUMBER-OF-SHARES-REDEEMED> 630,553
<SHARES-REINVESTED> 79,955
<NET-CHANGE-IN-ASSETS> 68,518,976
<ACCUMULATED-NII-PRIOR> 11,438
<ACCUMULATED-GAINS-PRIOR> 775,236
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 719,186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,326,444
<AVERAGE-NET-ASSETS> 135,939,620
<PER-SHARE-NAV-BEGIN> 17.84
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 1.88
<PER-SHARE-DIVIDEND> 0.10
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.65
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 356865
<NAME> Oppenheimer Disciplined Value Fund - B
<SERIES>
<NUMBER> 5
<NAME> Oppenheimer Series Fund, Inc.
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 159,965,336
<INVESTMENTS-AT-VALUE> 186,354,504
<RECEIVABLES> 1,387,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,903,355
<TOTAL-ASSETS> 189,645,061
<PAYABLE-FOR-SECURITIES> 2,107,323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184,230
<TOTAL-LIABILITIES> 2,291,553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,189,214
<SHARES-COMMON-STOCK> 296,100
<SHARES-COMMON-PRIOR> 39,640
<ACCUMULATED-NII-CURRENT> 479,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,295,701
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,389,168
<NET-ASSETS> 5,854,228
<DIVIDEND-INCOME> 1,741,056
<INTEREST-INCOME> 735,017
<OTHER-INCOME> 0
<EXPENSES-NET> 1,326,444
<NET-INVESTMENT-INCOME> 1,149,629
<REALIZED-GAINS-CURRENT> 13,385,207
<APPREC-INCREASE-CURRENT> 665,122
<NET-CHANGE-FROM-OPS> 15,199,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,039
<DISTRIBUTIONS-OF-GAINS> 19,962
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 261,924
<NUMBER-OF-SHARES-REDEEMED> 6,999
<SHARES-REINVESTED> 1,535
<NET-CHANGE-IN-ASSETS> 68,518,976
<ACCUMULATED-NII-PRIOR> 11,438
<ACCUMULATED-GAINS-PRIOR> 775,236
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 719,186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,326,444
<AVERAGE-NET-ASSETS> 2,903,000
<PER-SHARE-NAV-BEGIN> 18.08
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.83
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.77
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 356865
<NAME> Oppenheimer Disciplined Value Fund - C
<SERIES>
<NUMBER> 5
<NAME> Oppenheimer Series Fund, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 159,965,336
<INVESTMENTS-AT-VALUE> 186,354,504
<RECEIVABLES> 1,387,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,903,355
<TOTAL-ASSETS> 189,645,061
<PAYABLE-FOR-SECURITIES> 2,107,323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184,230
<TOTAL-LIABILITIES> 2,291,553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,189,214
<SHARES-COMMON-STOCK> 36,533
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 479,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,295,701
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,389,168
<NET-ASSETS> 714,928
<DIVIDEND-INCOME> 1,741,056
<INTEREST-INCOME> 735,017
<OTHER-INCOME> 0
<EXPENSES-NET> 1,326,444
<NET-INVESTMENT-INCOME> 1,149,629
<REALIZED-GAINS-CURRENT> 13,385,207
<APPREC-INCREASE-CURRENT> 665,122
<NET-CHANGE-FROM-OPS> 15,199,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,428
<DISTRIBUTIONS-OF-GAINS> 1,789
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,414
<NUMBER-OF-SHARES-REDEEMED> 53
<SHARES-REINVESTED> 172
<NET-CHANGE-IN-ASSETS> 68,518,976
<ACCUMULATED-NII-PRIOR> 11,438
<ACCUMULATED-GAINS-PRIOR> 775,236
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 719,186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,326,444
<AVERAGE-NET-ASSETS> 342,000
<PER-SHARE-NAV-BEGIN> 18.79
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.94
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.57
<EXPENSE-RATIO> 1.87
<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> 701265
<NAME> OPPENHEIMER VALUE STOCK FUND -A
<SERIES>
<NUMBER> 7
<NAME> OPPENHEIMER INTEGRITY FUNDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 122,680,928
<INVESTMENTS-AT-VALUE> 188,386,472
<RECEIVABLES> 3,427,937
<ASSETS-OTHER> 7,941
<OTHER-ITEMS-ASSETS> 317,473
<TOTAL-ASSETS> 192,139,823
<PAYABLE-FOR-SECURITIES> 33,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,978,959
<TOTAL-LIABILITIES> 2,012,689
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,783,317
<SHARES-COMMON-STOCK> 7,286,952
<SHARES-COMMON-PRIOR> 7,639,176
<ACCUMULATED-NII-CURRENT> 23,659
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,614,614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,705,544
<NET-ASSETS> 148,128,771
<DIVIDEND-INCOME> 4,410,082
<INTEREST-INCOME> 818,192
<OTHER-INCOME> 0
<EXPENSES-NET> 2,405,254
<NET-INVESTMENT-INCOME> 2,823,020
<REALIZED-GAINS-CURRENT> 7,161,305
<APPREC-INCREASE-CURRENT> 21,456,991
<NET-CHANGE-FROM-OPS> 31,441,316
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,534,251
<DISTRIBUTIONS-OF-GAINS> 4,334,550
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,459,943
<NUMBER-OF-SHARES-REDEEMED> 2,062,372
<SHARES-REINVESTED> 250,205
<NET-CHANGE-IN-ASSETS> 27,080,811
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,802
<OVERDISTRIB-NII-PRIOR> 16,697
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,315,853
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,405,254
<AVERAGE-NET-ASSETS> 144,498,000
<PER-SHARE-NAV-BEGIN> 17.84
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 3.11
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.61
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.33
<EXPENSE-RATIO> 1.20
<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> 701265
<NAME> OPPENHEIMER VALUE STOCK FUND -B
<SERIES>
<NUMBER> 7
<NAME> OPPENHEIMER INTEGRITY FUNDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 122,680,928
<INVESTMENTS-AT-VALUE> 188,386,472
<RECEIVABLES> 3,427,937
<ASSETS-OTHER> 7,941
<OTHER-ITEMS-ASSETS> 317,473
<TOTAL-ASSETS> 192,139,823
<PAYABLE-FOR-SECURITIES> 33,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,978,959
<TOTAL-LIABILITIES> 2,012,689
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,783,317
<SHARES-COMMON-STOCK> 1,988,443
<SHARES-COMMON-PRIOR> 1,502,706
<ACCUMULATED-NII-CURRENT> 23,659
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,614,614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,705,544
<NET-ASSETS> 40,142,493
<DIVIDEND-INCOME> 4,410,082
<INTEREST-INCOME> 818,192
<OTHER-INCOME> 0
<EXPENSES-NET> 2,405,254
<NET-INVESTMENT-INCOME> 2,823,020
<REALIZED-GAINS-CURRENT> 7,161,305
<APPREC-INCREASE-CURRENT> 21,456,991
<NET-CHANGE-FROM-OPS> 31,441,316
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 366,547
<DISTRIBUTIONS-OF-GAINS> 1,169,914
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 730,295
<NUMBER-OF-SHARES-REDEEMED> 315,951
<SHARES-REINVESTED> 71,393
<NET-CHANGE-IN-ASSETS> 27,080,811
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,802
<OVERDISTRIB-NII-PRIOR> 16,697
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,315,853
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,405,254
<AVERAGE-NET-ASSETS> 33,258,000
<PER-SHARE-NAV-BEGIN> 17.73
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 3.09
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 0.61
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.19
<EXPENSE-RATIO> 1.97
<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> 701265
<NAME> OPPENHEIMER VALUE STOCK FUND -C
<SERIES>
<NUMBER> 7
<NAME> OPPENHEIMER INTEGRITY FUNDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 122,680,928
<INVESTMENTS-AT-VALUE> 188,386,472
<RECEIVABLES> 3,427,937
<ASSETS-OTHER> 7,941
<OTHER-ITEMS-ASSETS> 317,473
<TOTAL-ASSETS> 192,139,823
<PAYABLE-FOR-SECURITIES> 33,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,978,959
<TOTAL-LIABILITIES> 2,012,689
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,783,317
<SHARES-COMMON-STOCK> 91,685
<SHARES-COMMON-PRIOR> 7,290
<ACCUMULATED-NII-CURRENT> 23,659
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,614,614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,705,544
<NET-ASSETS> 1,855,870
<DIVIDEND-INCOME> 4,410,082
<INTEREST-INCOME> 818,192
<OTHER-INCOME> 0
<EXPENSES-NET> 2,405,254
<NET-INVESTMENT-INCOME> 2,823,020
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</TABLE>
