Registration No. 2-75276
File No. 811-3346
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __
[ ]
Post-Effective Amendment No. 36
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[X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 37 [X]
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Oppenheimer Series Fund, Inc.
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(Exact Name of Registrant as Specified in Charter)
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Two World Trade Center 34th Floor, New York, NY 10048
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(Address of Principal Executive Offices) (Zip Code)
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212-323-0200
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) [X] On February 28, 2000
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On ________pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to
paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Oppenheimer
Disciplined Allocation Fund
Prospectus dated February 28, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Disciplined Allocation Fund is a mutual fund. It seeks to maximize
total investment return by allocating its assets among investments in stocks,
corporate bonds, U.S. government securities and money market instruments.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
[logo] OppenheimerFunds Distributor, Inc.
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Contents
About the Fund
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
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ABOUT THE FUND
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to maximize total
investment return (including capital appreciation and income) principally by
allocating its assets among stocks, corporate bonds, U.S. government securities
and money market instruments, according to changing market conditions.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in stocks, bonds
and money market instruments. The Fund's investment Manager, OppenheimerFunds,
Inc., can allocate the Fund's investments among these different types of
securities in different proportions at different times to seek the Fund's
objective. That allocation is based on the Manager's judgment of where the best
opportunities are for total return after evaluating market and economic
conditions.
At least 25% of the Fund's total assets normally will be invested in
fixed-income senior securities. Otherwise, the Fund is not required to allocate
its investments among stocks, bonds and money market instruments in any fixed
proportion but may have none or some of its assets invested in each asset class
in relative proportions that change over time.
Equity Securities. The Fund can buy a variety of domestic and foreign
equity investments, including common and preferred stocks, warrants and
convertible securities (many of which are debt securities that the Manager
considers to be "equity substitutes" because of their conversion feature).
The Fund can buy securities of companies in different capitalization
ranges.
Debt Securities. The Fund can invest in a variety of debt securities (including
convertible securities), such as securities issued or guaranteed by the
U.S. government and its agencies and instrumentalities, including
mortgage-related securities and collateralized mortgage obligations
("CMOs"). It also can buy municipal securities, foreign government
securities, and domestic and foreign corporate debt obligations. The Fund
can buy debt securities rated below investment grade (these are commonly
called "junk bonds"), but has limits on those investments, as discussed
below.
Money Market Instruments. Under normal market conditions (when the equity and
debt securities markets are not unstable, in the Manager's view), the Fund
can hold up to 40% of its total assets in money market instruments, such
as short-term U.S. government securities and commercial paper.
HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers follow an investment process that uses quantitative tools to analyze
market dynamics and economic trends, to determine the allocation of the Fund's
portfolio among different asset classes. In selecting stocks for the portfolio,
the portfolio managers use a disciplined value investment style. While this
process and the inter-relationship of the factors used may change over time and
its implementation may vary in particular cases, in general the investment
selection process currently includes the strategies described below:
o The portfolio managers use a quantitative analysis of the equity and debt
securities markets in combination with their individual analysis and
judgment to determine the allocation of the Fund's portfolio among the
asset classes. They analyze market trends, general economic data and
relative performance of the asset classes in which the Fund can invest.
For example, during periods of slowing corporate growth rates, they might
shift more assets to bonds and other fixed-income securities.
o In selecting stocks, they use value investing techniques to identify a
universe of stocks that are undervalued in the market, focusing on stocks
that have lower price/earnings (P/E) ratios compared, for example, to the
P/E ratio of the S&P 500 Index.
o The portfolio managers use both quantitative tools and fundamental
analysis, including internal research and reports by other market
analysts, to identify stocks within the selected universe that may provide
growth opportunities, for example, by selecting stocks of issuers that
have better earnings than analysts have expected ("positive earnings
surprise"). The expectation is that these stocks will increase in value
when the market re-evaluates the issuers and the price/earnings ratios of
their stocks.
o If the P/E ratio of a stock held by the Fund moves significantly above the
P/E ratio of the broad market benchmark the portfolio managers use, or if
the issuer's business fundamentals deteriorate, the portfolio managers
will consider selling the stock.
In selecting bonds, the portfolio managers normally expect that portion of
the Fund's portfolio to have an average maturity (measured on a dollar-weighted
basis) of between 6 and 14 years.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking total investment return over the long term from a flexible portfolio
investing in different asset classes, including stocks and bonds. Because the
Fund generally invests a substantial portion of its assets in stocks, those
investors should be willing to assume the risks of short-term share price
fluctuations that are typical for a fund that can have substantial stock
investments. Since the Fund's income level will fluctuate and generally will not
be significant, it is not designed for investors needing an assured level of
current income. Because of its focus on long-term total return, the Fund may be
appropriate for a portion of a retirement plan investment. However, the Fund is
not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are
subject to changes in value from a number of factors described below. There is
also the risk that poor security selection by the Manager will cause the Fund to
under perform other funds having similar objectives. The share price of the Fund
will change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.
Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund currently has substantial
investments in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. Market risk will affect the Fund's per share
prices, which will fluctuate as the values of the Fund's portfolio securities
change.
A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. In particular, because the Fund currently emphasizes investments in
stocks of U.S. issuers, it will be affected primarily by changes in U.S. stock
markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions that affect that industry more than others, or
by changes in government regulations, availability of basic resources or
supplies, or other events. To the extent that the Fund emphasizes investments in
a particular industry, its share values may fluctuate in response to events
affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund can
invest in securities of large companies but it can also buy stocks of small- and
medium-size companies, which may have more volatile stock prices than stocks of
large companies.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk relates to
the ability of the issuer of a security to make interest and principal payments
on the security as they become due. If the issuer fails to pay interest, the
Fund's income might be reduced, and if the issuer fails to repay principal, the
value of that security and of the Fund's shares might be reduced. While the
Fund's investments in U.S. government securities are subject to little credit
risk, the Fund's other investments in debt securities, particularly high-yield,
lower-grade debt securities, are subject to risks of default.
INTEREST RATE RISKS. Debt securities are subject to changes in value when
prevailing interest rates change. When interest rates fall, the values of
outstanding debt securities generally rise. When interest rates rise, the values
of outstanding debt securities generally fall, and the securities may sell at a
discount from their face amount. The magnitude of these price changes is
generally greater for debt securities with longer-term maturities. However,
interest rate changes may have different effects on the values of
mortgage-related securities because of prepayment risks, discussed below.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and the prices of its shares. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objective.
The stock markets can be volatile, and the price of the Fund's shares will
go up and down as a result. The Fund's income-oriented investments may help
cushion the Fund's total return from changes in stock prices, but fixed-income
securities have their own risks. The Fund seeks to reduce the effects of these
risks by diversifying its investments over different asset classes. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than funds
that invest only in stocks, but more aggressive than funds that invest solely in
investment-grade bonds.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the last ten calendar years and by showing how the average
annual total returns of the Fund's Class A shares compare to those of a
broad-based market index and a secondary index. The Fund's past investment
performance is not necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 12.09% (4Q'98) and the lowest return (not annualized)
for a calendar quarter was -8.60% (3Q'90).
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Average Annual Total 1 Year 5 Years
Returns for the periods ---------------
ended December 31, 1999 (or life of
class, if less) 10 Years
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Class A Shares (inception -7.43% 10.45% 10.12%
9/16/85)
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S & P 500 Index 21.03% 28.54% 18.19%1
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Merrill Lynch Gov't/Corp. -2.05% 7.61% 7.70%1
Master Index
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Class B Shares (inception -6.83% 8.48% N/A
10/02/95)
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Class C Shares (inception -3.34% 8.42% N/A
5/01/96)
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1. From 12/31/89.
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The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year) and 2% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period. The
Fund's returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the S & P
500 Index, an unmanaged index of common stocks, and the Merrill Lynch Government
and Corporate Master Index, a broad-based index of U.S. Treasury and government
agency securities, corporate and Yankee bonds. Index performance reflects the
reinvestment of income but does not reflect transaction costs. The Fund's
investments vary from the securities in the indices.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 1999.
Shareholder Fees (charges paid directly from your investment):
<PAGE>
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Class A Shares Class B Shares Class C Shares
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Maximum Sales Charge None
(Load) on purchases
---------------------- 5.75% None
(as % of offering
price)
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Maximum Deferred 1%3
Sales Charge (Load)
(as % of the lower of
the original offering None1 5%2
price or redemption
proceeds)
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A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class A Class B Class C
Shares Shares Shares
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Management Fees 0.62% 0.62% 0.62%
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Distribution and/or 0.24% 1.00% 1.00%
Service (12b-1) Fees
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Other Expenses 0.18% 0.18% 0.18%
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Total Annual Operating 1.04% 1.80% 1.80%
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
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Examples. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
<PAGE>
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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $675 $887 $1,116 $1,773
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Class B Shares $683 $866 $1,175 $1,733
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Class C Shares $283 $566 $975 $2,116
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If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
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Class A Shares $675 $887 $1,116 $1,773
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Class B Shares $183 $566 $975 $1,733
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Class C Shares $183 $566 $975 $2,116
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. Class B
expenses for years 7 through 10 are based on Class A expenses, since Class
B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among the different types of investments will vary over time based upon the
evaluation of economic and market trends by the Manager. The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of any
one issuer and by not investing too great a percentage of the Fund's assets in
any one company. Also, the Fund does not concentrate 25% or more of its
investments in any one industry or the securities of any one foreign government.
However, changes in the overall market prices of securities and any income
they may pay can occur at any time. The share price and yield of the Fund will
change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.
Stock and Other Equity Investments. The Fund can invest in equity securities of
issuers that may be of small, medium or large capitalization, to seek
total investment return. The Fund can invest in common stock as well as
other equity securities, including preferred stocks, rights and warrants,
and securities convertible into common stock. The Fund can buy securities
issued by domestic or foreign companies. However, the Fund's investments
in stocks are currently focused on those of U.S. issuers.
Debt Securities. The Fund can invest in a variety of debt securities to seek
its objective. The debt securities the Fund buys may be rated by
nationally recognized rating organizations or they may be unrated
securities assigned an equivalent rating by the Manager. The Fund's debt
investments may be "investment grade" (that is, in the four highest rating
categories of a national rating organization) or may be lower-grade
securities (sometimes called "junk bonds") rated as low as "B." The Fund
does not invest more than 10% of its total assets in unrated debt
securities. A description of the ratings definitions of national rating
organizations is included in Appendix A to the Statement of Additional
Information.
While the Fund can invest as much as 20% of its total assets in lower-grade
securities, currently it does not intend to invest more than 10% of its
total assets in these investments. Lower-grade debt securities may be
subject to greater market fluctuations and greater risks of loss of income
and principal than investment-grade debt securities. Securities that are
(or that have fallen) below investment grade are exposed to a greater risk
that the issuers of those securities might not meet their debt obligations.
These risks can reduce the Fund's share prices and the income it earns.
U.S. Government Securities. The Fund can invest in securities issued or
guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.
U.S. Treasury Obligations. These include Treasury bills (having maturities of
one year or less when issued), Treasury notes (having maturities of more
than one year and up to ten years when issued), and Treasury bonds (having
maturities of more than ten years when issued). Treasury securities are
backed by the full faith and credit of the United States as to timely
payments of interest and repayments of principal. The Fund also can buy U.
S. Treasury securities that have been "stripped" of their coupons by a
Federal Reserve Bank, zero-coupon U.S. Treasury securities, and Treasury
Inflation-Protection Securities.
Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the
right of the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds
("Fannie Maes"). Others are supported only by the credit of the entity
that issued them, such as Federal Home Loan Mortgage Corporation
obligations ("Freddie Macs").
Mortgage-Related U.S. Government Securities. The Fund can buy interests in
pools of residential or commercial mortgages, in the form of CMO and other
"pass-through" mortgage securities. CMOs that are U.S. government
securities have collateral to secure payment of interest and principal.
They may be issued in different series, each having different interest
rates and maturities. The collateral is either in the form of mortgage
pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or mortgage loans insured by a U.S. government agency. The
Fund can have substantial amounts of its assets invested in
mortgage-related U.S. government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying
mortgages. Changes in interest rates may cause the rate of expected
prepayments of those mortgages to change. In general, prepayments increase
when general interest rates fall and decrease when general interest rates
rise.
Private-Issuer Mortgage-Backed Securities. The Fund can invest a
substantial portion of its assets in mortgage-backed securities issued by
private issuers, which do not offer the credit backing of U.S. government
securities. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks,
savings and loans, mortgage bankers and other non-governmental issuers.
Private issuer mortgage-backed securities are subject to the o credit risks
of the issuers (as well as the interest rate risks and prepayment risks of
CMOs), although in some cases they may be supported by insurance or
guarantees.
Prepayment Risk. Mortgage-related securities are subject to the risks of
unanticipated prepayment. The risk is that when interest rates fall,
borrowers under the mortgages that underlie these securities will prepay
their mortgages more quickly than expected, causing the issuer of the
security to prepay the principal to the Fund prior to the security's
expected maturity. The Fund may be required to reinvest the proceeds at a
lower interest rate, reducing its income. Mortgage-related securities
subject to prepayment risk generally offer less potential for gains when
prevailing interest rates fall and have greater potential for loss when
prevailing interest rates rise. The impact of prepayments on the price of
a security may be difficult to predict and may increase the volatility of
the price. If the Fund buys mortgage-related securities at a premium,
accelerated prepayments on those securities could cause the Fund to lose a
portion of its principal investment represented by the premium.
If interest rates rise rapidly, prepayments of mortgages may occur at a
slower rate than expected, and the expected maturity of long-term or
medium-term mortgage-related securities could lengthen as a result. That
could cause their values to fluctuate more, and the prices of the Fund's
shares, to fall.
Money Market Instruments and Short-Term Debt Securities. Under normal
market conditions the Fund can invest in a variety of short-term debt
obligations having a maturity of one year or less. These include: Money
market instruments. Generally, these are debt obligations having ratings in
the top two rating categories of national rating organizations (or
equivalent ratings assigned by the Manager). Examples include commercial
paper of domestic issuers or foreign companies (foreign issuers must have
assets of $1 billion or more). Short-term debt obligations of the U.S.
government or corporations.
Obligations of domestic or foreign banks or savings and loan associations,
such as certificates of deposit and bankers' acceptances. Under normal
market conditions this strategy would be used primarily for cash management
or liquidity purposes. The yields on shorter-term debt obligations tend to
be less than on longer-term debt. Therefore, to the extent that the Fund
uses this strategy, it might help preserve principal but might reduce
opportunities to seek growth of capital as part of its objective of total
return.
Can the Fund's Investment Objective and Policies Change? The Fund's Board
of Directors can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is not a fundamental policy. Investment restrictions that are
fundamental policies
are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the
investment techniques and strategies described below. The Manager might not
always use all of them. These techniques have risks, although some are designed
to help reduce overall investment or market risks.
Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt
securities the Fund buys are zero-coupon bonds that pay no interest. They
are issued at a substantial discount from their face value. "Stripped"
securities are the separate income or principal components of a debt
security. Some CMOs or other mortgage-related securities may be stripped,
with each component having a different proportion of principal or interest
payments. One class might receive all the interest and the other all the
principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The
Fund may have to pay out the imputed income on zero-coupon securities
without receiving the actual cash currently. Interest-only securities are
particularly sensitive to changes in interest rates.
The values of interest-only mortgage-related securities are also very
sensitive to prepayments of underlying mortgages. Principal-only
securities are also sensitive to changes in interest rates. When
prepayments tend to fall, the timing of the cash flows to these securities
increases, making them more sensitive to changes in interest rates. The
market for some of these securities may be limited, making it difficult
for the Fund to dispose of its holdings at an acceptable price. The Fund
can invest up to 50% of its total assets in zero-coupon securities issued
by either the U.S. government or U.S. companies.
Foreign Securities. The Fund can buy equity or debt securities of companies and
debt securities of governments in any country, developed or
underdeveloped. As a fundamental policy, the Fund cannot invest more than
10% of its total assets in foreign securities. As an exception to that
restriction the Fund can invest up to 25% of its total assets in foreign
equity or debt securities that are:
o issued, assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities,
o assumed or guaranteed by domestic issuers (including Eurodollar
securities), or
o issued, assumed or guaranteed by foreign issuers that have a class of
securities listed for trading on The New York Stock Exchange.
While foreign securities offer special investment opportunities, there are
also special risks, such as foreign taxation, risks of delays in
settlements of securities transactions, and the effects of a change in
value of a foreign currency against the U.S. dollar, which will result in
a change in the U.S. dollar value of securities denominated in that
foreign currency.
Derivative Investments. In general terms, a derivative investment is an
investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. Options, futures,
mortgage-related securities, asset-backed securities and "stripped"
securities are examples of derivatives the Fund can use. Currently the Fund
does not use derivative investments to a significant degree.
There are Special Risks in Using Derivative Investments. If the issuer of
the derivative does not pay the amount due, the Fund can lose money on the
investment. Also, the underlying security or investment on which the
derivative is based, and the derivative itself, might not perform the way
the Manager expected it to perform. If that happens, the Fund's share
prices could decline or the Fund could get less income than expected.
Interest rate and stock market changes in the U.S. and abroad may also
influence the performance of derivatives. Some derivative investments held
by the Fund may be illiquid. The Fund has limits on the amount of
particular types of derivatives it can hold. However, using derivatives can
cause the Fund to lose money on its investment and/or increase the
volatility of its share prices.
Hedging. The Fund can buy 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 is not required to use hedging instruments to seek
its objective. The Fund does not use hedging instruments for speculative o
purposes.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be required to
buy the underlying security at a disadvantageous price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could 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.
Temporary Defensive Investments. When market or economic conditions are unstable
or adverse, the Fund can invest up to 100% of its assets in defensive
securities. Generally, they would be short-term U.S. government
securities, high-grade commercial paper, bank obligations or repurchase
agreements. To the extent the Fund invests defensively in these
securities, it might not achieve its investment objective.
Convertible Securities. Many convertible securities are a form of debt security,
but the Manager regards some of them as "equity substitutes" because of
their feature allowing them to be converted into common stock. Therefore,
their ratings have less impact on the Manager's investment decision than
in the case of other debt securities. The Fund's investments in
convertible securities may include securities rated as low as "B" by
Moody's Investor Services, Inc. or Standard & Poor's Rating Service or
having comparable ratings by other national rating organizations (or, if
they are unrated, having comparable ratings assigned by the Manager).
Those ratings are below "investment grade" and the securities are subject
to greater risk of default by the issuer than investment-grade securities.
Asset-Backed Securities. The Fund can buy asset-backed securities, which are
fractional interests in pools of loans collateralized by the loans or
other assets or receivables. They are issued by trusts and special purpose
corporations that pass the income from the underlying pool to the buyer of
the interest. These securities are subject to the risk of default by the
issuer as well as by the borrowers of the underlying loans in the pool.
Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
its objective. Portfolio turnover affects brokerage costs the Fund pays,
and the Fund's performance. If the Fund realizes capital gains when it
sells its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial
Highlights table at the end of this Prospectus shows the Fund's portfolio
turnover rates during prior fiscal years.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Directors, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has been as an investment advisor since January 1960. The
Manager (including subsidiaries and an affiliate) managed more than $120 billion
in assets as of December 31, 1999, including other Oppenheimer funds, with more
than 5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Managers. The Fund has a portfolio management team consisting of
five portfolio managers. The principal portfolio manager, Peter M. Antos,
is a Vice President of the Fund and a Senior Vice President of the Manager.
He has been the Fund's senior portfolio manager since 1989 and is an
officer and portfolio manager of other Oppenheimer funds. Prior to joining
the Manager in 1996, he was employed by the G.R. Phelps & Co., Inc., the
Fund's prior investment adviser, and its parent, Connecticut Mutual Life
Insurance Company.
Portfolio managers Stephen F. Libera, Michael C. Strathearn, Kenneth B.
White and Arthur J. Zimmer are also Vice Presidents of the Fund. Mr. Zimmer
is a Senior Vice President of the Manager. Messrs. Libera, Strathearn and
White are Vice Presidents of the Manager. Each serves as an officer and
portfolio manager of other Oppenheimer funds. Before joining the Manager in
1996, Messrs. Libera, Strathearn and White were employed as portfolio
managers by Connecticut Mutual Life Insurance Company. Mr. Libera has been
a portfolio manager of the Fund since 1985, Mr. Strathearn since 1988, Mr.
White since 1992, and Mr. Zimmer since 1996.
Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 0.625% of the first $300 million of average annual net assets
of the Fund, 0.500% of the next $100 million, and 0.450% of average annual
net assets in excess of $400 million. The Fund's management fee for its
last fiscal year ended October 31, 1999, was 0.62% of average annual net
assets for each class of shares.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO you buy SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. 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 with a financial advisor before you make a purchase to be sure
that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through 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 Asset Builder
Application and the Statement of Additional Information.
How Much Must You Invest? You can buy Fund shares 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.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started as an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be for as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time."
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Directors has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures
for valuing illiquid securities and obligations for which market values
cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer
must receive the order by the close of The New York Stock Exchange and
transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally 5:00
P.M.) to receive that day's offering price. Otherwise, the order will
receive the next offering price that is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
- --------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on the
amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
- --------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
- --------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
Class C Shares?" below.
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- --------------------------------------------------------------------------------
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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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six years, as well as the effect of the
Class B asset-based sales charge on the investment return for that class
in the short-term. 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 as 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
Investing for the Longer Term. If you are investing less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to My Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement
of Additional Information details the conditions for the waiver of sales
charges that apply in certain cases, and the special sales charge rates
that apply to purchases of shares of the Fund by certain groups or under
specified retirement plan arrangements or in other special types of
transactions. To receive a waiver or special sales charge rate, you must
advise the Distributor when purchasing shares or the Transfer Agent when
redeeming shares that the special condition applies.
HOW CAN you BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
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Amount of Purchase Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Commission As
Percentage of Net Percentage of
Offering Price Amount Invested Offering Price
------------------------------------------------------------------------------
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Less than $25,000 5.75% 6.10% 4.75%
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$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
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$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
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$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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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
aggregating $1 million or more or for certain purchases by particular types
of retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an
amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts). For those retirement plan
accounts, the commission is 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, based on
the cumulative purchases during the prior 12 months ending with the current
purchase. In either case, the commission will be paid only on purchases
that were not previously subject to a front-end sales charge and dealer
commission.1
1 That commission will not be paid on purchases of shares in
amounts of $1 million or more (including any right of accumulation) by a
retirement plan that pays for the purchase with the redemption of Class C
shares of one or more Oppenheimer funds held by the plan for more than one
year.
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 Oppenheimer
funds are added as an investment option under that plan.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) the original net asset value of the redeemed shares. The Class A
contingent deferred sales charge will not exceed the aggregate amount of
the commissions the Distributor paid to your dealer on all purchases of
Class A shares of all Oppenheimer funds you made that were subject to the
Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN you BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
<PAGE>
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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6 and following None
- ----------------------------------------
In the table, a "year" is a 12-month period In applying the sales charge, 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. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares that you hold convert, any other Class B shares that were
acquired by reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.
How Can you Buy 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. 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.
Distribution and Service (12b-1) Plans.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
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
pay the Distributor for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class
B shares and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. 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 a sales concessions 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 sales of Class B
shares is therefore 4.00% of the purchase price. The Distributor retains
the Class B asset-based sales charge.
The Distributor currently pays a sales concessions 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 therefore 1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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 OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name o Shares are being redeemed by someone (such as an Executor) other
than the owners.
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOWDO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457
o To redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of
the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
If you have requested Federal Funds wire privileges for your account, the
wire of the redemption proceeds will normally be transmitted on the next
bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How contingent deferred sales charges affect redemptions. If you purchase shares
subject to a Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information) and you advise the Transfer Agent of your eligibility for the
waiver.
A 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 net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege.
o 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.
o You must meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some cases, sales charges may be imposed on exchange
transactions. For tax purposes, exchanges of shares involve a sale of the
shares of the fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more
details.
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.
HOW DO you SUBMIT EXCHANGE REQUESTS? 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
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o 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 conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o 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
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Directors at any time the Board believes it is
in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
has fewer than 100 shares. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share
purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on a quarterly basis in March, June, September
and December on a date selected by the Board of Directors. Dividends and
distributions paid on Class A shares will generally be higher than dividends for
Class B and Class C shares, which normally have higher expenses than Class A.
The Fund has no fixed dividend rate and cannot guarantee that it will pay any
dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." If you buy shares on or just before the Fund declares
a capital gains distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable dividend or
capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. 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. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the Statement
of Additional Information, which is available on request.
<PAGE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998
1997 1996(1) 1995 1994
===============================================================================================================================
<S> <C> <C>
<C> <C> <C> <C>
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.45 $ 16.81 $
16.00 $ 15.46 $ 13.44 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .45
.51(2) .46 .60 .55
Net realized and unrealized gain (loss) (.01) .45
2.25(2) .49 2.59 (.86)
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations .43 .90
2.76 .95 3.19 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.44) (.45)
(.56) (.36) (.60) (.55)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.57) (.24)
- -------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.85) (2.26)
(1.95) (.41) (1.17) (.79)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.03 $15.45
$16.81 $16.00 $15.46 $13.44
===============================================================================
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 2.62% 5.93%
18.82% 6.27% 23.95% (2.11)%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $258,159 $298,558
$243,267 $233,289 $218,099 $177,904
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $293,677 $268,715
$238,821 $228,203 $200,172 $187,655
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 2.72% 2.96%
3.17% 3.52% 4.00% 3.80%
Expenses 1.04% 1.04%(5)
1.11%(5) 1.11%(5) 1.17%(5) 0.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55% 115%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999 1998
1997 1996(1) 1995(7)
======================================================================================================================
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $16.99
$16.16 $15.66 $15.48
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .36
.40(2) .31 .07
Net realized and unrealized gain (loss) -- .43
2.27(2) .54 .70
- -------------------------------------------------------------------
Total income (loss) from
investment operations .31 .79
2.67 .85 .77
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.32) (.35)
(.45) (.30) (.07)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.52)
- -------------------------------------------------------------------
Total dividends and distributions
to shareholders (.73) (2.16)
(1.84) (.35) (.59)
Net asset value, end of period $15.20 $15.62
$16.99 $16.16 $15.66
===================================================================
======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84% 5.10%
17.96% 5.51% 4.93%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $23,522 $21,754
$8,720 $3,919 $650
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,648 $14,235
$6,183 $2,324 $375
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97% 2.19%
2.32% 2.86% 0.73%
Expenses 1.80% 1.80%(5)
1.89%(5) 1.85%(5) 1.92%(5)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995, (inception of offering) to December 31,
1995.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
<PAGE>
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C YEAR ENDED OCTOBER 31, 1999
1998 1997 1996(8)
====================================================================================================================
<S> <C>
<C> <C> <C>
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.31 $
16.70 $ 15.93 $ 15.71
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32
.37 .44(2) .30
Net realized and unrealized gain (loss) (.01)
.40 2.19(2) .32
- ---------------------------------------------------
Total income (loss) from investment operations .31
.77 2.63 .62
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33)
(.35) (.47) (.35)
Distributions from net realized gain (.41)
(1.81) (1.39) (.05)
- ---------------------------------------------------
Total dividends and distributions to shareholders (.74)
(2.16) (1.86) (.40)
Net asset value, end of period $14.88
$15.31 $16.70 $15.93
===================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84%
5.10% 17.93% 4.08%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,719
$4,824 $1,473 $188
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,876
$2,861 $ 805 $ 57
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97%
2.18% 2.18% 2.90%
Expenses 1.80%
1.80%(5) 1.92%(5) 1.87%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122%
97% 98% 85%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer Disciplined Allocation Fund The following
additional information about the Fund is available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
- ----------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or
read or down-load documents on the
OppenheimerFunds website:
http://www.oppenheimerfunds.com
- ----------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected], or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
SEC File No. 811-3346
PR0205.001.0200 Printed on recycled paper. [logo] OppenheimerFunds
Distributor, Inc.
<PAGE>
Appendix to Prospectus of
Oppenheimer Disciplined Allocation Fund
Graphic material included in the Prospectus of Oppenheimer Disciplined
Allocation Fund (the "Fund") under the heading "Annual Total Returns (Class A)(
as of 12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the ten most recent calendar years, without deducting sales charges.
Set forth below are the relevant data points that will appear in the bar chart:
Calendar Annual
Year Total
Ended Returns
1990 -0.21%
1991 28.21%
1992 9.90%
1993 15.89%
1994 -2.11%
1995 23.95%
1996 9.59%
1997 17.90%
1998 10.85%
1999 -1.78%
<PAGE>
Oppenheimer Disciplined Allocation Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 28, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 22, 2000. 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 12
Investment Restrictions............................................ 29
How the Fund is Managed ............................................... 31
Organization and History........................................... 31
Directors and Officers............................................. 33
The Manager........................................................ 39
Brokerage Policies of the Fund......................................... 40
Distribution and Service Plans......................................... 42
Performance of the Fund................................................ 46
About Your Account
How To Buy Shares...................................................... 51
How To Sell Shares..................................................... 59
How To Exchange Shares................................................. 64
Dividends, Capital Gains and Taxes..................................... 66
Additional Information About the Fund.................................. 68
Financial Information About the Fund
Independent Auditors' Report........................................... 69
Financial Statements................................................... 70
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
<PAGE>
86
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A B O U T T H E F U N D
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Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manger may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
goal. It may use some of the special investment techniques and strategies at
some times or not at all.
|X| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio managers currently use a value investing style coupled
with fundamental analysis of issuers. In using a value approach, the managers
look for stocks and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. Value investing
seeks stocks having prices that are low in relation to their real worth or
future prospects, with the expectation that the Fund will realize appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
Price/Earnings ratio, which is the stock's price divided by its earnings
per share. A stock having a price/earnings ratio lower than its historical
range, or lower than the market as a whole or that of similar companies may
offer attractive investment opportunities.
Price/book value ratio, which is the stock price divided by the book value
of the company per share. It measures the company's stock price in relation to
its asset value.
Dividend Yield, which is measured by dividing the annual dividend by the
stock price per share.
Valuation of Assets which compares the stock price to the value of the
company's underlying assets, including their projected value in the marketplace
and liquidation value.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year. Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
<PAGE>
|X| Investments in Stocks and Other Equity Securities. The Fund does not
limit its investments in equity securities to issuers having a market
capitalization of a specified size or range, and therefore may invest in
securities of small-, mid- and large-capitalization issuers. At times, the Fund
may have substantial amounts of its assets invested in securities of issuers in
one or more capitalization ranges, based upon the Manager's use of its
investment strategies and its judgment of where the best market opportunities
are to seek the Fund's objective.
At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may
be subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund has substantial investments in smaller
capitalization companies at times of market volatility, the Fund's share price
may fluctuate more than that of funds focusing on larger capitalization issuers.
At times, the Fund may increase the emphasis of its investments in a
particular industry. Therefore, it may be subject to the risks that economic,
political or other events can have a negative effect on the values of issuers in
that particular industry (this is referred to as "industry risk"). Stocks of
issuers in a particular industry may be affected by changes in economic
conditions that affect that industry more than others, or changes in government
regulations, availability of basic resources or supplies, or other events. To
the extent that the Fund is emphasizing investments in a particular industry,
its share values may fluctuate in response to events affecting that industry.
Rights and Warrants. The Fund can invest up to 5% of its total
assets in warrants or rights. That limit does not apply to warrants and rights
that the Fund has acquired as part of units of securities or that are attached
to other securities. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
Convertible Securities. While some convertible securities are a form
of debt security, in many cases their conversion feature (allowing conversion
into equity securities) causes them to be regarded by the Manager 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 fixed-income securities.
Convertible securities are subject to the credit risks and interest rate risks
described above.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security. In that case, it will likely
sell at a premium over its conversion value and its price will tend to fluctuate
directly with the price of the underlying security.
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 conversion of 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.
Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock, has
a stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before the issuer can pay dividends on common shares.
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 provisions for their call
or redemption prior to maturity which can have a negative effect on their prices
when interest prior to maturity rates decline. Preferred stock may be
"participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of protection
of capital as debt securities and may not offer the same degree of assurance of
continued income as debt securities. The rights of preferred stock on
distribution of a corporation's assets in the event of its liquidation are
generally subordinate to the rights associated with a corporation's debt
securities. Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of its liquidation.
|X| Investments in Bonds and Other Debt Securities. The Fund can invest in
a variety of bonds, debentures and other debt securities to seek its objective.
It will invest at least 25% of its assets in fixed-income senior securities and
could have a larger portion of its assets in debt investments.
The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., or at least "BBB" by Standard & Poor's Rating Service or Duff &
Phelps, Inc., or that have comparable ratings by another nationally-recognized
rating organization. In making investments in debt securities, the Manager may
rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness. If the securities that
the Fund buys are unrated, to be considered part of the Fund's holdings of
investment-grade securities, they must be judged by the Manager to be of
comparable quality to bonds rated as investment grade by a rating organization.
|X| Special Risks of Lower-Grade Securities. It is not anticipated that
the Fund will normally invest a substantial portion of its assets in lower-grade
debt securities. Because lower-grade securities tend to offer higher yields than
investment-grade securities, the Fund may invest in lower grade securities if
the Manager is trying to achieve greater income (and, in some cases, the
appreciation possibilities of lower-grade securities might be a reason they are
selected for the Fund's portfolio). High-yield convertible debt securities might
be selected as "equity substitutes," as described above.
"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
included in the limitation on the percentage of the Fund's assets that can be
invested in lower-grade securities. The Fund can invest in securities rated as
low as "B" at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risks of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of diversifying its investments.
Additionally, to the extent they can be converted into stock, convertible
securities may be less subject to some of these risks than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these
risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to greater risks than other investment-grade
securities, and have some speculative characteristics. Definitions of the debt
security ratings categories of Moody's, S&P, Fitch IBCA and Duff & Phelps are
included in Appendix A to this Statement of Additional Information.
Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the Fund
buys them will not affect the interest income payable on those securities
(unless the security pays interest at a variable rate pegged to interest rate
changes). However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.
Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus. Mortgage-related
securities issued by private issuers have greater credit risk.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages, and it is not possible to
predict accurately the security's yield. The principal that is returned earlier
than expected may have to be reinvested in other investments having a lower
yield than the prepaid security. As a result, these securities may be less
effective as a means of "locking in" attractive long-term interest rates, and
they may have less potential for appreciation during periods of declining
interest rates, than conventional bonds with comparable stated maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in response to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
Collateralized Mortgage Obligations. CMOs are multi-class bonds that are
backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the opposite direction of an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might not be able to assert a
claim against the United States if the issuing agency or instrumentality does
not meet its commitment. The Fund will invest in securities of U.S. government
agencies and instrumentalities only if the Manager is satisfied that the credit
risk with respect to the agency or instrumentality is minimal.
U.S. Treasury Obligations. These include Treasury bills (maturities of one
year or less when issued), Treasury notes (maturities of one to ten years), and
Treasury bonds (maturities of more than ten years). Treasury securities are
backed by the full faith and credit of the United States as to timely payments
of interest and repayments of principal. They also can include U. S. Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection
Securities ("TIPS").
Treasury Inflation-Protection Securities. The Fund can buy these
TIPS, which are designed to provide an investment vehicle that is not vulnerable
to inflation. The interest rate paid by TIPS is fixed. The principal value rises
or falls semi-annually based on changes in the published Consumer Price Index.
If inflation occurs, the principal and interest payments on TIPS are adjusted to
protect investors from inflationary loss. If deflation occurs, the principal and
interest payments will be adjusted downward, although the principal will not
fall below its face amount at maturity.
Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association ("GNMA") pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").
U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.
GNMA Certificates. The Government National Mortgage Association is a
wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs involve
its guarantees of privately-issued securities backed by pools of mortgages.
Ginnie Maes are debt securities representing an interest in one mortgage or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration.
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie Maes
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Maes,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However, if those payments are
insufficient, the guaranty agreements between the issuers of the Ginnie Maes and
GNMA require the issuers to make advances sufficient for the payments. If the
issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuers, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to 30 years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments, refinancing
and payments from foreclosures, is considerably less.
Federal Home Loan Mortgage Corporation ("FHLMC") Certificates.
FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the mortgage loans in
the pool represented by the FHLMC Certificate, in each case whether or
not such amounts are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues Fannie
Mae Certificates which are backed by a pool of mortgage loans. Fannie Mae
guarantees to each registered holder of a Fannie Mae Certificate that the holder
will receive amounts representing the holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments, on the
mortgage loans in the pool represented by such Certificate, less servicing and
guarantee fees, and the holder's proportionate interest in the full principal
amount of any foreclosed or other liquidated mortgage loan. In each case the
guarantee applies whether or not those amounts are actually received. The
obligations of Fannie Mae under its guarantees are obligations solely of Fannie
Mae and are not backed by the full faith and credit of the United States or any
of its agencies or instrumentalities other than Fannie Mae.
Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S.
government securities. These will typically be U.S. Treasury Notes and Bonds
that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Commercial (Privately-Issued) Mortgage Related Securities. The Fund
can invest in commercial mortgage related securities issued by private entities.
Generally these are multi-class debt or pass through certificates secured by
mortgage loans on commercial properties. They are subject to the credit risk of
the issuer. These securities typically are structured to provide protection to
investors in senior classes from possible losses on the underlying loans. They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying loans. They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described above, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interest in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the underlying debtors will not pay their obligations when
due. However, the enhancement, if any, might not be for the full par value of
the security. If the enhancement is exhausted and any required payments of
interest or repayments of principal are not made, the Fund could suffer losses
on its investment or delays in receiving payment.
The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if
any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, the Fund
would generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to prepayments,
which may shorten the weighted average life of asset-backed securities and may
lower their return, in the same manner as in the case of mortgage-backed
securities and CMOs, described above. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Municipal Securities. The Fund can buy municipal bonds and notes,
tax-exempt commercial paper, certificates of participation in municipal leases
and other debt obligations. These debt obligations are issued by the governments
of states, as well as their political subdivisions (such as cities, towns and
counties), or by the District of Columbia and their agencies and authorities.
The Fund can also buy securities issued by any commonwealths, territories or
possessions of the United States, or their respective agencies,
instrumentalities or authorities. The Fund would invest in municipal securities
because of the income and portfolio diversification they offer rather than for
the tax-exempt nature of the income they pay.
The Fund can buy both long-term and short-term municipal securities.
Long-term securities have a maturity of more than one year. In selecting
municipal securities the Fund would normally focus on longer-term securities, to
seek higher income. In general, the values of longer-term bonds are more
affected by changes in interest rates than are short-term bonds.
Municipal securities are issued to raise money for a
variety of public or private purposes, including financing state or local
governments, financing specific projects or public facilities. The Fund can
invest in municipal securities that are "general obligations," secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest.
The Fund can also buy "revenue obligations," payable only from the
revenues derived from a particular facility or class of facilities, or a
specific excise tax or other revenue source. Some of these revenue obligations
are private activity bonds that pay interest that may be a tax preference for
investors subject to alternative minimum tax.
Municipal Lease Obligations. Municipal leases are used by state and
local government authorities to obtain funds to acquire land, equipment or
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in payments made under municipal lease obligations. If
the government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable.
|X| Money Market Instruments and Short-Term Debt Obligations. The Fund can
invest in a variety of high quality money market instruments and short-term debt
obligations, both under normal market conditions and for defensive purposes. The
following is a brief description of the types of money market securities and
short-term debt obligations the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates. The Fund's investments in foreign money
market instruments and short-term debt obligations are subject to its limits on
investing in foreign securities and the risks of foreign investing, described
above.
U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities.
Bank Obligations. The Fund can buy time deposits, certificates of deposit
and bankers' acceptances. They must be :
o obligations issued or guaranteed by a domestic or foreign bank (including
a foreign branch of a domestic bank) having total assets of at least U.S.
$1 billion,
o banker's acceptances (which may or may not be supported by letters of
credit) only if guaranteed by a U.S. commercial bank with total assets of
at least U.S. $1 billion.
The Fund can make time deposits. These are non-negotiable deposits in a
bank for a specified period of time. They may be subject to early withdrawal
penalties. Time deposits that are subject to early withdrawal penalties are
subject to the Fund's limits on illiquid investments, unless the time deposit
matures in seven days or less. "Banks" include commercial banks, savings banks
and savings and loan associations.
Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's. If
the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under 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. 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 expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are 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 Prospectus.
Currently, the Fund does not intend that its investments in variable amount
master demand notes will exceed 5% of its total assets.
<PAGE>
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued or guaranteed by foreign companies or debt securities of foreign
governments or their agencies. "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 and their agencies and
instrumentalities. Those securities may be traded on foreign securities
exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations. That is because they are not subject to
many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers
than in the U.S.; o foreign exchange contracts;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities;
o foreign withholding taxes on interest and dividends;
o possibilities in some countries of expropriation, nationalization,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and
o 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.
Special Risks of Emerging Markets. Emerging and developing markets abroad may
also offer special opportunities for investing but have greater risks than more
developed foreign markets, such as those in Europe, Canada, Australia, New
Zealand and Japan. There may be even less liquidity in their securities markets,
and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets, because the selection of those
securities must be consistent with the Fund's investment objective.
Risks of Conversion to Euro. There may be transaction costs and
risks relating to the conversion of certain European currencies to the Euro that
commenced in January 1, 1999. However, their current currencies (for example,
the franc, the mark, and the lira) will also continue in use until January 1,
2002. After that date, it is expected that only the euro will be used in those
countries. A common currency is expected to confer some benefits in those
markets, by consolidating the government debt market for those countries and
reducing some currency risks and costs. But the conversion to the new currency
will affect the Fund operationally and also has potential risks, some of which
are listed below. Among other things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the competitive
environment from a consolidated currency market and greater operational
costs from converting to the new currency. This might depress stock values.
o vendors the Fund depends on to carry out its business, such as its
custodian (which holds the foreign securities the Fund buys), the Manager
(which must price the Fund's investments to deal with the conversion to the
euro) and brokers, foreign markets and securities depositories. If they are
not prepared, there could be delays in settlements and additional costs to
the Fund.
o exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between the
affected currencies and the need to update the Fund's contracts could pose
extra costs to the Fund.
The lack of currency rate calculations between the affected currencies and
the need to update the Fund's contracts could pose extra costs to the Fund.
The Manager has upgraded (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio managers will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
Foreign Debt Obligations. The debt obligations of foreign
governments and entities may or may not be supported by the full faith and
credit of the foreign government. The Fund may buy securities issued by certain
supra-national entities, which include entities designated or supported by
governments to promote economic reconstruction or development, international
banking organizations and related government agencies. Examples are the
International Bank for Reconstruction and Development (commonly called the
"World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|X| Floating Rate and Variable Rate Obligations. Some securities the Fund
can purchase have variable or floating interest rates. Variable rates are
adjusted at stated periodic intervals. Variable rate obligations can have a
demand feature that allows the Fund to tender the obligation to the issuer or a
third party prior to its maturity. The tender may be at par value plus accrued
interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of not less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than that for
fixed-rate obligations of the same maturity. The Manager may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or guarantee
issued by a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally, the issuer must provide a specified number of days' notice to the
holder.
|X| "Stripped" Mortgage-Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyers
participation interest bears to the total principal amount of the loan. No more
than 5% of the Fund's net assets can be invested in participation interests of
the same borrower. The issuing financial institution may have no obligation to
the Fund other than to pay the Fund the proportionate amount of the principal
and interest payments it receives.
Participation interests are primarily dependent upon the creditworthiness
of the borrowing corporation, which is obligated to make payments of principal
and interest on the loan. There is a risk that a borrower may have difficulty
making payments. If a borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation interest might also decline, which could affect the net asset
value of the Fund's shares. If the issuing financial institution fails to
perform its obligations under the participation agreement, the Fund might incur
costs and delays in realizing payment and suffer a loss of principal and/or
interest.
Forward Rolls. The Fund can enter into "forward roll" transactions with
respect to mortgage-related securities. These are limited to 10% of the Fund's
total assets. In this type of transaction, the Fund sells a mortgage-related
security to a buyer and simultaneously agrees to repurchase a similar security
(the same type of security, and having the same coupon and maturity) at a later
date at a set price. The securities that are repurchased will have the same
interest rate as the securities that are sold, but typically will be
collateralized by different pools of mortgages (with different prepayment
histories) than the securities that have been sold. Proceeds from the sale are
invested in short-term instruments, such as repurchase agreements. The income
from those investments, plus the fees from the forward roll transaction, are
expected to generate income to the Fund in excess of the yield on the securities
that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books liquid assets
in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed-delivery" basis. "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. Delivery
and payment for the securities take place at a later date. The securities are
subject to change in value from market fluctuations during the period until
settlement. The value at delivery may be less than the purchase price. For
example, changes in interest rates in a direction other than that expected by
the Manager before settlement will affect the value of such securities and may
cause a loss to the Fund. During the period between purchase and settlement, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss
to the Fund if the value of the security changes prior to the settlement date,
and there is the risk that the other party may not perform.
The Fund may engage in when-issued transactions to secure what the Manager
considers to be an advantageous price and yield at the time the obligation is
entered into. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge 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
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for defensive purposes.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's fundamental policy limits on holding illiquid investments. The Fund
cannot enter into a repurchase agreement that causes more than 10% of its net
assets to be subject to repurchase agreements having a maturity beyond seven
days. There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its ability
to do so. The Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Manager determines the
liquidity of certain of the Fund's investments. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
As a fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid or restricted securities, including repurchase
agreements having a maturity beyond seven days, portfolio securities for which
market quotations are not readily available and time deposits that mature in
more than 2 days. Certain restricted securities that are eligible for resale to
qualified institutional purchasers, as described below, may not be subject to
that limit. The Fund currently applies that limitation to 10% of its net assets,
as a non-fundamental policy. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It may do so to try to provide income or to raise cash for liquidity
purposes. As a fundamental policy, these loans are limited to not more than 33
1/3% of the value of the Fund's total assets. The Fund presently does not intend
to engage in loans of securities but may do so in the future.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, or other cash equivalents in which the Fund
is permitted to invest. 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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any 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
finders', custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Derivatives. The Fund may invest in a variety of derivative
investments to seek income for liquidity needs or for hedging purposes. Some
derivative investments the Fund may use are the hedging instruments described
below in this Statement of Additional Information.
Some of the derivative investments the Fund can use include debt
exchangeable for common stock of an issuer or "equity-linked debt securities" of
an issuer. At maturity, the debt security is exchanged for common stock of the
issuer or it is payable in an amount based on the price of the issuer's common
stock at the time of maturity. Both alternatives present a risk that the amount
payable at maturity will be less than the principal amount of the debt because
the price of the issuer's common stock may not be as high as the Manager
expected.
Other derivative investments the Fund may invest in include "index-linked"
notes. Principal and/or interest payments on these notes depend on the
performance of an underlying index. Currency-indexed securities are another
derivative the Fund may use. Typically these are short-term or intermediate-term
debt securities. Their value at maturity or the rates at which they pay income
are determined by the change in value of the U.S. dollar against one or more
foreign currencies or an index. In some cases, these securities may pay an
amount at maturity based on a multiple of the amount of the relative currency
movements. This type of index security offers the potential for increased income
or principal payments but at a greater risk of loss than a typical debt security
of the same maturity and credit quality.
"Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments with principal payments or
interest payments that are linked to the value of an index (such as a currency
or securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Fund) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or
more other securities or indices, and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index. They are subject to both credit and interest rate risks and therefore
the Fund could receive more or less than it originally invested when the notes
mature, or it might receive less interest than the stated coupon payment if the
underlying investment or index does not perform as anticipated. There values may
be very volatile and they may have a limited trading market, making it difficult
for the Fund to sell its investment at an acceptable price.
"Inverse Floaters." Certain types of variable rate bonds known as
"inverse floaters" pay interest at rates that vary as the yields generally
available on short-term tax-exempt bonds change. However, the yields on inverse
floaters move in the opposite direction of yields on short-term bonds in
response to market changes. As interest rates rise, inverse floaters produce
less current income, and their market value can become volatile. Inverse
floaters are a type of "derivative security." Some have a "cap," so that if
interest rates rise above the "cap," the security pays additional interest
income. If rates do not rise above the "cap," the Fund will have paid an
additional amount for a feature that proves worthless. The Fund will not invest
more than 5% of its total assets in inverse floaters.
|X| Hedging. The Fund can use hedging instruments. It is not obligated to
use them in seeking its objective although it can write covered calls to seek
high current income if the Manager believes that it is appropriate to do so. 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 that have appreciated, or to facilitate selling securities for
investment reasons, the Fund could:
sell futures contracts, or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case,
the Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could buy futures.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. 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. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
Futures. The Fund can buy and sell exchange-traded futures
contracts that relate to (1) broadly-based stock indices ("stock index futures")
(2) debt securities (these are referred to as "interest rate futures"), (3)
other broadly-based securities indices (these are referred to as "financial
futures"), (4) foreign currencies (these are referred to as "forward
contracts"), or (5) securities.
A broadly-based stock index is used as the basis for trading stock index
futures. An index may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial futures are similar contracts based on
the future value of the basket of securities that comprise the index. These
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian bank 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 (that is, its 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
daily.
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 any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions, except forward contracts,
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
Writing Covered Call Options. Under its fundamental policies, the
Fund is permitted to write (that is, sell) covered calls on securities, indices,
futures and forward contracts. If the Fund sells a call option, it must be
covered. That means the Fund must own the security subject to the call while the
call is outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if the
call is exercised. Up to 20% of the Fund's total assets may be subject to calls
the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by identifying on its
books an equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the segregated assets drops below 100%
of the current value of the future. Because of this segregation requirement, in
no circumstances would the Fund's receipt of an exercise notice as to that
future 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.
Selling Call Options on Foreign Currencies. The Fund can sell calls
on foreign currencies. They include calls that trade on a securities or
commodities exchange or in the over-the-counter markets or are quoted by major
recognized dealers in such options. The Fund could use these calls to try to
protect against declines in the dollar value of foreign securities and increases
in the dollar cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in
that currency might be partially offset by writing calls on that foreign
currency. However, the currency rates could fluctuate in a direction adverse to
the Fund's position.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying on its books liquid
assets in an amount equal to the exercise price of the option, in a segregated
account with the Fund's Custodian bank.
Risks of Hedging with Options and Futures.o The Fund could pay a brokerage
commission each time it sells a call, or sells an underlying investment in
connection with the exercise of a call. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The
risk is that the prices of the futures will correlate imperfectly with the
behavior of the cash prices of the Fund's securities. For example, it is
possible that while the Fund has used hedging instruments in a short hedge, the
market might advance and the value of the securities held in the Fund's
portfolio might decline. If that occurred, the Fund would lose money on the
hedging instruments and also experience a decline in the value of 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.
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 might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures. It is possible that when the Fund
does so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them 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 a foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among 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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge." Normally, the Fund will not use
cross-hedging.
The Fund will cover its short positions in these cases by identifying to
its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if 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 the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one 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. As another alternative,
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.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
Interest Rate Swap Transactions. The Fund can enter into interest
rate swap agreements. In an interest rate swap, the Fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets. Also, the Fund will identify on its books liquid
assets (such as cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.
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 be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures 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 the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same adviser as the Fund (or an adviser that is an affiliate of the Fund's
adviser). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss:
(1) 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, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in
a foreign currency or foreign currency forward contracts and the date of
disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
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 represented by proxy, or more than 50% of the outstanding
shares.
Policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The Fund's
Board of Directors can change non-fundamental policies without shareholder
approval. However, significant changes to investment policies will be described
in supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's principal investment policies are
described in the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
The Fund cannot issue senior securities. However, it can make payments or
deposits of margin in connection with options or futures transactions, lend its
portfolio securities, enter into repurchase agreements, borrow money and pledge
its assets as permitted by its other fundamental policies. 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.
The Fund cannot invest more than 5% of its total assets (taken at market
value at the time of each investment) in the securities (other than securities
of the U.S. government or its agencies) of any one issuer or invest more than
15% of its total assets in the obligations of any one bank. This restriction
applies to repurchase agreements with any one bank or dealer. Additionally, the
Fund cannot purchase more than either 10% of the principal amount of the
outstanding debt securities of an issuer, or 10% of the outstanding voting
securities of an issuer. This restriction shall not apply to securities issued
or guaranteed by the U.S. government or its agencies, bank money market
instruments or bank repurchase agreements.
The Fund cannot invest more than 25% of the value of its total assets in
the securities of issuers in any single industry. However, this limitation shall
not apply to the purchase of obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. For the purpose of this
restriction, each utility that provides a separate service (for example, gas,
gas transmission, electric or telephone) shall be considered to be a separate
industry. This test shall be applied on a pro forma basis using the market value
of all assets immediately prior to making any investment. The Fund has
undertaken as a matter of non-fundamental policy to apply this restriction to
25% or more of its total assets.
The Fund cannot, by itself or together with any other fund, portfolio or
portfolios, make investments for the purpose of exercising control over, or
management of, any issuer.
The Fund cannot purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition or reorganization. It
can also purchase in the open market securities of closed-end investment
companies if 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% of the Fund's total assets, taken at market value, would be
invested in such securities.
The Fund cannot purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity contracts or real
estate. However, the Fund can purchase securities of issuers that invest or deal
an any of the above interests and can 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.
The Fund cannot purchase any securities on margin or make short sales of
securities or maintain a short position. However, the Fund can obtain such
short- term credits as may be necessary for the clearance of purchases and sales
of portfolio securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with futures contracts or related options
transactions is not considered to be the purchase of a security on margin.
The Fund cannot make loans. However, the Fund 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. The Fund can also enter into
repurchase agreements, and 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.
The Fund cannot borrow amounts in excess of 10% of its total assets, taken
at market value at the time of the borrowing. It can borrow only from banks as a
temporary measure for extraordinary or emergency purposes. It cannot make
investments in portfolio securities while such outstanding borrowings exceed 5%
of its total assets.
The 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).
The Fund cannot 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 its restriction
on borrowing, above. In that case such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets, taken at market value at the time of
the borrowing. The deposit of cash, cash equivalents and liquid debt securities
in a segregated account with the Fund's custodian bank and/or with a broker in
connection with futures contracts or related options transactions and the
purchase of securities on a "when-issued" basis are not deemed to be pledges.
The Fund cannot underwrite securities of other issuers. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 in reselling its portfolio securities.
The Fund cannot write, purchase or sell puts, calls or combinations
thereof, except that it can write covered call options.
The Fund cannot invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the time
of the investment, would be invested in such securities. However, up to 25% of
the total assets of the Fund may be invested in the aggregate in such securities
that are (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.
The Fund cannot invest more than 10% 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 two days, portfolio securities that do not have
readily available market quotations and all other illiquid assets.
For purposes of the fundamental investment restrictions, the term "borrow"
does not include mortgage dollar rolls, reverse repurchase agreements or lending
portfolio securities. The terms "illiquid securities" and "portfolio securities
that do not have readily available market quotations" include restricted
securities. However, reverse repurchase agreements are treated as borrowings,
master demand notes may be deemed to be illiquid securities and mortgage dollar
rolls are sales transactions and not financings.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios, or
"series," of Oppenheimer Series Fund, Inc. That corporation is an open-end,
management investment company organized as a Maryland corporation in 1981, and
was called Connecticut Mutual Investment Accounts, Inc. until March 18, 1996,
when the Manager became the Fund's investment adviser. The Fund is a diversified
mutual fund, and until March 18, 1996 was called Connecticut Mutual Total Return
Account.
The Fund's parent corporation is governed by a Board of Directors, which
is responsible for protecting the interests of shareholders under Maryland law.
The Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
|X| Classes of Shares. The Board of Directors has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three classes of
shares: Class A, Class B, and Class C. All classes invest in the same investment
portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as
a class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Fund's parent corporation or
its series or classes into additional series or classes of shares. The Directors
also may divide or combine the shares of a class into a greater or lesser number
of shares without 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 at
shareholder meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Maryland law to hold annual meetings, it may hold shareholder meetings from time
to time on important matters. The shareholders of the Fund's parent corporation
have the right to call a meeting to remove a Director or to take certain other
action described in the Articles of Incorporation or under Maryland law.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund's
parent corporation receives a written request of the record holders of at least
25% of the outstanding shares eligible to be voted at a meeting to call a
meeting for a specified purpose (which might include the removal of a Director),
the Directors will call a meeting of shareholders for that specified purpose.
The Fund's parent corporation has undertaken that it will then either give the
applicants access to the Fund's shareholder list or mail the applicants'
communication to all other shareholders at the applicants' expense.
Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at shareholders' meetings. Those
matters include the election of Directors and ratification of appointment of the
independent auditors. Shareholders of a particular series or class vote
separately on proposals that affect that series or class. Shareholders of a
series or class that is not affected by a proposal are not entitled to vote on
the proposal. For example, only shareholders of a particular series vote on any
material amendment to the investment advisory agreement for that series. Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.
Directors and Officers of the Fund. The Directors of the Fund's parent
corporation and the Fund's officers and their principal occupations and business
affiliations during the past five years are listed below. Directors denoted with
an asterisk (*) below are deemed to be "interested persons" of the Fund's parent
corporation and the Fund under the Investment Company Act. All of the Directors
are also trustees, directors or managing general partners of the following New
York-based Oppenheimer funds2:
2 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market
Fund, Inc. Mr. Griffiths is not a Trustee of Oppenheimer Discovery Fund.
<PAGE>
Oppenheimer California Municipal Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund
Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Europe Fund
Oppenheimer New York Municipal Fund
Oppenheimer Global Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of February 15, 2000 the Directors and officers of
the Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.
Leon Levy, Chairman of the Board of Directors, Age 74
280 Park Avenue, New York, New York 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Director, Age 66
19750 Beach Road, Jupiter Island, Florida 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Director, Age 61
97 Olden Lane, Princeton, New Jersey 08540
The Director of the Institute for Advanced Study, Princeton, NJ (since 1991) and
a member of the National Academy of Sciences (since 1979); formerly a director
of Bankers Trust Corporation (1994 through June 1999), Provost and Professor of
Mathematics at Duke University (1983 - 1991), a director of Research Triangle
Institute, Raleigh, N.C. (1983 - 1991), and a Professor of Mathematics at
Harvard University (1972 - 1983).
Benjamin Lipstein, Director, Age 76
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill,* President and Director, Age 51
Two World Trade Center, 34th Floor, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation; Chairman and a director
of Shareholder Services, Inc. (since August 1994) and Shareholder Financial
Services, Inc. (since September 1995), (both are transfer agent subsidiaries of
the Manager); President (since September 1995) and a director (since October
1990) of Oppenheimer Acquisition Corp., the Manager's parent holding company;
President (since September 1995) and a director (since November 1989) of
Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the
Manager; a director of Oppenheimer Real Asset Management, Inc., an investment
advisory subsidiary of the Manager (since July 1996); President and a director
(since October 1997) of OppenheimerFunds International Ltd. and of Oppenheimer
Millennium Funds plc, off-shore investment companies managed by the Manager;
President and a director of other Oppenheimer funds; a director of Prudential
Corporation plc (a U.K. financial service company).
Elizabeth B. Moynihan, Director, Age 70
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Director, Age 72
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), and Prime Retail,
Inc. (real estate investment trust); 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 69
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 director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Director, Age 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (a U.K.
temporary staffing company); a life trustee of International House (non-profit
educational organization), and a trustee of the Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Director, Age 74
Two World Trade Center, 34th Floor, New York, New York 10048-0203
Formerly he held the following positions: Chairman Emeritus (August 1991 -
August 1999), Chairman (November 1987 - January 1991) and a director (January
1969 - August 1999) of the Manager; President and Director of OppenheimerFunds
Distributor, Inc., the Fund's Distributor (July 1978 - January 1992).
Clayton K. Yeutter, Director, Age 69
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) 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.
Peter M. Antos, Vice President and Portfolio Manager, Age 54
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Principal Portfolio Manager, Vice President of the
Fund, Senior Vice President of the Manager and HarbourView Asset Management
Corp. (since March 1996); an officer and portfolio manager of other Oppenheimer
funds; previously Vice President and Senior Portfolio Manager, Equities of
Connecticut Mutual Life Insurance Company and its subsidiary, G.R. Phelps & Co.
(1989-1996).
Stephen F. Libera, Vice President and Portfolio Manager, Age 49
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103-2603
Chartered Financial Analyst; Vice President of the Fund, the Manager and
HarbourView Asset Management Corporation (since March 1996); portfolio manager
of other Oppenheimer funds; previously a Vice President and Senior Portfolio
Manager, Fixed Income - Connecticut Mutual Life Insurance Company and its
subsidiary - G.R. Phelps (1985 - 1996).
Michael C. Strathearn, Vice President and Portfolio Manager, Age 47
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Fund, the Manager and
HarbourView Asset Management Corp (since March 1996); an officer of other
Oppenheimer funds; previously a Portfolio Manager, Equities, of Connecticut
Mutual Life Insurance Company (1988-1996).
Kenneth B. White, Vice President and Portfolio Manager, Age 48
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Fund, the Manager and
HarbourView Asset Management Corp. (since March 1996); an officer of other
Oppenheimer funds; previously a Portfolio Manager, Equities, of Connecticut
Mutual Life Insurance Company (1992-1996).
Arthur J. Zimmer, Vice President and Portfolio Manager, Age 52
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President of the Manager (since June 1997); Vice President of
Centennial Asset Management Corporation, an investment advisory subsidiary of
the Manager (since September 1991); an officer of other Oppenheimer funds;
formerly Vice President of the Manager (October 1990 - June 1997).
Andrew J. Donohue, Secretary, Age 49
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Executive Vice
President (since January 1993), General Counsel (since October 1991) and a
Director (since September 1995) of the Manager; Executive Vice President and
General Counsel (since September 1993) and a director (since January 1992) of
the Distributor; Executive Vice President, General Counsel and a director of
HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and (since September 1995) Oppenheimer
Partnership Holdings, Inc.; President and a director of Centennial Asset
Management Corporation (since September 1995); President, General Counsel and a
director of Oppenheimer Real Asset Management, Inc. (since July 1996); General
Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age 51
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of Shareholder Services, Inc. (since May 1985), and
Shareholder Financial Services, Inc. (since November 1989); Assistant Secretary
of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age 41
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer, Age 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
|X| Remuneration of Directors. The officers of the Fund and Ms. Macaskill,
who is affiliated with the Manager receive no salary or fee from the Fund. The
remaining Directors of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
1999. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1999.
<PAGE>
- --------------------------------------------------------------------------------
Total
Compensation
Retirement from all
Benefits New York-based
Aggregate Accrued as Part Oppenheimer
Director's Name Compensation of Fund Funds (24
And Position From Fund 1 Expenses Funds)2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Leon Levy $0 $0 $166,700
Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli $0 $0 $176,2153
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Phillip Griffiths4 $0 $0 $17,835
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benjamin Lipstein
Study Committee Chairman,
Audit Committee Member $0 $0 $144,100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Elizabeth B. Moynihan $0 $0 $101,500
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Kenneth A. Randall $0 $0 $93,100
Audit Committee Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward V. Regan
Proxy Committee Chairman,
Audit Committee Member $0 $0 $92,100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Russell S. Reynolds, Jr. $0 $0 $68,900
Proxy Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Donald W. Spiro4 $0 $0 $10,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Clayton K. Yeutter $0 $0 $68,900
Proxy Committee Member
- --------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a 1. Trustee or Director. No
compensation or retirement benefit expenses were allocated to the Fund
because the Fund received an expense credit in excess of its compensation and
retirement benefit expenses due to a reallocation of such expenses among the
New York-based Oppenheimer funds.
2. For the 1999 calendar year.
Total Compensation for the 1999 calendar year includes compensation received for
serving as a Trustee or Director of 10 other Oppenheimer funds.
4. Prior to August 1, 1999, Mr. Spiro was not an Independent Director.
|X| Retirement Plan for Directors. The Fund and its parent corporation
have adopted a retirement plan that provides for payments to retired Directors.
Payments are up to 80% of the average compensation paid during a Director's five
years of service in which the highest compensation was received. A Director must
serve as director or trustee for any of the New York-based Oppenheimer funds for
at least 15 years to be eligible for the maximum payment. Each Director's
retirement benefits will depend on the amount of the Director's future
compensation and length of service. Therefore the amount of those benefits
cannot be determined at this time, nor can we estimate the number of years of
credited service that will be used to determine those benefits.
|X| Deferred Compensation Plan. The Board of Directors has adopted a
Deferred Compensation Plan for disinterested directors that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Fund. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Director.
The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Directors' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Director or to pay any particular level
of compensation to any Director. Pursuant to an Order issued by the Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
|X| Major Shareholders. As of February 15, 2000, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:
Merrill Lynch, Pierce, Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, FL 32246, which owned 28,954.695 Class C shares (representing
approximately 8.43% of the outstanding Class C shares) for the benefit of
its clients.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
of the Fund are employed by the Manager and are the persons who are principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories 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 costs. The management fees paid
by the Fund to the Manager are calculated at the rates described in the
Prospectus, which are applied to the assets of the Fund as a whole. The fees are
allocated to each class of shares based upon the relative proportion of the
Fund's net assets represented by that class.
------------------------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1997 $1,535,343
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $1,774,240
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $1,994,511
------------------------------------------------------------------------------
The investment advisory agreement states 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 investment 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 under the
agreement.
The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the Manager may withdraw the right of the Fund's parent
corporation to use the name "Oppenheimer" as part of its name and the name of
the Fund.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Directors.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio 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 investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment 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. The investment research received for the
commissions of those other accounts may be useful both to the Fund and one or
more of the Manager's other accounts. Investment research may be supplied to the
Manager by a third party at the instance of a broker through which trades are
placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Directors permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
- -------------------------------------------------------------------------------
Fiscal Year Ended 10/31: Total Brokerage Commissions Paid by the Fund1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $385,963
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $457,263
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $717,6422
- -------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 10/31/99, the amount of transactions directed to
brokers for research services was $421,993,246 and the amount of the
commissions paid to broker-dealers for those services was $511,633.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund's
parent corporation, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The Distributor is not obligated to sell a specific number of shares. Expenses
normally attributable to sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale
of shares or on the redemption of shares during the Fund's three most recent
fiscal years is shown in the table below.
<PAGE>
- -------------------------------------------------------------------------------
Aggregate Class A
Front-End Front-End Commissions Commissions Commissions
Fiscal Sales Sales on Class A on Class B on Class C
Year Charges on Charges Shares Shares Shares
Ended Class A Retained by Advanced by Advanced by Advanced by
10/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $468,073 $456,768 $10,843 $175,997 $10,881
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $481,886 $397,054 $27,571 $316,680 $21,560
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $400,298 $295,333 $46,607 $250,032 $25,954
- -------------------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- -------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent
Year Deferred Sales Deferred Sales Class C Contingent
Ended Charges Retained by Charges Retained by Deferred Sales Charges
10/31 Distributor Distributor Retained by Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $2,000 $57,857 $3,487
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors3, cast in person at a meeting called for
the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the Manager as the sole initial holder of
Class C shares of the Fund.
3 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Directors" in this Statement of Additional Information refers to
those Directors who are not "interested persons" of the Fund (or its parent
corporation) and who do not have any direct or indirect financial interest in
the operation of the distribution plan or any agreement under the plan.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.
Each plan states that while it is in effect, the selection and nomination
of those Directors of the Fund's parent corporation who are not "interested
persons" of the corporation (or the Fund) is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others in the
selection and nomination process as long as the final decision as to selection
or nomination is approved by a majority of the Independent Directors.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Directors. The Board of Directors has set no minimum amount of
assets to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services 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. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended October 31, 1999 payments under the Class A plan
totaled $732,222, all of which was paid by the Distributor to recipients. That
included $587,717 paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received under the Class A plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution 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 Class B and Class C plans
provide for the Distributor to be compensated for its services at a flat rate,
whether the Distributor's costs in distributing Class B and Class C shares and
servicing accounts are more or less than the amounts paid by the Fund under the
plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A
service plan, described above.
The Class B and the Class C plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of sale
and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing from
its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares, and
o bears the costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky" registration
fees and certain other distribution expenses.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B or the Class C plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 10/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Amount Unreimbursed Expenses as %
Total Payments Retained by Expenses Under of Net Assets
Class: Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $246,431 $206,2531 $689,149 2.93%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $58,740 $33,2272 $67,663 1.18%
- --------------------------------------------------------------------------------
1. Includes $20,874 paid to an affiliate of the Distributor's parent company.
2. Includes $7,586 paid to an affiliate of the Distributor's parent company.
All payments under the Class B and the 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions. o An investment in the Fund is not
insured by the FDIC or any other government agency.
The principal value of the Fund's shares, and total returns are not
guaranteed and normally will fluctuate on a daily basis.
When an investor's shares are redeemed, they may be worth more or less
than their original cost.
Total returns for any given past period represent historical performance
information and are not, and should not be considered, a prediction of future
returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The total returns
of each class of shares of the Fund are affected by market conditions, the
quality of the Fund's investments, the maturity of those investments, the types
of investments the Fund holds, and its operating expenses that are allocated to
the particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge,
as described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Return. 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
Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) 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 Fund's Total Returns for the Periods Ended 10/31/99
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Cumulative Total
Returns (10
years
Class of or Life of
Shares Class) Average Annual Total Returns
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5-Year
(or
1-Year life-of-class) 10-Year
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A1 163.14% 179.19% -3.28% 2.62% 9.65% 10.96% 10.16% 10.81%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B 37.81%2 39.78%2 -3.03% 1.84% 8.18%2 8.55%2 N/A N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C 31.38%3 31.38%3 0.87% 1.84% 8.11%3 8.11%3 N/A N/A
- -------------------------------------------------------------------------------
1. Inception of Class A: 9/16/85
2. Inception of Class B: 10/2/95
3. Inception of Class C: 5/1/96
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is 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 is ranked by Lipper against
all other general U.S. government funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the performance of
all mutual funds in a category that it monitors and averages of the performance
of the funds in particular categories.
Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the intermediate government fund category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the Fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), 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
rating is the Fund's (or class's) overall rating, which is the Fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%, respectively),
depending on the inception date of the Fund (or class). Ratings are subject to
change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star rating. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the Funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
- --------------------------------------------------------------------------------
A B O U T Y O U R A C C O U N T
- -------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
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 for your joint accounts, or for trust or
custodial accounts on behalf of your children who are minors, and
o 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, and
o 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.
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. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer California Municipal Fund Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund
Oppenheimer Capital Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Champion Income Fund Oppenheimer Municipal Bond Fund
Oppenheimer Convertible Securities Fund Oppenheimer New York Municipal Fund
Oppenheimer Developing Markets Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Global Fund
0Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Insured Municipal Fund
Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund
Oppenheimer Large Cap Growth Fund
Limited-Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Rochester Fund Municipals
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a
front-end sales charge or subject to a Class A contingent deferred sales
charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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 (2) Class B shares
of one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make 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 debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor ) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values of some of the Fund's
portfolio securities may change significantly on those days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
Securities Valuation. The Fund's Board of Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation date if it
is within the spread of the closing "bid" and "asked" prices on the
valuation date or, if not, at the closing "bid" price on the valuation
date.
Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Directors, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last trading
session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis of
reasonable inquiry, from two market makers in the security.
Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
The following securities are valued at the mean between the "bid" and
"asked" 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:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or less.
The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts: (1) money market debt securities held
by a non-money market fund that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less, and (2) debt
instruments held by a money market fund that have a remaining maturity of
397 days or less.
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, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is 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. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of: Class A shares purchased
subject to an initial sales charge or Class A shares on which a contingent
deferred sales charge was paid, or Class B shares that were subject to the Class
B contingent deferred sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
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 account
holds fewer than 100 shares. If the Board exercises this right, it may also fix
the requirements for any notice to be given to the shareholders in question (not
less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so
that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Sending Redemption Proceeds 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. 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
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, 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, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these 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 Appendix C to this
Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another 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. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
Allof the Oppenheimer funds currently offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial
America Fund, L.P., which only offer Class A shares.
Oppenheimer Main Street California Municipal Fund currently offers only 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.
Only certain Oppenheimer funds currently offer Class Y shares. Class Y shares of
Oppenheimer Real Asset Fund(sm) may not be exchanged for shares of any other
fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of shares of any class of any other Oppenheimer funds except
Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange of
Class A shares of other Oppenheimer funds. Class A shares of Senior Floating
Rate Fund that are exchanged for shares of the other Oppenheimer funds may
not be exchanged back for Class A shares of Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only
for Class B shares of other Oppenheimer funds and no exchanges may be made to
Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those change whenever it is required to do so by applicable
law. It may be required to provide 60 days' notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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. 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 B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class
of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request.
When you exchange some or all of your shares from one fund to another, any
special account feature such as an Asset Builder Plan or Automatic Withdrawal
Plan, will be switched to the new fund account unless you tell the Transfer
Agent not to do so. However, special redemption and exchange features such as
Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an
account in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A shares. That is because of
the effect of the asset-based sales charge on Class B and Class C shares. Those
dividends will also differ in amount as a consequence of any difference in the
net asset values of the different classes of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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 Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Directors and the Manager might determine in a particular year that it
would be in the best interests 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.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent 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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
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. 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. KPMG LLP are the independent auditors of the Fund. They
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>
THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF
OPPENHEIMER DISCIPLINED ALLOCATION FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Disciplined Allocation Fund as of
October 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended, and the ten months ended October 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. The financial
highlights for each of the years in the two-year period 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 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 as of
October 31, 1999, 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 audits provide 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 Allocation Fund as of October 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended, and the ten months ended
October 31, 1996, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 19, 1999
STATEMENT OF INVESTMENTS October 31,
1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=======================================================================================================================
<S>
<C> <C>
COMMON STOCKS--54.1%
- -----------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--2.2%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.1%
Dow Chemical
Co.
13,200 $ 1,560,900
- -----------------------------------------------------------------------------------------------------------------------
International Flavors & Fragrances,
Inc.
12,300 470,475
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas
Co.
26,100 998,325
- -------------
3,029,700
- -----------------------------------------------------------------------------------------------------------------------
PAPER--1.1%
Georgia-Pacific
Group
21,700 861,219
- -----------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Group/Timber
Group
16,000 382,000
- -----------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific
Corp.
43,700 554,444
- -----------------------------------------------------------------------------------------------------------------------
Rayonier,
Inc.
7,900 323,900
- -----------------------------------------------------------------------------------------------------------------------
Weyerhaeuser
Co.
18,100 1,080,344
- -------------
3,201,907
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.2%
Cordant Technologies,
Inc.
8,200 255,737
- -----------------------------------------------------------------------------------------------------------------------
General Dynamics
Corp.
43,900 2,433,706
- -----------------------------------------------------------------------------------------------------------------------
Northrop Grumman
Corp.
13,100 718,862
- -------------
3,408,305
- -----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.1%
Rockwell International
Corp.
9,900 479,531
- -----------------------------------------------------------------------------------------------------------------------
SPX
Corp.(1)
31,400 2,661,150
- -------------
3,140,681
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.3%
Valassis Communications,
Inc.(1)
17,400 748,200
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.6%
Avery-Dennison
Corp.
9,700 606,250
- -----------------------------------------------------------------------------------------------------------------------
Ball
Corp.
14,300 576,469
- -----------------------------------------------------------------------------------------------------------------------
Briggs & Stratton
Corp.
12,600 736,312
- -----------------------------------------------------------------------------------------------------------------------
Cooper Industries,
Inc.
20,100 865,556
- -----------------------------------------------------------------------------------------------------------------------
Dover
Corp.
38,100 1,621,631
- -----------------------------------------------------------------------------------------------------------------------
Eaton
Corp.
11,300 850,325
- -----------------------------------------------------------------------------------------------------------------------
ITT Industries,
Inc.
23,100 789,731
- -----------------------------------------------------------------------------------------------------------------------
Miller (Herman),
Inc.
23,000 498,812
- -----------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing
Co.
30,200 2,870,887
</TABLE>
12 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
MANUFACTURING Continued
Parker-Hannifin
Corp.
17,300 $ 792,556
- -----------------------------------------------------------------------------------------------------------------------
Textron,
Inc.
10,800 833,625
- -----------------------------------------------------------------------------------------------------------------------
United Technologies
Corp.
38,000 2,299,000
- -------------
13,341,154
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--4.0%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE--2.4%
ADC Telecommunications,
Inc.(1)
15,000 715,312
- -----------------------------------------------------------------------------------------------------------------------
ALLTELL
Corp.
47,500 3,954,375
- -----------------------------------------------------------------------------------------------------------------------
AT&T
Corp.
35,250 1,647,937
- -----------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings,
Inc.(1)
16,100 679,219
- -------------
6,996,843
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.6%
BellSouth
Corp.
40,400 1,818,000
- -----------------------------------------------------------------------------------------------------------------------
SBC Communications,
Inc.
56,456 2,875,727
- -------------
4,693,727
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--2.2%
Cooper Tire & Rubber
Co.
23,200 390,050
- -----------------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors,
Inc.
21,800 775,262
- -----------------------------------------------------------------------------------------------------------------------
Fortune Brands,
Inc.
13,800 489,037
- -----------------------------------------------------------------------------------------------------------------------
Genuine Parts
Co.
58,900 1,535,081
- -----------------------------------------------------------------------------------------------------------------------
Southdown,
Inc.
11,100 536,269
- -----------------------------------------------------------------------------------------------------------------------
Stanley Works
(The)
21,600 599,400
- -----------------------------------------------------------------------------------------------------------------------
USG
Corp.
19,500 966,469
- -----------------------------------------------------------------------------------------------------------------------
Vulcan Materials
Co.
18,100 747,756
- -----------------------------------------------------------------------------------------------------------------------
York International
Corp.
15,400 362,862
- -------------
6,402,186
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--0.3%
Harte-Hanks,
Inc.
15,500 307,094
- -----------------------------------------------------------------------------------------------------------------------
Hertz Corp., Cl.
A
10,500 455,437
- -------------
762,531
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.6%
Hasbro,
Inc.
22,600 466,125
- -----------------------------------------------------------------------------------------------------------------------
MGM Grand,
Inc.(1)
12,100 617,100
- -----------------------------------------------------------------------------------------------------------------------
Mirage Resorts,
Inc.(1)
44,000 640,750
- -------------
1,723,975
</TABLE>
13 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
MEDIA--1.5%
Central Newspapers, Inc., Cl.
A
12,900 $ 553,894
- -----------------------------------------------------------------------------------------------------------------------
Deluxe
Corp.
15,700 443,525
- -----------------------------------------------------------------------------------------------------------------------
Gannett Co.,
Inc.
28,700 2,213,487
- -----------------------------------------------------------------------------------------------------------------------
Knight-Ridder,
Inc.
17,500 1,111,250
- -------------
4,322,156
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.8%
Federated Department Stores,
Inc.(1)
22,500 960,469
- -----------------------------------------------------------------------------------------------------------------------
May Department Stores
Co.
18,700 648,656
- -----------------------------------------------------------------------------------------------------------------------
Nordstrom,
Inc.
22,600 563,587
- -------------
2,172,712
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--0.8%
Ross Stores,
Inc.
44,000 907,500
- -----------------------------------------------------------------------------------------------------------------------
Sherwin-Williams
Co.
23,600 528,050
- -----------------------------------------------------------------------------------------------------------------------
TJX Cos.,
Inc.
35,000 949,375
- -------------
2,384,925
- -----------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--1.0%
Jones Apparel Group,
Inc.(1)
43,400 1,372,525
- -----------------------------------------------------------------------------------------------------------------------
Liz Claiborne,
Inc.
13,900 556,000
- -----------------------------------------------------------------------------------------------------------------------
Shaw Industries,
Inc.
35,300 544,944
- -----------------------------------------------------------------------------------------------------------------------
WestPoint Stevens,
Inc.
21,600 409,050
- -------------
2,882,519
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.0%
- -----------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.8%
Adolph Coors Co., Cl.
B
5,600 310,800
- -----------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos.,
Inc.
27,300 1,960,481
- -------------
2,271,281
- -----------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.4%
Brinker International,
Inc.(1)
17,700 412,631
- -----------------------------------------------------------------------------------------------------------------------
Darden Restaurants,
Inc.
18,400 350,750
- -----------------------------------------------------------------------------------------------------------------------
Wendy's International,
Inc.
18,300 436,912
- -------------
1,200,293
</TABLE>
14 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
FOOD--1.8%
Flowers Industries,
Inc.
22,200 $ 374,625
- -----------------------------------------------------------------------------------------------------------------------
Heinz (H.J.)
Co.
22,300 1,064,825
- -----------------------------------------------------------------------------------------------------------------------
Hormel Foods
Corp.
18,100 780,562
- -----------------------------------------------------------------------------------------------------------------------
IBP,
Inc.
58,400 1,397,951
- -----------------------------------------------------------------------------------------------------------------------
Keebler Foods
Co.(1)
18,800 600,425
- -----------------------------------------------------------------------------------------------------------------------
Sara Lee
Corp.
33,500 906,594
- -------------
5,124,982
- -----------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's,
Inc.
18,200 660,888
- -----------------------------------------------------------------------------------------------------------------------
SUPERVALU,
Inc.
10,800 226,800
- -------------
887,688
- -----------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--1.4%
Kimberly-Clark
Corp.
37,400 2,360,875
- -----------------------------------------------------------------------------------------------------------------------
Premark International,
Inc.
30,500 1,669,875
- -------------
4,030,750
- -----------------------------------------------------------------------------------------------------------------------
TOBACCO--0.3%
UST,
Inc.
35,200 974,600
- -----------------------------------------------------------------------------------------------------------------------
ENERGY--4.4%
- -----------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES--0.5%
Anadarko Petroleum
Corp.
12,000 369,750
- -----------------------------------------------------------------------------------------------------------------------
ENSCO International,
Inc.
29,300 567,688
- -----------------------------------------------------------------------------------------------------------------------
Global Marine,
Inc.(1)
36,700 557,381
- -------------
1,494,819
- -----------------------------------------------------------------------------------------------------------------------
OIL: DOMESTIC--2.4%
Apache
Corp.
15,200 592,800
- -----------------------------------------------------------------------------------------------------------------------
Burlington Resources,
Inc.
12,100 421,988
- -----------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl.
A
29,200 801,175
- -----------------------------------------------------------------------------------------------------------------------
Exxon
Corp.
26,700 1,977,469
- -----------------------------------------------------------------------------------------------------------------------
Mobil
Corp.
16,800 1,621,200
- -----------------------------------------------------------------------------------------------------------------------
Murphy Oil
Corp.
9,900 555,019
- -----------------------------------------------------------------------------------------------------------------------
Texaco,
Inc.
15,000 920,625
- -------------
6,890,276
</TABLE>
15 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
OIL: INTERNATIONAL--1.5%
BP Amoco plc,
ADR
29,600 $ 1,709,400
- -----------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY
Shares
30,600 1,834,088
- -----------------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored
ADR
13,300 886,944
- -------------
4,430,432
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL--13.6%
- -----------------------------------------------------------------------------------------------------------------------
BANKS--2.8%
Bank United Corp., Cl.
A
5,900 230,100
- -----------------------------------------------------------------------------------------------------------------------
Chase Manhattan
Corp.
10,600 926,175
- -----------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co.,
Inc.
6,200 811,425
- -----------------------------------------------------------------------------------------------------------------------
National City
Corp.
28,400 837,800
- -----------------------------------------------------------------------------------------------------------------------
Old Kent Financial
Corp.
18,845 767,934
- -----------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp,
Inc.
11,800 228,625
- -----------------------------------------------------------------------------------------------------------------------
UnionBanCal
Corp.
26,100 1,133,719
- -----------------------------------------------------------------------------------------------------------------------
Wachovia
Corp.
19,100 1,647,375
- -----------------------------------------------------------------------------------------------------------------------
Wells Fargo
Co.
31,300 1,498,488
- -------------
8,081,641
- -----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--3.4%
AMBAC Financial Group,
Inc.
16,200 967,950
- -----------------------------------------------------------------------------------------------------------------------
Citigroup,
Inc.
76,900 4,162,213
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The)
14,000 994,000
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter &
Co.
18,500 2,040,781
- -----------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc.,
Cl.
A
21,300 806,738
- -----------------------------------------------------------------------------------------------------------------------
PMI Group, Inc.
(The)
7,000 363,125
- -----------------------------------------------------------------------------------------------------------------------
Radian Group,
Inc.
7,000 369,688
- -------------
9,704,495
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE--7.3%
ACE
Ltd.
38,300 744,456
- -----------------------------------------------------------------------------------------------------------------------
Allstate
Corp.
31,700 911,375
- -----------------------------------------------------------------------------------------------------------------------
American General
Corp.
14,000 1,038,625
- -----------------------------------------------------------------------------------------------------------------------
American International Group,
Inc.
18,375 1,891,477
- -----------------------------------------------------------------------------------------------------------------------
AXA Financial,
Inc.
64,500 2,068,031
- -----------------------------------------------------------------------------------------------------------------------
Chubb
Corp.
24,600 1,349,925
- -----------------------------------------------------------------------------------------------------------------------
Cigna
Corp.
20,900 1,562,275
- -----------------------------------------------------------------------------------------------------------------------
Conseco,
Inc.
41,200 1,001,675
- -----------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl.
A
21,600 1,128,600
- -----------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot
Corp.
34,900 2,619,681
</TABLE>
16 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
INSURANCE Continued
Lincoln National
Corp.
46,200 $ 2,130,975
- -----------------------------------------------------------------------------------------------------------------------
Manulife Financial
Corp.(1)
37,600 453,550
- -----------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos.,
Inc.
17,800 1,407,313
- -----------------------------------------------------------------------------------------------------------------------
Safeco
Corp.
10,100 277,750
- -----------------------------------------------------------------------------------------------------------------------
St. Paul Cos.,
Inc.
26,800 857,600
- -----------------------------------------------------------------------------------------------------------------------
Torchmark
Corp.
13,200 411,675
- -----------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl.
A
28,200 1,015,200
- -------------
20,870,183
- -----------------------------------------------------------------------------------------------------------------------
SAVINGS & LOANS--0.1%
Greenpoint Financial
Corp.
9,000 256,500
- -----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--5.9%
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.3%
Apple Computer,
Inc.(1)
24,500 1,963,063S
- -----------------------------------------------------------------------------------------------------------------------
Hewlett-Packard
Co.
14,000 1,036,875
- -----------------------------------------------------------------------------------------------------------------------
International Business Machines
Corp.
38,400 3,777,600
- -----------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl.
A(1)
34,100 2,661,931
- -------------
9,439,469
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES--0.6%
First Data
Corp.
35,800 1,635,613
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--0.5%
BISYS Group, Inc.
(The)(1)
13,400 683,400
- -----------------------------------------------------------------------------------------------------------------------
Synopsys,
Inc.(1)
12,200 760,213
- -------------
1,443,613
- -----------------------------------------------------------------------------------------------------------------------
ELECTRONICS--1.5%
Cypress Semiconductor
Corp.(1)
27,800 710,638
- -----------------------------------------------------------------------------------------------------------------------
Dallas Semiconductor
Corp.
8,000 471,000
- -----------------------------------------------------------------------------------------------------------------------
Intel
Corp.
13,100 1,014,431
- -----------------------------------------------------------------------------------------------------------------------
National Semiconductor
Corp.(1)
18,800 562,825
- -----------------------------------------------------------------------------------------------------------------------
Teradyne,
Inc.(1)
37,600 1,447,600
- -------------
4,206,494
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- -----------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.5%
Delta Air Lines,
Inc.
24,000 1,306,500
- -----------------------------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.3%
Union Pacific
Corp.
16,900 942,175
</TABLE>
17 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
UTILITIES--3.8%
- -----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.4%
Carolina Power & Light
Co.
13,600 $ 469,200
- -----------------------------------------------------------------------------------------------------------------------
Conectiv,
Inc.
23,300 454,350
- -----------------------------------------------------------------------------------------------------------------------
Duke Energy
Corp.
33,500 1,892,750
- -----------------------------------------------------------------------------------------------------------------------
Entergy
Corp.
7,600 227,525
- -----------------------------------------------------------------------------------------------------------------------
FPL Group,
Inc.
18,700 940,844
- -----------------------------------------------------------------------------------------------------------------------
Montana Power
Co.
42,900 1,219,969
- -----------------------------------------------------------------------------------------------------------------------
Peco Energy
Co.
14,200 542,263
- -----------------------------------------------------------------------------------------------------------------------
Potomac Electric Power
Co.
18,900 518,569
- -----------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group,
Inc.
20,000 791,250
- -----------------------------------------------------------------------------------------------------------------------
Reliant Energy,
Inc.
48,400 1,318,900
- -----------------------------------------------------------------------------------------------------------------------
Texas Utilities
Co.
17,100 662,625
- -----------------------------------------------------------------------------------------------------------------------
Unicom
Corp.
22,400 858,200
- -------------
9,896,445
- -----------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.4%
El Paso Energy
Corp.
24,600 1,008,600
- -----------------------------------------------------------------------------------------------------------------------
NICOR,
Inc.
7,600 294,500
- -------------
1,303,100
- -------------
Total Common Stocks (Cost
$157,899,001)
155,602,870
- -----------------------------------------------------------------------------------------------------------------------
OTHER SECURITIES--0.3%
Ingersoll-Rand International Finance
Corp. I, 6.22% Preferred Redeemable
Increased Dividend Equity Securities,
5/16/01(1)(Cost
$750,000)
30,000 748,125
UNITS
- -----------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Concentric Network Corp. Wts., Exp.
12/15/07(2)
100 25,012
- -----------------------------------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc.
Wts., Exp.
12/12/01(2)
666 233
- -----------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts.,
Exp.
6/1/00
100 8,715
- -----------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc.
Wts., Exp.
6/1/06(2)
500 21,375
- -----------------------------------------------------------------------------------------------------------------------
Nextel International Ltd. Wts., Exp.
4/15/07(2)
100 413
- -----------------------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp.
8/1/07(2)
516 79,980
- -----------------------------------------------------------------------------------------------------------------------
Signature Brands, Inc.
Wts.(2)
100 2,013
- -------------
Total Rights, Warrants and Certificates
(Cost
$8,004)
137,741
</TABLE>
18 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
=======================================================================================================================
<S>
<C> <C>
ASSET-BACKED SECURITIES--0.8%
Dayton Hudson Credit Card Master Trust,
Asset-Backed Certificates,
Series 1997-1, Cl. A, 6.25%,
8/25/05
$ 125,000 $ 122,969
- -----------------------------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing
Nts., Series 1997-2, Cl. A,
6.752%,
6/25/07(2)
920,591 909,299
- -----------------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust,
Automobile Receivables-Backed Nts.,
Series 1997-A, Cl. A-5, 6.80%,
2/15/05
1,150,000 1,142,094
- -------------
Total Asset-Backed Securities (Cost
$2,194,029)
2,174,362
=======================================================================================================================
MORTGAGE-BACKED OBLIGATIONS--4.0%
- -----------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities
Corp., Commercial Mtg. Obligations,
Series 1996-1, Cl. A2, 7.60%,
3/18/06
1,500,000 1,525,195
- -----------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg.
Pass-Through Certificates, Series
1994-10,
Cl. A3, 6%,
5/25/09
250,000 245,390
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 1711, Cl. EA, 7%,
3/15/24
200,000 196,186
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd.
Multiclass Mtg. Participation
Certificates:
6%,
3/1/09
642,304 626,247
Series 1843, Cl. VB, 7%,
4/15/03
65,000 65,508
Series 1849, Cl. VA, 6%,
12/15/10
643,403 639,383
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 1542, Cl. QC, 9.411%,
10/15/20(3)
400,000 42,124
Series 1583, Cl. IC, 11.65%-12.752%,
1/15/20(3)
1,739,930 151,148
Series 1661, Cl. PK, 25.774%,
11/15/06(3)
261,995 9,825
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%,
12/1/03
474,525 468,494
6.50%,
3/1/26-4/1/26
633,275 610,415
7%,
4/1/00
11,155 11,163
7.50%,
1/1/08-6/1/08
466,950 473,221
Collateralized Mtg. Obligations, Gtd.
Multiclass Mtg. Participation
Certificates, Trust 1992-15, Cl. KZ,
7%,
2/25/22
853,815 808,990
Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust
1993-190, Cl. Z, 5.85%,
7/25/08
219,938 218,907
Interest-Only Stripped Mtg.-Backed
Security, Trust 1993-223, Cl. PM,
9.526%,
10/25/23(3)
1,215,494 157,625
- -----------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc.,
Collateralized Mtg. Obligations,
Series 1998-12, Cl. A3, 6.50%,
4/25/29
500,000 455,469
</TABLE>
19 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNTS SEE NOTE 1
=======================================================================================================================
<S>
<C> <C>
MORTGAGE-BACKED OBLIGATIONS Continued
GE Capital Mortgage Services, Inc.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Series 1994-7, Cl. A18, 6%,
2/25/09
$1,143,592 $ 1,035,306
- -----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%,
4/15/09-2/15/24
981,372 975,492
7.50%,
3/15/09
419,635 426,912
8%,
5/15/17
305,464 314,601
- -----------------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed
Home Equity Securities,
Series 1998-3, Cl. A5, 6.36%,
8/20/22(4)
700,000 687,312
- -----------------------------------------------------------------------------------------------------------------------
Northwest Asset Securities Corp., Gtd.
Multiclass Mtg. Participation
Certificates:
Series 1999-16, Cl. A3, 6%,
6/25/29
500,000 479,375
Series 1999-18, Cl. A2, 6%,
7/25/29
1,000,000 943,750
- -----------
Total Mortgage-Backed Obligations (Cost
$11,684,578)
11,568,038
=======================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--8.1%
U.S. Treasury Bonds:
6%,
2/15/26
6,800,000 6,453,628
7.50%,
11/15/16(5)
2,000,000 2,207,500
8.75%,
5/15/17(5)
8,250,000 10,173,281
STRIPS, 5.88%,
11/15/18(6)
6,000,000 1,736,472
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%,
5/15/08
2,500,000 2,412,500
6.125%,
8/15/07
250,000 249,141
- -----------
Total U.S. Government Obligations (Cost
$22,863,832)
23,232,522
=======================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
United Mexican States Bonds, 6.97%,
8/12/00 (Cost
$248,358)
250,000 250,485
=======================================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND
NOTES--18.2%
BASIC MATERIALS--0.7%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.4%
PPG Industries, Inc., 9% Debs.,
5/1/21
315,000 361,786
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Debs.,
7/15/29(7)
650,000 666,229
- -----------
1,028,015
- -----------------------------------------------------------------------------------------------------------------------
METALS--0.0%
Alcan Aluminum Ltd., 9.625% Debs.,
7/15/19(2)
105,000 110,397
- -----------------------------------------------------------------------------------------------------------------------
PAPER--0.3%
Aracruz Celulose SA, 10.375% Debs.,
1/31/02(7)
750,000 746,250
</TABLE>
20 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--2.5%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Raytheon Co., 6.45% Nts.,
8/15/02
$ 500,000 $ 492,060
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.8%
Fred Meyer, Inc., 7.375% Sr. Nts.,
3/1/05
1,250,000 1,251,990
- -----------------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized
Bond Obligations, Series 1A,
Cl. A3,
8/13/10(2)
1,000,000 935,000
- -----------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts.,
5/15/05
1,000,000 941,152
- -----------------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs.,
12/15/01
1,175,000 1,196,374
- -----------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr.
Nts., Series B,
12/1/06
830,000 793,683
- -----------
5,118,199
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--0.5%
Federal-Mogul Corp., 7.50% Nts.,
7/1/04
500,000 477,303
- -----------------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds,
10/23/01
500,000 516,375
- -----------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USI American
Holdings, Inc./USI Global Corp., 7.125%
Sr. Unsec. Nts.,
10/15/03
500,000 492,237
- -----------
1,485,915
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--0.6%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--0.4%
AT&T Capital Corp., 6.25% Medium-Term
Nts., Series F,
5/15/01
725,000 720,326
- -----------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125%
Nts.,
7/15/02
500,000 490,006
- -----------
1,210,332
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--0.2%
Liberty Media Group, 8.50% Nts.,
7/15/29(7)
500,000 501,823
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--1.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--0.7%
Black & Decker Corp., 6.625% Nts.,
11/15/00
810,000 811,602
- -----------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 6.375% Sr. Unsec.
Unsub. Nts.,
2/1/29
1,000,000 864,853
- -----------------------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Nts.,
5/15/05(7)
500,000 486,507
- -----------
2,162,962
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.0%
Hilton Hotels Corp., 7.375% Nts.,
6/1/02
50,000 49,104
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--0.1%
Reed Elsevier, Inc., 6.625% Nts.,
10/15/23(7)
400,000 341,516
</TABLE>
21 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
<S>
<C> <C>
RETAIL: GENERAL--0.4%
Federated Department Stores, Inc.,
6.125% Cv. Sub. Nts., 9/1/01(4) $
750,000 $ 737,779
- ----------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr.
Nts., 6/15/05
550,000 553,699
- ------------
1,291,478
- ----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.6%
- ----------------------------------------------------------------------------------------------------
BROADCASTING--0.5%
British Sky Broadcasting Group plc,
8.20% Nts., 7/15/09(7)
400,000 389,891
- ----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec.
Debs., 7/15/18
1,000,000 911,250
- ------------
1,301,141
- ----------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.8%
Tricon Global Restaurants, Inc., 7.45%
Sr. Unsec. Nts., 5/15/05
1,000,000 961,591
- ----------------------------------------------------------------------------------------------------
Viacom, Inc.:
6.75% Sr. Unsec. Nts.,
1/15/03
530,000 524,973
7.50% Sr. Nts.,
1/15/02
750,000 761,791
- ------------
2,248,355
- ----------------------------------------------------------------------------------------------------
FOOD--1.2%
CPC International, Inc., 6.15% Unsec.
Nts., Series C, 1/15/06
500,000 480,176
- ----------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts.,
7/15/00
650,000 650,539
- ----------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125%
Nts., 9/15/04
1,250,000 1,265,001
- ----------------------------------------------------------------------------------------------------
RACERS-Kellogg-98-1, 5.75% Nts.,
2/2/017
1,000,000 994,108
- ------------
3,389,824
- ----------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's, Inc., 7.45% Unsec. Debs.,
8/1/29
1,000,000 992,105
- ----------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.8%
Dial Corp. (The), 5.89% Medium-Term
Nts., Series A, 10/22/01
750,000 731,795
- ----------------------------------------------------------------------------------------------------
Fort James Corp.:
6.234% Nts.,
3/15/01
250,000 249,219
6.875% Sr. Nts.,
9/15/07
1,000,000 965,299
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp., 7.875% Debs.,
2/1/23
355,000 354,032
- ------------
2,300,345
</TABLE>
22 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
<S>
<C> <C>
ENERGY--2.1%
- ----------------------------------------------------------------------------------------------------
ENERGY SERVICES--1.8%
Coastal Corp., 8.125% Sr. Nts.,
9/15/02
$ 565,000 $ 582,310
- ----------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts.,
Series C, 11/28/05
500,000 490,830
- ----------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr.
Nts., 3/15/17
575,000 509,444
- ----------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65%
Debs., 12/1/23
990,000 967,491
- ----------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts.,
3/31/07
825,000 821,869
- ----------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts.,
7/1/03(7)
500,000 479,332
- ----------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875%
Debs., 1/1/21
500,000 595,215
- ----------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.25% Sr. Unsec. Debs., 2/1/06
750,000 705,497
- ------------
5,151,988
- ----------------------------------------------------------------------------------------------------
OIL: DOMESTIC--0.3%
Norcen Energy Resources Ltd., 6.80%
Debs., 7/2/02
1,000,000 978,830
- ----------------------------------------------------------------------------------------------------
FINANCIAL--4.3%
- ----------------------------------------------------------------------------------------------------
BANKS--0.9%
Chase Manhattan Corp., 10.125% Sub.
Nts., 11/1/00
250,000 258,906
- ----------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90%
Sub. Nts., 6/15/01
360,000 377,653
- ----------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn, New York),
6.70% Sr. Medium-Term
Bank Nts.,
7/15/02
1,000,000 984,799
- ----------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub.
Nts., 4/15/00
110,000 110,136
- ----------------------------------------------------------------------------------------------------
People's Bank of Bridgeport
(Connecticut), 7.20% Sub. Nts.,
12/1/06 1,000,000 950,438
- ------------
2,681,932
- ----------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.6%
American General Institutional Capital
B, 8.125% Bonds,
Series B,
3/15/46(7)
575,000 582,170
- ----------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25%
Nts., 12/1/03
1,000,000 979,835
- ----------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796%
Bonds, 4/1/27
850,000 752,371
- ----------------------------------------------------------------------------------------------------
Finova Capital Corp., 7.625% Sr. Nts.,
9/21/09
750,000 753,363
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625%
Nts., 2/15/01
162,000 160,293
- ----------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts.,
8/1/01
1,000,000 974,567
- ----------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts.,
2/1/00
350,000 350,641
- ------------
4,553,240
- ----------------------------------------------------------------------------------------------------
INSURANCE--1.1%
Conseco, Inc., 6.40% Nts.,
6/15/01
500,000 483,415
- ----------------------------------------------------------------------------------------------------
Equitable Life Assurance Society
(U.S.A.), 6.95% Surplus Nts.,
12/1/05(7)
500,000 491,637
- ----------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts.,
6/30/27(2)
750,000 632,684
- ----------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts.,
6/15/27(7)
500,000 507,222
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp.,
6.75% Sr. Unsec. Nts., 11/15/06
1,000,000 969,218
- ------------
3,084,176
</TABLE>
23 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
<S>
<C> <C>
- ----------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.7%
Chelsea GCA Realty Partner, Inc., 7.75%
Unsec. Nts., 1/26/01
$1,050,000 $ 1,056,030
- ----------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds,
5/15/27
560,000 551,653
- ----------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec.
Nts., 6/15/03
500,000 480,955
- -------------
2,088,638
- ----------------------------------------------------------------------------------------------------
HEALTHCARE--0.3%
- ----------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--0.3%
Columbia/HCA Healthcare Corp., 6.875%
Nts., 7/15/01
120,000 116,730
- ----------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8% Sr. Nts.,
1/15/05
325,000 307,938
8.625% Sr. Unsec. Nts.,
12/1/03
500,000 491,641
- -------------
916,309
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- ----------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.3%
Northwest Airlines Corp., 8.375% Unsec.
Nts., 3/15/04
750,000 730,790
- ----------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.5%
CSX Corp., 7.05% Debs.,
5/1/02
145,000 145,798
- ----------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts.,
5/15/07
125,000 124,108
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp.:
7% Nts.,
6/15/00
605,000 607,871
7.60% Nts.,
5/1/05
500,000 507,943
- -------------
1,385,720
- ----------------------------------------------------------------------------------------------------
UTILITIES--2.1%
- ----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
Cleveland Electric Illumination, Inc.,
6.86% First Mtg. Nts.,
10/1/08
1,500,000 1,411,833
- ----------------------------------------------------------------------------------------------------
El Paso Electric Co., 8.25% First Mtg.
Bonds, Series C, 2/1/03
500,000 512,896
- ----------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc.,
6.31% Medium-Term Nts.,
Series B,
2/19/02
1,000,000 980,894
- -------------
2,905,623
- ----------------------------------------------------------------------------------------------------
GAS UTILITIES--1.1%
Northern Illinois Gas Co., 6.45% First
Mtg. Bonds, 8/1/01
680,000 676,483
- ----------------------------------------------------------------------------------------------------
Southern California Gas Co., 6.38%
Medium-Term Nts., 10/29/01
500,000 496,824
- ----------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50%
Bonds, 4/1/17
825,000 810,228
- ----------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts.,
8/1/02
1,250,000 1,226,760
- -------------
3,210,295
- -------------
Total Non-Convertible Corporate Bonds
and Notes (Cost
$54,233,858)
52,457,362
</TABLE>
24 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================
<S>
<C> <C>
CONVERTIBLE CORPORATE BONDS AND
NOTES--0.0%
- ----------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv.
Sr. Sub. Nts., 2/15/01(8)
(Cost
$92,540)
$ 100,000 $ 625
====================================================================================================
SHORT-TERM NOTES--13.1%(9)
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.16%,
11/1/99
14,500,000 14,500,000
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.14%,
11/4/99
7,700,000 7,696,676
5.20%,
12/10/99
5,000,000 4,971,833
5.23%,
11/8/99
5,395,000 5,389,514
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.22%,
11/3/99
5,000,000 4,998,550
- --------------
Total Short-Term Notes (Cost
$37,556,573)
37,556,573
====================================================================================================
REPURCHASE AGREEMENTS--4.3%
- ----------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First
National Bank, 5.20%,
dated 10/29/99, to be repurchased at
$12,405,373 on 11/1/99,
collateralized by U.S. Treasury Nts.,
5.50%-7.875%,
12/31/99-11/15/04, with a value of
$12,546,079 and U.S.
Treasury Bonds, 5.625%, 9/30/01, with a
value of $109,610
(Cost
$12,400,000)
12,400,000 12,400,000
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$299,930,773)
103.0% 296,128,703
- ----------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS
(3.0) (8,728,838)
- ----------------------------
NET
ASSETS
100.0% $287,399,865
============================
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Identifies issues considered to be
illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
4. Represents the current interest rate
for a variable rate security.
5. Securities with an aggregate market
value of $12,380,781 are held in
collateralized accounts to cover initial
margin requirements on open futures
sales contracts. See Note 5 of Notes to
Financial Statements.
6. For zero coupon bonds, the interest
rate shown is the effective yield on the
date of purchase.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $6,186,685 or 2.15% of the Fund's net
assets as of October 31, 1999.
8. Issuer is in default.
9. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial
Statements.
25 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
================================================================================================================
<S>
<C>
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments, at value (cost
$299,930,773)--see accompanying
statement $
296,128,703
- ----------------------------------------------------------------------------------------------------------------
Cash
682,120
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal
paydowns
1,841,161
Investments
sold
1,066,292
Daily variation on futures
contracts
554,400
Shares of capital stock
sold
53,917
Other
3,402
- ---------------
Total
assets
300,329,995
================================================================================================================
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments
purchased
12,046,692
Shares of capital stock
redeemed
564,526
Directors'
compensation
93,162
Distribution and service plan
fees
62,763
Transfer and shareholder servicing
agent
fees
36,928
Other
126,059
- ---------------
Total
liabilities
12,930,130
================================================================================================================
NET
ASSETS
$287,399,865
==============
================================================================================================================
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Par value of shares of capital
stock
$ 19,109
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
263,940,677
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment
income
779,391
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on
investments and
foreign currency
transactions
25,841,491
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on
investments and translation of
assets and liabilities denominated in
foreign
currencies
(3,180,803)
- ---------------
Net
assets
$287,399,865
===============
</TABLE>
26 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
================================================================================================================
<S>
<C>
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price
per share (based on net assets
of $258,159,251 and 17,176,755 shares
of capital stock
outstanding)
$15.03
Maximum offering price per share (net
asset value plus sales charge
of 5.75% of offering
price)
$15.95
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price
(excludes applicable contingent deferred
sales charge) and offering price per
share (based on net assets of $23,521,762
and 1,547,260 shares of capital stock
outstanding)
$15.20
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price
(excludes applicable contingent deferred
sales charge) and offering price per
share (based on net assets of $5,718,852
and 384,445 shares of capital stock
outstanding)
$14.88
</TABLE>
See accompanying Notes to Financial
Statements.
27 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENT OF OPERATIONS For the Year
Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
================================================================================================================
<S>
<C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------
Interest
$ 9,464,177
- ----------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding
taxes of
$2,439)
2,722,741
- --------------
Total
income
12,186,918
================================================================================================================
EXPENSES
- ----------------------------------------------------------------------------------------------------------------
Management
fees
1,994,511
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
732,222
Class
B
246,431
Class
C
58,740
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing
agent
fees
345,571
- ----------------------------------------------------------------------------------------------------------------
Shareholder
reports
148,022
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
20,104
- ----------------------------------------------------------------------------------------------------------------
Accounting service
fees
15,000
- ----------------------------------------------------------------------------------------------------------------
Other
56,993
- -------------
Total
expenses
3,617,594
Less expenses paid
indirectly
(9,729)
- -------------
Net
expenses
3,607,865
================================================================================================================
NET INVESTMENT
INCOME
8,579,053
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments
23,229,928
Closing of futures
contracts
6,180,223
Foreign currency
transactions
(380)
- -------------
Net realized
gain
29,409,771
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments
(28,349,571)
Translation of assets and liabilities
denominated in foreign
currencies
(892)
- -------------
Net
change
(28,350,463)
- -------------
Net realized and unrealized
gain
1,059,308
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM
OPERATIONS
$ 9,638,361
=============
</TABLE>
See accompanying Notes to Financial
Statements.
28 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
1999 1998
====================================================================================================
<S>
<C> <C>
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment
income
$ 8,579,053 $ 8,315,523
- ----------------------------------------------------------------------------------------------------
Net realized
gain
29,409,771 5,047,223
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation
(28,350,463) 234,047
- ----------------------------
Net increase in net assets resulting
from operations
9,638,361 13,596,793
====================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO
SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class
A
(8,122,829) (7,782,493)
Class
B
(502,951) (326,896)
Class
C
(124,914) (68,904)
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class
A
(7,782,789) (26,053,041)
Class
B
(594,276) (1,001,059)
Class
C
(139,060) (171,534)
====================================================================================================
CAPITAL STOCK TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital stock
transactions:
Class
A
(33,744,712) 75,962,031
Class
B
2,509,874 13,987,615
Class
C
1,126,929 3,532,579
====================================================================================================
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Total increase
(decrease)
(37,736,367) 71,675,091
- ----------------------------------------------------------------------------------------------------
Beginning of
period
325,136,232 253,461,141
- -----------------------------
End of period (including undistributed
net investment
income of $779,391 and $986,365,
respectively)
$287,399,865 $325,136,232
- -----------------------------
</TABLE>
See accompanying Notes to Financial
Statements.
29 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS
A
1999 1998 1997
1996(1) 1995 1994
===============================================================================================================================
<S>
<C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 15.45 $
16.81 $ 16.00 $ 15.46
$ 13.44 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
.44 .45 .51(2)
.46 .60 .55
Net realized and unrealized gain
(loss) (.01)
.45 2.25(2) .49
2.59 (.86)
- -------------------------------------------------------------------------------
Total income (loss) from
investment
operations
.43 .90 2.76
.95 3.19 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.44)
(.45) (.56)
(.36) (.60) (.55)
Distributions from net realized
gain (.41)
(1.81) (1.39)
(.05) (.57) (.24)
- -------------------------------------------------------------------------------
Total dividends and distributions
to
shareholders
(.85) (2.26) (1.95)
(.41) (1.17) (.79)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $15.03
$15.45 $16.81
$16.00 $15.46 $13.44
===============================================================================
===============================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(3) 2.62%
5.93% 18.82% 6.27%
23.95% (2.11)%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $258,159
$298,558 $243,267
$233,289 $218,099 $177,904
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $293,677
$268,715 $238,821
$228,203 $200,172 $187,655
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment
income
2.72% 2.96% 3.17%
3.52% 4.00% 3.80%
Expenses
1.04% 1.04%(5) 1.11%(5)
1.11%(5) 1.17%(5) 0.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(6)
122% 97%
98% 85% 55%
115%
</TABLE>
1. For the ten months ended October 31,
1996. The Fund changed its fiscal year
end from December 31 to October 31. On
March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the
Fund.
2. Per share amounts calculated based on
the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than
one full year.
5. Expense ratio reflects the effect of
expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
See accompanying Notes to Financial
Statements.
30 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
OCT. 31, DEC. 31,
CLASS
B
1999 1998 1997
1996(1) 1995(7)
======================================================================================================================
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 15.62
$16.99 $16.16 $15.66
$15.48
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
.31 .36 .40(2)
.31 .07
Net realized and unrealized gain
(loss) --
.43 2.27(2) .54
.70
- -------------------------------------------------------------------
Total income (loss) from
investment
operations
.31 .79 2.67
.85 .77
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.32)
(.35) (.45) (.30)
(.07)
Distributions from net realized
gain (.41)
(1.81) (1.39)
(.05) (.52)
- -------------------------------------------------------------------
Total dividends and distributions
to
shareholders
(.73) (2.16) (1.84)
(.35) (.59)
Net asset value, end of
period $15.20
$15.62 $16.99 $16.16
$15.66
===================================================================
======================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(3) 1.84%
5.10% 17.96% 5.51%
4.93%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $23,522
$21,754 $8,720
$3,919 $650
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $24,648
$14,235 $6,183
$2,324 $375
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment
income
1.97% 2.19% 2.32%
2.86% 0.73%
Expenses
1.80% 1.80%(5) 1.89%(5)
1.85%(5) 1.92%(5)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(6)
122% 97%
98% 85% 55%
</TABLE>
1. For the ten months ended October 31,
1996. The Fund changed its fiscal year
end from December 31 to October 31. On
March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the
Fund.
2. Per share amounts calculated based on
the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than
one full year.
5. Expense ratio reflects the effect of
expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995,
(inception of offering) to December 31,
1995.
See accompanying Notes to Financial
Statements.
31 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C YEAR ENDED OCTOBER
31,
1999 1998 1997
1996(8)
====================================================================================================================
<S>
<C> <C> <C>
<C>
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $
15.31 $ 16.70 $ 15.93
$ 15.71
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
.32 .37
.44(2) .30
Net realized and unrealized gain
(loss)
(.01) .40
2.19(2) .32
- ---------------------------------------------------
Total income (loss) from investment
operations
.31 .77
2.63 .62
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income
(.33) (.35)
(.47) (.35)
Distributions from net realized
gain
(.41) (1.81)
(1.39) (.05)
- ---------------------------------------------------
Total dividends and distributions to
shareholders
(.74) (2.16)
(1.86) (.40)
Net asset value, end of
period
$14.88 $15.31
$16.70 $15.93
===================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(3)
1.84% 5.10%
17.93% 4.08%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands)
$5,719 $4,824
$1,473 $188
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands)
$5,876 $2,861 $
805 $ 57
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment
income
1.97% 2.18%
2.18% 2.90%
Expenses
1.80% 1.80%(5)
1.92%(5) 1.87%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(6)
122% 97%
98% 85%
</TABLE>
1. For the ten months ended October 31,
1996. The Fund changed its fiscal year
end from December 31 to October 31. On
March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the
Fund.
2. Per share amounts calculated based on
the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than
one full year.
5. Expense ratio reflects the effect of
expenses paid indirectly by the Fund.
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, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995
(inception of offering) to December 31,
1995.
8. For the period from May 1, 1996
(inception of offering) to October 31,
1996.
See accompanying Notes to Financial
Statements.
32 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Disciplined Allocation 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.
The Fund's investment objective is to maximize total investment return
(including both capital appreciation and income) principally by allocating its
assets among stocks, corporate bonds, U.S. government securities and money
market instruments, according to changing market conditions. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge on investments up to $1 million. Class B and Class C shares may be
subject to a contingent deferred sales charge (CDSC). All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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 an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
33 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Continued
FOREIGN CURRENCY TRANSLATION. The
accounting records of the Fund are
maintained
in U.S. dollars. Prices of securities
denominated in foreign currencies are
translated into U.S. dollars at the
closing rates of exchange. Amounts
related
to the purchase and sale of foreign
securities and investment income are
translated at the rates of exchange
prevailing on the respective dates of
such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. 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 year ended
October 31, 1999, a credit of $28,674 was made for the Fund's projected benefit
obligations and payments of $2,820 were made to retired Directors, resulting in
an accumulated liability of $93,143 as of October 31, 1999.
The Board of Directors has adopted a deferred compensation plan for
independent Directors that enables Directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Directors in shares of one or more
Oppenheimer funds selected by the Director. The amount paid to the Director
under the plan will be determined based upon the performance of the selected
funds. Deferral of Directors' fees under the plan will not affect the net assets
of the Fund, and will not materially affect the Fund's assets, liabilities or
net income per share.
34 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS. Dividends and
distributions to
shareholders, which are determined in
accordance with income tax regulations,
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 distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts 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 October 31, 1999, amounts have been reclassified to reflect an
increase in additional paid-in capital of $32,040, a decrease in undistributed
net investment income of $35,333, and an increase in accumulated net realized
gain on investments of $3,293.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses
paid indirectly represent a reduction of
custodian fees for earnings on cash
balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable 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 lia-bilities 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.
35 OPPENHEIMER
DISCIPLINED ALLOCATION 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>
YEAR ENDED OCTOBER 31, 1999
YEAR ENDED OCTOBER 31, 1998
SHARES AMOUNT
SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
<C> <C>
CLASS A
Sold
1,351,571 $ 21,353,382
1,454,634 $ 22,895,924
Dividends and/or
distributions
reinvested
965,998 15,250,027
2,193,655 33,253,817
Acquisition--Note
7
- -- --
4,023,572 64,135,741
Redeemed
(4,463,822) (70,348,121)
(2,818,335) (44,323,451)
- --------------------------------------------------------------------------
Net increase
(decrease)
(2,146,253) $ (33,744,712)
4,853,526 $ 75,962,031
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS B
Sold
547,606 $ 8,732,198
589,123 $ 9,351,049
Dividends and/or
distributions
reinvested
66,056 1,054,288
84,350 1,293,844
Acquisition--Note
7
- -- --
328,973 5,299,757
Redeemed
(458,993) (7,276,612)
(123,259) (1,957,035)
- --------------------------------------------------------------------------
Net
increase
154,669 $ 2,509,874
879,187 $ 13,987,615
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS C
Sold
202,792 $ 3,181,342
193,669 $ 2,998,346
Dividends and/or
distributions
reinvested
16,189 252,900
15,173 228,310
Acquisition--Note
7
- -- --
70,016 1,105,546
Redeemed
(149,699) (2,307,313)
(51,932) (799,623)
- --------------------------------------------------------------------------
Net
increase
69,282 $ 1,126,929
226,926 $ 3,532,579
==========================================================================
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON
SECURITIES
As of October 31, 1999, net unrealized depreciation on securities of $3,802,070
was composed of gross appreciation of $10,453,650, and gross depreciation of
$14,255,720.
36 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
===============================================================================
4. MANAGEMENT FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager are 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 of the Fund, 0.50% of the
next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for the year ended October 31, 1999 was 0.62%
of the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. The Manager acts as the
accounting agent for the Fund at an
annual fee of $15,000, plus
out-of-pocket costs and expenses
reasonably
incurred.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A
COMMISSIONS COMMISSIONS
COMMISSIONS
FRONT-END FRONT-END ON
CLASS A ON CLASS B ON
CLASS C
SALES
CHARGES SALES CHARGES
SHARES SHARES
SHARES
ON
CLASS A RETAINED BY ADVANCED
BY ADVANCED BY ADVANCED BY
YEAR ENDED
SHARES DISTRIBUTOR
DISTRIBUTOR(1) DISTRIBUTOR(1)
DISTRIBUTOR(1)
- -----------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
<C> <C>
<C>
October 31, 1999
$400,298 $295,333
$46,607 $250,032 $25,954
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS
B CLASS C
CONTINGENT
DEFERRED CONTINGENT
DEFERRED CONTINGENT
DEFERRED
SALES
CHARGES SALES
CHARGES SALES CHARGES
YEAR ENDED RETAINED BY
DISTRIBUTOR RETAINED BY
DISTRIBUTOR RETAINED BY
DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
<S>
<C>
<C> <C>
October 31, 1999
$2,000
$57,857 $3,487
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
37 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. MANAGEMENT FEES AND OTHER
TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended October 31, 1999, payments under
the Class A Plan totaled $732,222, all of which was paid by the Distributor to
recipients. That included $587,717 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 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 or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended October 31,
1999, were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT
RETAINED EXPENSES OF
NET ASSETS
UNDER PLAN BY DISTRIBUTOR
UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------------------------
<S>
<C>
<C> <C>
<C>
Class B
Plan
$246,431 $206,253
$689,149 2.93%
Class C
Plan
58,740 33,227
67,663 1.18
</TABLE>
38 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of October 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF
VALUATION AS OF UNREALIZED
CONTRACT
DESCRIPTION
DATE CONTRACTS OCTOBER 31,
1999 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
<S>
<C> <C>
<C> <C>
NASDAQ 100
Index
12/16/99 44
$11,677,600 $ 495,077
Standard & Poor's 500
Index
12/16/99 22
7,569,100 126,503
- -----------------
$621,580
=================
</TABLE>
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of October 31, 1999, was $2,716,406,
which represents 0.95% of the Fund's net assets.
39 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
7. ACQUISITION OF OPPENHEIMER LIFESPAN
BALANCED FUND
On June 12, 1998, the Fund acquired all of the net assets of Oppenheimer
LifeSpan Balanced Fund, pursuant to an agreement and plan of reorganization
approved by the Oppenheimer LifeSpan Balanced Fund shareholders on June 9, 1998.
The Fund issued (at an exchange ratio of 0.711330 for Class A, 0.789560 for
Class B, and 0.716167 for Class C of the Fund to one share of Oppenheimer
LifeSpan Balanced Fund) 4,023,572, 328,973 and 70,016 shares of capital stock
for Class A, Class B and Class C, respectively, valued at $64,135,741,
$5,299,757 and $1,105,546 in exchange for the net assets, resulting in combined
Class A net assets of $313,743,282, Class B net assets of $18,371,573 and Class
C net assets of $3,985,465 on June 12, 1998. The net assets acquired included
net unrealized appreciation of $3,969,222. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
================================================================================
8. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended October 31,
1999.
40 OPPENHEIMER
DISCIPLINED ALLOCATION FUND
<PAGE>
A-5
Appendix A
- -----------------------------------------
RATINGS DEFINITIONS
- -----------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- -----------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there
may be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- -----------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- -----------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in the case of exceptionally
strong capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events. A: High Credit Quality. "A" ratings denote a low expectation
of credit risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for higher
ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade: D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
- ----------------------------------------- Food and Drug Retailers
Industry Classi
- -----------------------------------------
Aerospace/Defense fications
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-15
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."4 This waiver provision applies to:
4 However, that commission will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored 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 those
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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch. On
the date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by
the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a cost-allocation
agreement with the Transfer Agent on or before May 1, 1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) 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 (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| 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 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 through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to purchase
and pay for shares of Oppenheimer funds using the proceeds of shares
redeemed in the prior 30 days from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries) on which an initial
sales charge or contingent deferred sales charge was paid. This waiver
also applies to shares purchased by exchange of shares of Oppenheimer
Money Market Fund, Inc. that were purchased and paid for in this manner.
This waiver must be requested when the purchase order is placed for shares
of the Fund, and the Distributor may require evidence of qualification for
this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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 account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(2) To return excess contributions.
(3)
<PAGE>
To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.5
5 This provision does not apply to IRAs.
(5) Under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code, or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.6
6 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of the
Manager) if the plan has made special arrangements with the
Distributor.
(11 ) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|-|
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for any of
the following purposes:
(1) Following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary. The death or disability must occur
after the participant's account was established in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.7
7 This provision does not apply to IRAs.
(5) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue
Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.8
8 This provision does not apply to loans from 403(b)(7) custodial
plans.
(9) On account of the participant's separation from service.9
9 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
offered as an investment option in a Retirement Plan if the plan has made
special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the Oppenheimer
funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long as the
aggregate value of the distributions does not exceed 10% of the account's
value, adjusted annually. Redemptions of Class B shares under an Automatic
Withdrawal Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the account's
value annually.
B. 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.
Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section I.A.)
of the Fund, the Manager and its affiliates and retirement plans
established by them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Value
Fund
Oppenheimer Quest Balanced Value Oppenheimer Quest Global Value Fund
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Income Quest for Value New York Tax-Exempt
Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest
for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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 who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10%
of the initial value of the account value, adjusted annually, and
|_| liquidation of a shareholder's account if the aggregate net asset value
of shares held in the account is less than the required minimum value
of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B or
Class C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account value; adjusted annually, and
|-|
<PAGE>
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account
value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(1) persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result
of direct purchases or purchases pursuant to the Fund's policies on
Combined Purchases or Rights of Accumulation, who still hold those shares
in that Fund or other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
<PAGE>
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation features
available at the time of the initial purchase and such investment is
still held in one or more of the Former Connecticut Mutual Funds or a
Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more of
the Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former Connecticut
Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(5)
<PAGE>
in whole or in part, in connection with shares sold to any state, county,
or city, or any instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of
any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or liquidate
the Fund; in connection with automatic redemptions of Class A shares and
Class B shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as adopted
by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Disciplined Allocation Fund
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
67890
PX205.022000
Oppenheimer
Disciplined Value Fund
Prospectus dated February 28, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Disciplined Value Fund is a mutual fund. It seeks long-term growth
of capital by investing mainly in common stocks with low price-earnings ratios
and better-than-anticipated earnings.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
[logo] OppenheimerFunds Distributor, Inc.
<PAGE>
Contents
About the Fund
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<PAGE>
ABOUT THE FUND
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks long-term growth of
capital by investing primarily in common stocks with low price-earnings ratios
and better-than-anticipated earnings. Realization of current income is a
secondary consideration.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in common stocks of
different capitalization ranges. The Fund also can buy other investments,
including:
Preferred stocks, rights and warrants and convertible securities, and
Securities of U.S. and foreign companies, although there are limits on the
Fund's investments in foreign securities.
HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers use a disciplined value style. While this process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases, the investment selection process
currently includes the strategies described below:
o The portfolio managers use a quantitative, valued-oriented investment
discipline to identify stocks considered to be undervalued or out of favor
in the market that they believe have potential for improved performance.
They also conduct "fundamental" analysis of an issuer's business prospects
and financial condition to search for stocks that they believe have the
best growth potential.
The portfolio managers use quantitative tools to identify a universe of
stocks that have low price/earnings (P/E) ratios compared, for example, to
the P/E ratio of the S&P 500 Index. They then search that universe for
stocks having characteristics suggesting the potential for improved price
performance (for example, better than expected earnings reports).
o The portfolio managers use internal research and analysis by other market
analysts to identify stocks within the selected universe that may provide
growth opportunities. The expectation is that the stock will increase in
value when the market re-evaluates the issuer's earnings expectations and
price/earnings ratio.
If the P/E ratio of a stock held by the Fund moves significantly above the
P/E ratio of the broad market benchmark the portfolio managers use, or if
there is evidence an issuer's business prospects are deteriorating (for
example, the issuer reports a material earnings disappointment), the
portfolio managers will consider selling the stock.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking capital growth in their investment over the long term. Because the Fund
currently focuses its investments in stocks, those investors should be willing
to assume the risks of short-term share price fluctuations that are typical for
a fund that can have substantial stock investments. Since the Fund's income
level will fluctuate and will likely be small, it is not designed for investors
needing an assured level of current income. Because of its focus on long-term
total growth of capital, the Fund may be appropriate for a portion of a
retirement plan investment. However, the Fund is not a complete investment
program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are subject to
changes in value from a number of factors described below. There is also the
risk that poor security selection by the Fund's investment Manager,
OppenheimerFunds, Inc., will cause the Fund to under perform other funds having
similar objectives.
Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund currently focuses its
investments in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. Market risk will affect the Fund's per share
prices, which will fluctuate as the values of the Fund's portfolio securities
change.
A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. In particular, because the Fund currently emphasizes investments in
stocks of U.S. issuers, it will be affected primarily by changes in U.S. stock
markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions that affect that industry more than others, or
by changes in government regulations, availability of basic resources or
supplies, or other events. At times, the Fund may increase the relative emphasis
of its investments in a particular industry. To the extent that the Fund is
emphasizing investments in a particular industry, its share values may fluctuate
in response to events affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund can
invest in securities of large companies but it can also buy stocks of small- and
medium-size companies, which may have more volatile stock prices than stocks of
large companies.
Risks of Value Investing. Value investing seeks stocks having prices that are
low in relation to their real worth or prospects in the hope that the Fund
will realize appreciation in the value of its holdings when other
investors realize the intrinsic value of those stocks. In using a value
investing style, there is the risk that the market will not recognize that
the securities are undervalued and they might not appreciate in value as
the Manager anticipates.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and the prices of its shares. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. The share price of the Fund
will change daily based on changes in market prices of securities and market
conditions, and in response to other economic events. There is no assurance that
the Fund will achieve its investment objective.
The Fund focuses its investments on stocks for long-term growth. In the
short term, the stock markets can be volatile, and the price of the Fund's
shares will go up and down. The Fund generally does not use income-oriented
investments to help cushion the Fund's total return from changes in stock
prices, except for defensive purposes. In the OppenheimerFunds spectrum, the
Fund is generally more conservative than aggressive growth stock funds, but more
aggressive than funds that invest in stocks and bonds.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the last ten calendar years and by showing how the average
annual total returns of the Fund's Class A shares compared to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 18.26% (4Q'98) and the lowest return (not annualized)
for a calendar quarter was -18.20% (3Q'90).
- --------------------------------------------------------------------------------
Average Annual 1 Year
Total Returns for 5 Years
the periods ended (or life of
December 31, 1999 class, if less) 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception -10.19% 14.31% 12.71%
9/16/85)
- --------------------------------------------------------------------------------
S & P 500 Index 21.03% 28.54% 18.19%1
- --------------------------------------------------------------------------------
Class B Shares -9.45% 11.15% N/A
(inception 10/02/95)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares (inception -6.24% 9.63% N/A
5/01/96)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares -4.51% 9.78% N/A
(inception 12/16/96)
- --------------------------------------------------------------------------------
1. From 12/31/89.
- --------------------------------------------------------------------------------
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year) and 2% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period. There is
no sales charge for Class Y shares. The Fund's returns measure the performance
of a hypothetical account and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The performance of the
Fund's Class A shares is compared to the S & P 500 Index, an unmanaged index of
common stocks. The index performance reflects the reinvestment of income but
does not reflect transaction costs. The Fund's investments vary from the
securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 1999.
Shareholder Fees (charges paid directly from your investment):
- -------------------------------------------------------------------------------
Class A Class B Class C Class Y
Shares Shares Shares Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases
- ----------------------- 5.75% None None None
(as % of offering
price)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the
original offering None1 5%2 1%3 None
price or redemption
proceeds)
- -------------------------------------------------------------------------------
4. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
5. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
6. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- -------------------------------------------------------------------------------
Class A Class B Class C Class Y
Shares Shares Shares Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Management Fees 0.53% 0.53% 0.53% 0.53%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Distribution and/or 0.25% 1.00% 1.00% None
Service (12b-1) Fees
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Other Expenses 0.24% 0.24% 0.24% 0.23%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Annual Operating 1.02% 1.77% 1.77% 0.76%
Expenses
- -------------------------------------------------------------------------------
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
- -------------------------------------------------------------------------------
Examples. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $673 $881 $1,106 $1,751
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $680 $857 $1,159 $1,705
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $280 $557 $959 $2,084
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $78 $243 $422 $942
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $673 $881 $1,106 $1,751
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $180 $557 $959 $1,705
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $180 $557 $959 $2,084
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $78 $243 $422 $942
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 2. Class
B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among the different types of investments will vary over time based upon the
evaluation of economic and market trends by the Manager. The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of any
one issuer and by not investing too great a percentage of the Fund's assets in
any one company. Also, the Fund does not concentrate 25% or more of its
investments in any one industry or the securities of any one foreign government.
However, changes in the overall market prices of securities and any income
they may pay can occur at any time. The share price and yield of the Fund will
change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.
Stock Investments. The Fund invests primarily in a diversified portfolio of
common stocks of issuers that may be of small, medium or large
capitalization, to seek capital growth. The Fund can invest in other
equity securities, including preferred stocks, rights and warrants, and
securities convertible into common stock. The Fund can buy securities
issued by domestic or foreign companies. However, the Fund currently
emphasizes investments in stocks of U.S. issuers.
Although many convertible securities are debt securities, the Manager
considers some of them to be "equity equivalents" because of their
conversion feature. In those cases, their rating has less impact on the
investment decision than in the case of other debt securities. The Fund
can buy convertible securities rated as low as "B" by Moody's Investor
Services, Inc. or Standard & Poor's Rating Service or having comparable
ratings by other national rating organizations (or, if they are unrated,
having a comparable rating assigned by the Manager). Those ratings are
below "investment grade" and the securities are subject to greater risk of
default by the issuer than investment-grade securities. Additionally,
these investments are subject to the Fund's policy of not investing more
than 10% of its net assets in debt securities.
Can the Fund's Investment Objective and Policies Change? The Fund's Board
of Directors can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is not a fundamental policy. Investment restrictions that are
fundamental policies
are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the
investment techniques and strategies described below. The Manager might not
always use all of them. These techniques have risks, although some are designed
to help reduce overall investment or market risks.
Cash and Cash Equivalents. Under normal market conditions the Fund can invest
up to 15% of its net assets in cash and cash equivalents such as
commercial paper, repurchase agreements, Treasury bills and other
short-term U.S. government securities. This strategy would be used
primarily for cash management or liquidity purposes. To the extent that
the Fund uses this strategy, it might reduce its opportunities to seek its
objective of long-term growth.
Debt Securities. Under normal market conditions, the Fund can invest in debt
securities, such as securities issued or guaranteed by the U.S. government
or its agencies and instrumentalities, foreign government securities, and
foreign and domestic corporate bonds and debentures. Normally these
investments are limited to not more than 10% of the Fund's net assets,
including convertible debt securities.
The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned an
equivalent rating by the Manager. The Fund's debt investments may be
"investment grade" (that is, in the four highest rating categories of a
national rating organization) or may be lower-grade securities (sometimes
called "junk bonds") rated as low as "B," as described above.
Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails
to pay interest, the Fund's income might be reduced, and if the issuer
fails to repay principal, the value of that security and of the Fund's
shares might be reduced. A downgrade in an issuer's credit rating or other
adverse news about an issuer can reduce the value of that issuer's
securities. While the Fund's investments in U.S. government securities are
subject to little credit risk, the Fund's other investments in debt
securities, particularly high-yield, lower-grade debt securities, are
subject to risks of default. Lower-grade debt securities may be subject to
greater market fluctuations and greater risks of loss of income and
principal than investment-grade debt securities.
Interest Rate Risk. The values of debt securities, including U.S. government
securities, are subject to change when prevailing interest rates change.
When interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-issued
debt securities generally fall, and they may sell at a discount from their
face amount. The magnitude of these fluctuations will often be greater for
longer-term debt securities than shorter-term debt securities. The Fund's
share prices can go up or down when interest rates change because of the
effect of the changes on the value of the Fund's investments in debt
securities.
Foreign Securities. The Fund can buy securities of companies or governments in
any country, developed or underdeveloped. As a fundamental policy, the
Fund cannot invest more than 10% of its total assets in foreign
securities. As an exception to that restriction the Fund can invest up to
25% of its total assets in foreign equity or debt securities that are:
issued, assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities, assumed or guaranteed by domestic
issuers (including Eurodollar securities), or issued, assumed or guaranteed
by foreign issuers that have a class of securities listed for trading on
The New York Stock Exchange.
While foreign securities offer special investment opportunities, there are
also special risks, such as foreign taxation, risks of delays in
settlements of securities transactions, and the effects of a change in
value of a foreign currency against the U.S. dollar, which will result in
a change in the U.S. dollar value of securities denominated in that
foreign currency.
Derivative Investments. In general terms, a derivative investment is an
investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. Options, futures,
mortgage-related securities and "stripped" securities are examples of
derivatives the Fund can use. Currently the Fund does not use derivative
investments to a significant degree.
There Are Special Risks In Using Derivative Investments. If the issuer of the
derivative does not pay the amount due, the Fund can lose money on the
investment. Also, the underlying security or investment on which the
derivative is based, and the derivative itself, might not perform the way the
Manager expected it to perform. If that happens, the Fund's share prices
could decline or the Fund could get less income than expected. Interest rate
and stock market changes in the U.S. and abroad may also influence the
performance of derivatives. Some derivative investments held by the Fund may
be illiquid. The Fund has limits on the amount of particular types of
derivatives it can hold. However, using derivatives can cause the Fund to
lose money on its investment and/or increase the volatility of its share
prices.
Hedging. The Fund can write covered calls on securities, futures and stock
indices, and can buy and sell certain kinds of futures contracts and forward
contracts. The Fund is not required to use hedging instruments to seek its
objective. The Fund does not use hedging instruments for speculative o purposes.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could 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.
Temporary Defensive Investments. When market or economic conditions are unstable
or adverse, the Fund can invest up to 100% of its assets in defensive
securities. Generally, they would be short-term U.S. government
securities, high-grade commercial paper, bank obligations or repurchase
agreements. To the extent the Fund invests defensively in these
securities, it might not achieve its investment objective.
Portfolio Turnover. The Fund may engage in short-term trading to seek its
objective. Portfolio turnover increases the Fund's' brokerage costs (and
reduces its performance). Additionally, if the Fund realizes capital gains
when it sells its portfolio investments, it must generally pay those gains
out to shareholders, increasing their taxable distributions. The Financial
Highlights table at the end of this Prospectus shows the Fund's portfolio
turnover rates during recent fiscal years.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Directors, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries and an affiliate) managed more than $120 billion in
assets as of December 31, 1999, including other Oppenheimer funds, with more
than 5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Managers. The Fund has a portfolio management team consisting of
three portfolio managers. The principal portfolio manager, Peter M. Antos,
is a Vice President of the Fund and a Senior Vice President of the Manager.
He has been the Fund's senior portfolio manager since 1989 and is an
officer and portfolio manager of other Oppenheimer funds. Prior to joining
the Manager in 1996, he was employed by the G.R. Phelps & Co., Inc., the
Fund's prior investment adviser.
Portfolio managers Michael C. Strathearn and Kenneth B. White are also
Vice Presidents of the Fund and the Manager and serve as officers and
portfolio managers of other Oppenheimer funds. Before joining the Manager
in 1996, each was employed by Connecticut Mutual Life Insurance Company,
the then-parent of G.R. Phelps. They have been portfolio managers of the
Fund since 1989.
Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 0.625% of the first $300 million of average
annual net assets of the Fund, 0.500% of the next $100 million, and 0.450%
of average annual net assets in excess of $400 million. The Fund's
management fee for its last fiscal year ended October 31, 1999, was 0.53%
of average annual net assets for each class of shares.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO you buy SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. 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 with a financial advisor before you make a purchase to be sure
that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through 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 Asset Builder
Application and the Statement of Additional Information.
How Much Must You Invest? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started as an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be for as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time."
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Directors has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures
for valuing illiquid securities and obligations for which market values
cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer
must receive the order by the close of The New York Stock Exchange and
transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally 5:00
P.M.) to receive that day's offering price. Otherwise, the order will
receive the next offering price that is determined.
<PAGE>
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
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Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on the
amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
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Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
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Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
Class C Shares?" below.
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Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
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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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six years, as well as the effect of the
Class B asset-based sales charge on the investment return for that class
in the short-term. 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 as 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A or Class Y shares, such as the Class B and Class C
asset-based sales charge described below and in the Statement of
Additional Information. Share certificates are not available for Class B
and Class C shares, and if you are considering using your shares as
collateral for a loan, that may be a factor to consider.
How Do Share Classes Affect Payments to My Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special condition
applies.
HOW CAN you BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
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Amount of Purchase Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Commission As
Percentage of Net Percentage of
Offering Price Amount Invested Offering Price
------------------------------------------------------------------------------
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Less than $25,000 5.75% 6.10% 4.75%
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$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
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$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
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$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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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
aggregating $1 million or more or for certain purchases by particular types
of retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an
amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts). For those retirement plan
accounts, the commission is 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, based on
the cumulative purchases during the prior 12 months ending with the current
purchase. In either case, the commission will be paid only on purchases
that were not previously subject to a front-end sales charge and dealer
commission.10 That commission will not be paid on purchases of shares in
amounts of $1 million or more (including any right of accumulation) by a
retirement plan that pays for the purchase with the redemption of Class C
shares of one or more Oppenheimer funds held by the plan for more than one
year.
10 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 Oppenheimer
funds are added as an investment option under that plan.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales
charge") may be deducted from the redemption proceeds. That sales charge
will be equal to 1.0% of the lesser of (1) the aggregate net asset value of
the redeemed shares at the time of redemption (excluding shares purchased
by reinvestment of dividends or capital gain distributions) or (2) the
original net asset value of the redeemed shares. The Class A contingent
deferred sales charge will not exceed the aggregate amount of the
commissions the Distributor paid to your dealer on all purchases of Class A
shares of all Oppenheimer funds you made that were subject to the Class A
contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN you BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
<PAGE>
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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6 and following None
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In the table, a "year" is a 12-month period. In applying the sales charge, 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. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares that you hold convert, any other Class B shares that were
acquired by reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.
How Can you Buy 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. 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.
Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per share
without a sales charge directly to institutional investors that have special
agreements with the Distributor for this purpose. They may include insurance
companies, registered investment companies and employee benefit plans. For
example, Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds advised by MassMutual) for asset allocation
programs, investment companies or separate investment accounts it sponsors and
offers to its customers. Individual investors cannot buy Class Y shares
directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares (other
than the time those orders must be received by the Distributor or Transfer Agent
at their Colorado office) and the special account features available to
investors buying those other classes of shares do not apply to Class Y shares.
Instructions for purchasing, redeeming, exchanging or transferring Class Y
shares must be submitted by the institutional investor, not by its customers for
whose benefit the shares are held.
Distribution and Service (12b-1) Plans.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
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
pay the Distributor for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class
B shares and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. 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 a sales concession 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 sales of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays a sales concession 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
therefore 1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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 OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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 or Class Y shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance. Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, the following redemption requests must be in writing
and must include a signature guarantee (although there may be other situations
that also require a signature guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name
o Shares are being redeemed by someone (such as an Executor) other than the
owners.
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457
o To redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of
the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
If you have requested Federal Funds wire privileges for your account, the
wire of the redemption proceeds will normally be transmitted on the next
bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
how contingent deferred sales charges affect redemptions. If you purchase shares
subject to a Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information) and you advise the Transfer Agent of your eligibility for the
waiver.
A 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 net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege.
o 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.
o You must meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some cases, sales charges may be imposed on exchange
transactions. For tax purposes, exchanges of shares involve a sale of the
shares of the fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more
details.
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.
HOW DO you SUBMIT EXCHANGE REQUESTS? 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
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o 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 conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o 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
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Directors at any time the Board believes it is
in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
has fewer than 100 shares. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share
purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on an annual basis and to pay them to
shareholders in December on a date selected by the Board of Directors. Dividends
and distributions paid on Class A and Class Y shares will generally be higher
than dividends for Class B and Class C shares, which normally have higher
expenses than Class A and Class Y. The Fund has no fixed dividend rate and
cannot guarantee that it will pay any dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." 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.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. 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. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the Statement
of Additional Information, which is available on request.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT.
31, DEC. 31,
CLASS A 1999 1998 1997
1996(1) 1995 1994
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
DATA
<S> <C> <C> <C>
<C> <C> <C>
Net asset value, beginning of period $20.91 $23.31 $19.65
$17.84 $14.20 $15.14
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .17 .16 .23(2)
.15 .25 .22
Net realized and unrealized gain (loss) .64 .32 4.91(2)
1.88 4.88 (.32)
- -------------------------------------------------------------
Total income (loss)
from
investment operations .81 .48 5.14
2.03 5.13 (.10)
- -------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.17) (.12) (.07)
(.10) (.25) (.22)
Distributions from net realized gain (.86) (2.76) (1.41)
(.12) (1.24) (.62)
- -------------------------------------------------------------
Total dividends and
distributions
to shareholders (1.03) (2.88) (1.48)
(.22) (1.49) (.84)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.69 $20.91 $23.31
$19.65 $17.84 $14.20
- -------------------------------------------------------------
- -------------------------------------------------------------
Total Return, at Net Asset Value(3) 3.60% 2.24% 27.60%
11.41% 36.40% (0.65)%
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of period (in thousands) $392,483 $456,264 $371,810
$180,784 $118,118 $78,390
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $448,884 $442,138 $234,314
$135,940 $ 98,063 $71,956
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) 0.68% 0.84% 1.05%
1.01% 1.53% 1.50%
Expenses 1.02% 0.98%(5) 1.07%(5)
1.13%(5) 1.22%(5) 1.02%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 135% 106% 103%
74% 70% 99%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $875,161,964 and $1,028,399,607,
respectively.
OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999
1998 1997 1996(1) 1995(7)
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C> <C>
<C> <C> <C>
Net asset value, beginning of period $20.83 $23.32
$19.77 $18.08 $17.83
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03)
.02 .09(2) .05 .02
Net realized and unrealized gain (loss) .66
.30 4.91(2) 1.83 1.40
- ---------------------------------------------------------------
Total income (loss) from
investment operations .63
.32 5.00 1.88 1.42
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.02)
(.05) (.04) (.07) (.02)
Distributions from net realized gain (.86) (2.76)
(1.41) (.12) (1.15)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (2.81)
(1.45) (.19) (1.17)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.58 $20.83
$23.32 $19.77 $18.08
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(3) 2.79% 1.47%
26.61% 10.43% 8.04%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $102,736 $123,260
$83,291 $5,854 $717
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $123,616 $110,240
$30,019 $2,903 $306
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.08)%
0.08% 0.22% 0.22% 0.21%
Expenses 1.77%
1.73%(5) 1.84%(5) 1.88%(5) 1.97%(5)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 135%
106% 103% 74% 70%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS continued
CLASS C YEAR ENDED OCTOBER 31,
1999 1998 1997 1996(8)
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C>
<C> <C> <C>
Net asset value, beginning of period $20.60
$23.07 $19.57 $18.79
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.02) .01 .10(2) .06
Net realized and unrealized gain (loss)
.65 .31 4.85(2) .94
- --------------------------------------------------
Total income (loss) from investment operations
.63 .32 4.95 1.00
- ------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income
(.02) (.03) (.04) (.10)
Distributions from net realized gain (.86)
(2.76) (1.41) (.12)
- --------------------------------------------------
Total dividends and distributions to shareholders (.88)
(2.79) (1.45) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.35
$20.60 $23.07 $19.57
- --------------------------------------------------
- --------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3)
2.82% 1.47% 26.64% 5.35%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $14,582
$18,204 $10,243 $715
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $17,746
$15,355 $4,477 $342
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss)
(0.07)% 0.06% 0.17% 0.04%
Expenses
1.77% 1.73%(5) 1.86%(5) 1.87%(5)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6)
135% 106% 103% 74%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS Y YEAR ENDED OCTOBER
31, 1999 1998 1997(9)
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S>
<C> <C> <C>
Net asset value, beginning of period
$20.97 $23.34 $20.31
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
(loss) .22
.22 .31(2)
Net realized and unrealized gain
(loss) .64 34
4.20(2)
- ------------------------------------
Total income (loss) from investment
operations .86 .56 4.51
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.25) (.17)
(.07)
Distributions from net realized
gain (.86) (2.76) (1.41)
- ------------------------------------
Total dividends and distributions to shareholders
(1.11) (2.93) (1.48)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$20.72 $20.97 $23.34
- ------------------------------------
- ------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(3) 3.81% 2.63%
23.62%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
$76,571 $136,729 $90,994
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$95,765 $118,010 $51,775
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income
(loss) 0.90%
1.19% 1.21%
Expenses
0.76% 0.62%(5) 0.78%(5)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(6) 135%
106% 103%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
9. For the period from December 16, 1996 (inception of offering) to October
31, 1997.
OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer Disciplined Value Fund
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
- ----------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or
read or down-load documents on the
OppenheimerFunds website:
http://www.oppenheimerfunds.com
- ----------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected], or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
SEC File No. 811-3346
PR0375.001.0200 Printed on recycled paper. [logo] OppenheimerFunds
Distributor, Inc.
<PAGE>
Appendix to Prospectus of
Oppenheimer Disciplined Value Fund
Graphic material included in the Prospectus of Oppenheimer Disciplined
Value Fund (the "Fund") under the heading "Annual Total Returns (Class A)(as of
12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the ten most recent calendar years, without deducting sales charges.
Set forth below are the relevant data points that will appear in the bar chart:
Calendar Annual
Year Total
Ended Returns
1990 -7.98%
1991 36.91%
1992 11.99%
1993 20.91%
1994 -0.65%
1995 36.40%
1996 18.38%
1997 24.00%
1998 8.54%
1999 -4.71%
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<PAGE>
Oppenheimer Disciplined Value Fund
- --------------------------------------------------------------------------------
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 28, 2000,
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 22, 2000. 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 6
Investment Restrictions............................................ 25
How the Fund is Managed ............................................... 28
Organization and History........................................... 28
Directors and Officers............................................. 29
The Manager........................................................ 35
Brokerage Policies of the Fund......................................... 36
Distribution and Service Plans......................................... 38
Performance of the Fund................................................ 42
About Your Account
How To Buy Shares...................................................... 46
How To Sell Shares..................................................... 54
How To Exchange Shares................................................. 59
Dividends, Capital Gains and Taxes..................................... 61
Additional Information About the Fund.................................. 63
Financial Information About the Fund
Independent Auditors' Report........................................... 64
Financial Statements................................................... 65
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
<PAGE>
117
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A B O U T T H E F U N D
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manger may use in selecting portfolio
securities will vary over time. The Fund is not required to use the investment
techniques and strategies described below at all times in seeking its goal. It
may use some of the special investment techniques and strategies at some times
or not at all.
In selecting equity investments for the Fund's portfolio, the portfolio
managers currently use a value investing style coupled with fundamental analysis
of issuers. In using a value approach, the managers look for stocks and other
securities that appear to be temporarily undervalued, by various measures, such
as price/earnings ratios. Value investing seeks stocks having prices that are
low in relation to their real worth or future prospects, in the hope that the
Fund will realize appreciation in the value of its holdings when other investors
realize the intrinsic value of the stock.
|X| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio managers currently use a value investing style coupled
with fundamental analysis of issuers. In using a value approach, the managers
look for stocks and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. Value investing
seeks stocks having prices that are low in relation to their real worth or
future prospects, with the expectation that the Fund will realize appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
Price/Earnings ratio, which is the stock's price divided by its earnings
per share. A stock having a price/earnings ratio lower than its historical
range, or lower than the market as a whole or that of similar companies may
offer attractive investment opportunities.
Price/book value ratio, which is the stock price divided by the book value
of the company per share. It measures the company's stock price in relation to
its asset value.
Dividend Yield, which is measured by dividing the annual dividend by the
stock price per share.
Valuation of Assets which compares the stock price to the value of the
company's underlying assets, including their projected value in the marketplace
and liquidation value.
|X| Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of a
specified size or range, and therefore may invest in securities of small-, mid-
and large-capitalization issuers. At times, the Fund may have substantial
amounts of its assets invested in securities of issuers in one or more
capitalization ranges, based upon the Manager's use of its investment strategies
and its judgment of where the best market opportunities are to seek the Fund's
objective.
At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may
be subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund has substantial investments in smaller
capitalization companies at times of market volatility, the Fund's share price
may fluctuate more than that of funds focusing on larger capitalization issuers.
|X| Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants or rights. That limit does not apply to warrants and rights that the
Fund has acquired as part of units of securities or that are attached to other
securities. No more than 2% of the Fund's total assets may be invested in
warrants that are not listed on either The New York Stock Exchange or The
American Stock Exchange.
Warrants basically are options to purchase equity securities at specific
prices valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
|X| Convertible Securities. While many convertible securities are a form
of debt security, in some cases their conversion feature (allowing conversion
into equity securities) causes the Manager to regard them more as "equity
equivalents." In those cases, the rating assigned to the security has less
impact on the Manager's investment decision than in the case of non-convertible
fixed income 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 conversion of 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.
|X| Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock, has
a stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before the issuer can pay dividends on common shares.
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 provisions for their call
or redemption prior to maturity which can have a negative effect on their prices
when interest prior to maturity rates decline. Preferred stock may be
"participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of protection
of capital as debt securities and may not offer the same degree of assurance of
continued income as debt securities. The rights of preferred stock on
distribution of a corporation's assets in the event of its liquidation are
generally subordinate to the rights associated with a corporation's debt
securities. Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of its liquidation.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued or guaranteed by foreign companies or of foreign governments or their
agencies. "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 and their agencies and instrumentalities.
Those securities may be traded on foreign securities exchanges or in the foreign
over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations. That is because they are not subject to
many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates
or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers
than in the U.S.;
o foreign exchange contracts;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities;
o foreign withholding taxes on interest and dividends;
o possibilities in some countries of expropriation, nationalization,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and
o 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.
Risks of Conversion to Euro. There may be transaction costs and
risks relating to the conversion of certain European currencies to the Euro that
commenced in January 1, 1999. However, their current currencies (for example,
the franc, the mark, and the lira) will also continue in use until January 1,
2002. After that date, it is expected that only the euro will be used in those
countries. A common currency is expected to confer some benefits in those
markets, by consolidating the government debt market for those countries and
reducing some currency risks and costs. But the conversion to the new currency
will affect the Fund operationally and also has potential risks, some of which
are listed below. Among other things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the
competitive environment from a consolidated currency market
and greater operational costs from converting to the new
currency. This might depress stock values.
o vendors the Fund depends on to carry out its business, such as
its custodian (which holds the foreign securities the Fund
buys), the Manager (which must price the Fund's investments to
deal with the conversion to the euro) and brokers, foreign
markets and securities depositories. If they are not prepared,
there could be delays in settlements and additional costs to
the Fund.
o exchange contracts and derivatives that are outstanding during
the transition to the euro. The lack of currency rate
calculations between the affected currencies and the need to
update the Fund's contracts could pose extra costs to the
Fund.
The lack of currency rate calculations between the affected currencies and
the need to update the Fund's contracts could pose extra costs to the Fund.
The Manager has upgraded (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio managers will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets, because the selection of those
securities must be consistent with the Fund's investment objective.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year. The Fund does not expect to have a portfolio
turnover rate of 100% annually. Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Investments in Bonds and Other Debt Securities. The Fund can invest in
bonds, debentures and other debt securities under normal market conditions.
Because the Fund currently emphasizes investments in equity securities, such as
stocks, it is not anticipated that significant amounts of the Fund's assets will
be invested in debt securities. However, if market conditions suggest that debt
securities may offer better growth opportunities than stocks, or if the Manager
determines to seek a higher income for liquidity purposes, the Manager might
shift up to 10% of the Fund's net assets into debt securities.
The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., or at least "BBB" by Standard & Poor's Rating Service or Duff &
Phelps, Inc., or that have comparable ratings by another nationally-recognized
rating organization. In making investments in debt securities, the Manager may
rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness. If the securities that
the Fund buys are unrated, to be considered part of the Fund's holdings of
investment-grade securities, they must be judged by the Manager to be of
comparable quality to bonds rated as investment grade by a rating organization.
|X| Special Risks of Lower-Grade Securities. It is not anticipated that
the Fund will invest a substantial portion of its assets in lower-grade debt
securities. Because lower-grade securities tend to offer higher yields than
investment-grade securities, the Fund may invest in lower grade securities if
the Manager is trying to achieve greater income (and, in some cases, the
appreciation possibilities of lower-grade securities might be a reason they are
selected for the Fund's portfolio). High-yield convertible debt securities might
be selected as "equity substitutes," as described above.
"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
included in the limitation on the percentage of the Fund's assets that can be
invested in lower-grade securities. The Fund can invest in securities rated as
low as "B" at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risks of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of diversifying its investments.
Additionally, to the extent they can be converted into stock, convertible
securities may be less subject to some of these risks than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these
risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to greater risks than other investment-grade
securities, and have some speculative characteristics. Definitions of the debt
security ratings categories of Moody's, S&P, Fitch IBCA and Duff & Phelps are
included in Appendix A to this Statement of Additional Information.
Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the Fund
buys them will not affect the interest income payable on those securities
(unless the security pays interest at a variable rate pegged to interest rate
changes). However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.
|X| Floating Rate and Variable Rate Obligations. Some securities the Fund
can purchase have variable or floating interest rates. Variable rates are
adjusted at stated periodic intervals. Variable rate obligations can have a
demand feature that allows the Fund to tender the obligation to the issuer or a
third party prior to its maturity. The tender may be at par value plus accrued
interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of not less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than that for
fixed-rate obligations of the same maturity. The Manager may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or guarantee
issued by a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally, the issuer must provide a specified number of days' notice to the
holder.
Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus. Mortgage-related
securities issued by private issuers have greater credit risk.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages, and it is not possible to
predict accurately the security's yield. The principal that is returned earlier
than expected may have to be reinvested in other investments having a lower
yield than the prepaid security. As a result, these securities may be less
effective as a means of "locking in" attractive long-term interest rates, and
they may have less potential for appreciation during periods of declining
interest rates, than conventional bonds with comparable stated maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
Collateralized Mortgage Obligations. CMOs are multi-class bonds that are
backed by pools of mortgage loans or mortgage pass-through certificates. They
may be collateralized by:
pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae,
or Freddie Mac,
unsecuritized mortgage loans insured by the Federal Housing Administration
or guaranteed by the Department of Veterans' Affairs, unsecuritized
conventional mortgages, other mortgage-related securities, or any
combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the opposite direction of an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might not be able to assert a
claim against the United States if the issuing agency or instrumentality does
not meet its commitment. The Fund will invest in securities of U.S. government
agencies and instrumentalities only if the Manager is satisfied that the credit
risk with respect to the agency or instrumentality is minimal.
U.S. Treasury Obligations. These include Treasury bills (maturities of one
year or less when issued), Treasury notes (maturities of one to ten years), and
Treasury bonds (maturities of more than ten years). Treasury securities are
backed by the full faith and credit of the United States as to timely payments
of interest and repayments of principal. They also can include U. S. Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection
Securities ("TIPS").
Treasury Inflation-Protection Securities. The Fund can buy these
TIPS, which are designed to provide an investment vehicle that is not vulnerable
to inflation. The interest rate paid by TIPS is fixed. The principal value rises
or falls semi-annually based on changes in the published Consumer Price Index.
If inflation occurs, the principal and interest payments on TIPS are adjusted to
protect investors from inflationary loss. If deflation occurs, the principal and
interest payments will be adjusted downward, although the principal will not
fall below its face amount at maturity.
Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association ("GNMA") pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").
U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.
GNMA Certificates. The Government National Mortgage Association is a
wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs involve
its guarantees of privately-issued securities backed by pools of mortgages.
Ginnie Maes are debt securities representing an interest in one mortgage or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie Maes
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Maes,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However, if those payments are
insufficient, the guaranty agreements between the issuers of the Ginnie Maes and
GNMA require the issuers to make advances sufficient for the payments. If the
issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuers, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to 30 years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments, refinancing
and payments from foreclosures, is considerably less.
Federal Home Loan Mortgage Corporation ("FHLMC") Certificates.
FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in:
(iv) interest payments less servicing and guarantee fees,
(v) principal prepayments, and
(vi) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the mortgage
loans in the pool represented by the FHLMC Certificate, in
each case whether or not such amounts are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues Fannie
Mae Certificates which are backed by a pool of mortgage loans. Fannie Mae
guarantees to each registered holder of a Fannie Mae Certificate that the holder
will receive amounts representing the holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments, on the
mortgage loans in the pool represented by such Certificate, less servicing and
guarantee fees, and the holder's proportionate interest in the full principal
amount of any foreclosed or other liquidated mortgage loan. In each case the
guarantee applies whether or not those amounts are actually received. The
obligations of Fannie Mae under its guarantees are obligations solely of Fannie
Mae and are not backed by the full faith and credit of the United States or any
of its agencies or instrumentalities other than Fannie Mae.
Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S.
government securities. These will typically be U.S. Treasury Notes and Bonds
that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| "Stripped" Mortgage-Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Money Market Instruments and Short-Term Debt Obligations. The Fund can
invest in a variety of high quality money market instruments and short-term debt
obligations, both under normal market conditions and for defensive purposes. The
following is a brief description of the types of money market securities and
short-term debt obligations the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates. The Fund's investments in foreign money
market instruments and short-term debt obligations are subject to its limits on
investing in foreign securities and the risks of foreign investing, described
above.
U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities.
Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. They must be :
obligations issued or guaranteed by a domestic or foreign bank (including a
foreign branch of a domestic bank) having total assets of at least $1
billion, banker's acceptances (which may or may not be supported by letters
of credit) only if guaranteed by a U.S. commercial bank with total assets
of at least U.S. $1 billion.
The Fund can make time deposits. These are non-negotiable deposits in a
bank for a specified period of time. They may be subject to early withdrawal
penalties. Time deposits that are subject to early withdrawal penalties are
subject to the Fund's limits on illiquid investments, unless the time deposit
matures in seven days or less. "Banks" include commercial banks, savings banks
and savings and loan associations.
Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's. If
the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under 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. 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 expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are 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 Prospectus.
Currently, the Fund does not intend that its investments in variable amount
master demand notes will exceed 5% of its total assets.
"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed-delivery" basis. "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. Delivery
and payment for the securities take place at a later date. The securities are
subject to change in value from market fluctuations during the period until
settlement. The value at delivery may be less than the purchase price. For
example, changes in interest rates in a direction other than that expected by
the Manager before settlement will affect the value of such securities and may
cause a loss to the Fund. During the period between purchase and settlement, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss
to the Fund if the value of the security changes prior to the settlement date,
and there is the risk that the other party may not perform.
The Fund may engage in when-issued transactions to secure what the Manager
considers to be an advantageous price and yield at the time the obligation is
entered into. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge 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
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for defensive purposes.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's fundamental policy limits on holding illiquid investments. The Fund
cannot enter into a repurchase agreement that causes more than 10% of its net
assets to be subject to repurchase agreements having a maturity beyond seven
days. There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its ability
to do so. The Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Manager determines the
liquidity of certain of the Fund's investments. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
As a fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid or restricted securities, including repurchase
agreements having a maturity beyond seven days, portfolio securities for which
market quotations are not readily available and time deposits that mature in
more than 2 days. Certain restricted securities that are eligible for resale to
qualified institutional purchasers, as described below, may not be subject to
that limit. The Fund currently does not intend to invest more than 5% of its
total assets in illiquid and restricted securities. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted securities,
as stated above. Those percentage restrictions do not limit purchases of
restricted securities that are eligible for sale to qualified institutional
purchasers under Rule 144A of the Securities Act of 1933, if those securities
have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It may do so to try to provide income or to raise cash for liquidity
purposes. As a fundamental policy, these loans are limited to not more than 33
1/3% of the value of the Fund's total assets. The Fund presently does not intend
to engage in loans of securities but may do so in the future.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, or other cash equivalents in which the Fund
is permitted to invest. 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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any 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
finders', custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Hedging. The Fund can use hedging instruments. It is not obligated to
use them in seeking its objective although it can write covered calls to seek
high current income if the Manager believes that it is appropriate to do so. 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 that have appreciated, or to facilitate selling securities for
investment reasons, the Fund could:
sell futures contracts, or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case,
the Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could buy futures.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. 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. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
Futures. The Fund can buy and sell exchange-traded futures
contracts that relate to (1) broadly-based stock indices ("stock index futures")
(2) debt securities (these are referred to as "interest rate futures"), (3)
other broadly-based securities indices (these are referred to as "financial
futures"), (4) foreign currencies (these are referred to as "forward
contracts"), or (5) securities.
A broadly-based stock index is used as the basis for trading stock index
futures. An index may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial futures are similar contracts based on
the future value of the basket of securities that comprise the index. These
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian bank 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 (that is, its 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
daily.
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 any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions, except forward contracts,
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
Writing Covered Call Options. Under its fundamental policies, the
Fund is permitted to write (that is, sell) covered calls on securities, indices,
futures and forward contracts. If the Fund sells a call option, it must be
covered. That means the Fund must own the security subject to the call while the
call is outstanding, or, for calls on futures and indices, the call may be
covered by segregating liquid assets to enable the Fund to satisfy its
obligations if the call is exercised. Up to 20% of the Fund's total assets may
be subject to calls the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
If the Fund writes an over-the-counter ("OTC") option, it will enter into
an arrangement with a primary U.S. government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
The Fund may realize a profit if a call it has written expires
unexercised, because the Fund will retain the underlying security and the
premium it received when it wrote the call. Any such profits are considered
short-term capital gains for federal income tax purposes, as are the premiums on
lapsed calls. When distributed by the Fund they are taxable as ordinary income.
Because of the Fund's fundamental policies prohibiting the purchase of call
options, the Fund cannot effect closing purchase transactions to terminate calls
it has written.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by identifying on its
books an equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the segregated assets drops below 100%
of the current value of the future. Because of this segregation requirement, in
no circumstances would the Fund's receipt of an exercise notice as to that
future 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.
Selling Call Options on Foreign Currencies. The Fund can sell calls
on foreign currencies. They include calls that trade on a securities or
commodities exchange or in the over-the-counter markets or are quoted by major
recognized dealers in such options. The Fund could use these calls to try to
protect against declines in the dollar value of foreign securities and increases
in the dollar cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in
that currency might be partially offset by writing calls on that foreign
currency. However, the currency rates could fluctuate in a direction adverse to
the Fund's position.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying on its books liquid
assets in an amount equal to the exercise price of the option.
Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund could pay a brokerage commission each time it sells a call, or
sells an underlying investment in connection with the exercise of a call. Those
commissions could be higher on a relative basis than the commissions for direct
purchases or sales of the underlying investments. Premiums paid for options are
small in relation to the market value of the underlying investments.
Consequently, 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The
risk is that the prices of the futures will correlate imperfectly with the
behavior of the cash prices of the Fund's securities. For example, it is
possible that while the Fund has used hedging instruments in a short hedge, the
market might advance and the value of the securities held in the Fund's
portfolio might decline. If that occurred, the Fund would lose money on the
hedging instruments and also experience a decline in the value of 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.
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 might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures. It is possible that when the Fund
does so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them 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 a foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among 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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying to
its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if 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 the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
Interest Rate Swap Transactions. The Fund can enter into interest
rate swap agreements. In an interest rate swap, the Fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. Also, the Fund will identify on its books liquid assets
(such as cash or U.S. government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily, as needed.
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 be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures 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 the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund may write may be affected by options written
or held by other entities, including other investment companies having the same
adviser as the Fund (or an adviser that is an affiliate of the Fund's adviser).
The exchanges also impose position limits on futures transactions. An exchange
may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss:
(1) 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, and
(2) gains or losses attributable to fluctuations in the value of a
foreign currency between the date of acquisition of a debt security
denominated in a foreign currency or foreign currency forward
contracts and the date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
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 represented by proxy, or more than
50% of the outstanding shares.
Policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The Fund's
Board of Directors can change non-fundamental policies without shareholder
approval. However, significant changes to investment policies will be described
in supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's principal investment policies are
described in the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
The Fund cannot issue senior securities. However, it can make payments or
deposits of margin in connection with options or futures transactions, lend its
portfolio securities, enter into repurchase agreements, borrow money and pledge
its assets as permitted by its other fundamental policies. 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.
The Fund cannot invest more than 5% of its total assets (taken at market
value at the time of each investment) in the securities (other than securities
of the U.S. government or its agencies) of any one issuer or invest more than
15% of its total assets in the obligations of any one bank. This restriction
applies to repurchase agreements with any one bank or dealer. Additionally, the
Fund cannot purchase more than either 10% principal amount of the outstanding
debt securities of an issuer, or 10% of the outstanding voting securities of an
issuer. This restriction shall not apply to securities issued or guaranteed by
the U.S. government or its agencies, bank instruments or bank repurchase
agreements.
The Fund cannot invest more than 25% of the value of its total assets in
the securities of issuers in any single industry. However, this limitation shall
not apply to the purchase of obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. For the purpose of this
restriction, each utility that provides a separate service (for example, gas,
gas transmission, electric or telephone) shall be considered to be a separate
industry. This test shall be applied on a pro forma basis using the market value
of all assets immediately prior to making any investment. The Fund has
undertaken as a matter of non-fundamental policy to apply this restriction to
25% or more of its total assets.
The Fund cannot, by itself or together with any other fund, portfolio or
portfolios, make investments for the purpose of exercising control over, or
management of, any issuer.
The Fund cannot purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition or reorganization. It
can also purchase in the open market securities of closed-end investment
companies if 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% of the Fund's total assets, taken at market value, would be
invested in such securities.
The Fund cannot purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity contracts or real
estate. However, the Fund can purchase securities of issuers that invest or deal
an any of the above interests and can 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.
The Fund cannot purchase any securities on margin or make short sales of
securities or maintain a short position. However, the Fund can obtain such
short- term credits as may be necessary for the clearance of purchases and sales
of portfolio securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with futures contracts or related options
transactions is not considered to be the purchase of a security on margin.
The Fund cannot make loans. However, the Fund 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. The Fund can also enter into
repurchase agreements, and 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.
The Fund cannot borrow amounts in excess of 10% of its total assets, taken
at market value at the time of the borrowing. It can borrow only from banks as a
temporary measure for extraordinary or emergency purposes. It cannot make
investments in portfolio securities while such outstanding borrowings exceed 5%
of its total assets.
The 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).
The Fund cannot 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 its restriction
on borrowing, above. In that case such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets, taken at market value at the time of
the borrowing. The deposit of cash, cash equivalents and liquid debt securities
in a segregated account with the Fund's custodian bank and/or with a broker in
connection with futures contracts or related options transactions and the
purchase of securities on a "when-issued" basis are not deemed to be pledges.
The Fund cannot underwrite securities of other issuers. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 in reselling its portfolio securities.
The Fund cannot write, purchase or sell puts, calls or combinations
thereof, except that it can write covered call options.
The Fund cannot invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the time
of the investment, would be invested in such securities. However, up to 25% of
the total assets of the Fund may be invested in the aggregate in such securities
that are (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.
The Fund cannot invest more than 10% 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 two days, portfolio securities that do not have
readily available market quotations and all other illiquid assets.
For purposes of the fundamental investment restrictions, the term "borrow"
does not include mortgage dollar rolls, reverse repurchase agreements or lending
portfolio securities. The terms "illiquid securities" and "portfolio securities
that do not have readily available market quotations" include restricted
securities. However, reverse repurchase agreements are treated as borrowings,
master demand notes may be deemed to be illiquid securities and mortgage dollar
rolls are sales transactions and not financings.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios, or
"series," of Oppenheimer Series Fund, Inc. That corporation is an open-end,
management investment company organized as a Maryland corporation in 1981, and
was called Connecticut Mutual Investment Accounts, Inc. until March 18, 1996,
when the Manager became the Fund's investment adviser. The Fund is a diversified
mutual fund, and until March 18, 1996 was called Connecticut Mutual Growth
Account.
The Fund's parent corporation is governed by a Board of Directors, which
is responsible for protecting the interests of shareholders under Maryland law.
The Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
|X| Classes of Shares. The Board of Directors has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares: Class A, Class B, Class C and Class Y. All classes invest in the same
investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class
are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Fund's parent corporation or
its series or classes into additional series or classes of shares. The Directors
also may divide or combine the shares of a class into a greater or lesser number
of shares without 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 at
shareholder meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Maryland law to hold annual meetings, it may hold shareholder meetings from time
to time on important matters. The shareholders of the Fund's parent corporation
have the right to call a meeting to remove a Director or to take certain other
action described in the Articles of Incorporation or under Maryland law.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund's
parent corporation receives a written request of the record holders of at least
25% of the outstanding shares eligible to be voted at a meeting to call a
meeting for a specified purpose (which might include the removal of a Director),
the Directors will call a meeting of shareholders for that specified purpose.
The Fund's parent corporation has undertaken that it will then either give the
applicants access to the Fund's shareholder list or mail the applicants'
communication to all other shareholders at the applicants' expense.
Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at shareholders' meetings. Those
matters include the election of Directors and ratification of appointment of the
independent auditors. Shareholders of a particular series or class vote
separately on proposals that affect that series or class. Shareholders of a
series or class that is not affected by a proposal are not entitled to vote on
the proposal. For example, only shareholders of a particular series vote on any
material amendment to the investment advisory agreement for that series. Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.
Directors and Officers of the Fund. The Directors of the Fund's parent
corporation and the Fund's officers and their principal occupations and business
affiliations during the past five years are listed below. Directors denoted with
an asterisk (*) below are deemed to be "interested persons" of the Fund's parent
corporation and the Fund under the Investment Company Act. All of the Directors
are also trustees, directors or managing general partners of the following New
York-based Oppenheimer funds11:
11 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market
Fund, Inc. Mr. Griffiths is not a Trustee of Oppenheimer Discovery Fund.
<PAGE>
Oppenheimer California Municipal Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund
Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Europe Fund
Oppenheimer New York Municipal Fund
Oppenheimer Global Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of February 15, 2000 the Directors and officers of
the Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.
Leon Levy, Chairman of the Board of Directors, Age 74
280 Park Avenue, New York, New York 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Director, Age 66
19750 Beach Road, Jupiter Island, Florida 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Director, Age 61
97 Olden Lane, Princeton, New Jersey 08540
The Director of the Institute for Advanced Study, Princeton, NJ (since 1991) and
a member of the National Academy of Sciences (since 1979); formerly a director
of Bankers Trust Corporation (1994 through June 1999), Provost and Professor of
Mathematics at Duke University (1983 - 1991), a director of Research Triangle
Institute, Raleigh, N.C. (1983 - 1991), and a Professor of Mathematics at
Harvard University (1972 - 1983).
Benjamin Lipstein, Director, Age 76
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill,* President and Director, Age 51 Two World Trade Center,
34th Floor, New York, New York 10048-0203 President (since June 1991), Chief
Executive Officer (since September 1995) and a Director (since December 1994) of
the Manager; President and director (since June 1991) of HarbourView Asset
Management Corporation; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), (both are transfer agent subsidiaries of the Manager); President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp., the Manager's parent holding company; President (since September 1995)
and a director (since November 1989) of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of the Manager; a director of Oppenheimer Real
Asset Management, Inc., an investment advisory subsidiary of the Manager (since
July 1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd. and of Oppenheimer Millennium Funds plc, off-shore investment
companies managed by the Manager; President and a director of other Oppenheimer
funds; a director of Prudential Corporation plc (a U.K. financial service
company).
Elizabeth B. Moynihan, Director, Age 70
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Director, Age 72
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), and Prime Retail,
Inc. (real estate investment trust); 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 69
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 director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Director, Age 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (a U.K.
temporary staffing company); a life trustee of International House (non-profit
educational organization), and a trustee of the Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Director, Age 74
Two World Trade Center, 34th Floor, New York, New York 10048-0203
Formerly he held the following positions: Chairman Emeritus (August 1991 -
August 1999), Chairman (November 1987 - January 1991) and a director (January
1969 - August 1999) of the Manager; President and Director of OppenheimerFunds
Distributor, Inc., the Fund's Distributor (July 1978 - January 1992).
Clayton K. Yeutter, Director, Age 69
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) 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.
Peter M. Antos, Vice President and Portfolio Manager, Age 54
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Principal Portfolio Manager, Vice President of the
Fund and Senior Vice President of the Manager and HarbourView Asset Management
Corporation (since March 1996); portfolio manager of other Oppenheimer funds;
before joining HarbourView in March 1996, he was Vice President and Senior
Portfolio Manager, Equities - Connecticut Mutual Life Insurance Company and its
subsidiary - G.R. Phelps & Co. ("G.R. Phelps") (1989 - 1996).
Michael C. Strathearn, Vice President and Portfolio Manager, Age 47
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Fund, the Manager and
HarbourView Asset Management Corp (since March 1996); an officer of other
Oppenheimer funds; previously a Portfolio Manager, Equities, of Connecticut
Mutual Life Insurance Company (1988-1996).
Kenneth B. White, Vice President and Portfolio Manager, Age 48
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Fund, the Manager and
HarbourView Asset Management Corp. (since March 1996); an officer of other
Oppenheimer funds; previously a Portfolio Manager, Equities, of Connecticut
Mutual Life Insurance Company (1992-1996).
Andrew J. Donohue, Secretary, Age 49
Two World Trade Center, 34th Floor, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Age40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age 51
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of Shareholder Services, Inc. (since May 1985), and
Shareholder Financial Services, Inc. (since November 1989); Assistant Secretary
of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age 41
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer, Age 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
|X| Remuneration of Directors. The officers of the Fund and Ms. Macaskill,
who is affiliated with the Manager receive no salary or fee from the Fund. The
remaining Directors of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
1999. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1999.
<PAGE>
------------------------------------------------------------------------------
Total
Retirement Compensation
Benefits From all
Aggregate Accrued as Part New York based
Director's Name Compensation of Fund Oppenheimer
and Other Positions from Fund1 Expenses Funds (24 Funds)2
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Leon Levy $5,559 $1,271 $166,700
Chairman
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Robert G. Galli $2,500 None $176,2153
Study Committee Member
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Phillip A. Griffiths $5334 None $17,835
- -------------------------------------------------------------------------------
------------------------------------------------------------------------------
Benjamin Lipstein
Study Committee
Chairman,
Audit Committee Member $5,135 $1,429 $144,100
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Elizabeth B. Moynihan $2,752 $141 $101,500
Study Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Kenneth A. Randall $3,172 $778 $93,100
Audit Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Edward V. Regan
Proxy Committee
Chairman, Audit
Committee Member $2,369 None $92,100
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Russell S. Reynolds, Jr. $2,010 $238 $68,900
Proxy Committee Member
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Donald W. Spiro None None $10,2505
- -------------------------------------------------------------------------------
------------------------------------------------------------------------------
Clayton K. Yeutter
Proxy Committee
Member $1,7726 None $68,900
------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Director.
2. For the 1999 calendar year.
Total Compensation for the 1999 calendar year includes compensation
received for serving as Trustee or Director of 10 other Oppenheimer funds.
4. Includes $461 deferred under Deferred Compensation Plan described below.
5. Prior to August 1, 1999 Mr. Spiro was not an independent Director.
6. Includes $517 deferred under Deferred Compensation Plan described below.
|X| Retirement Plan for Directors. The Fund and its parent corporation
have adopted a retirement plan that provides for payments to retired Directors.
Payments are up to 80% of the average compensation paid during a Director's five
years of service in which the highest compensation was received. A Director must
serve as director or trustee for any of the New York-based Oppenheimer funds for
at least 15 years to be eligible for the maximum payment. Each Director's
retirement benefits will depend on the amount of the Director's future
compensation and length of service. Therefore the amount of those benefits
cannot be determined at this time, nor can we estimate the number of years of
credited service that will be used to determine those benefits.
|X| Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation Plan for disinterested directors that enables them to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Director
is periodically adjusted as though an equivalent amount had been invested in
shares of one or more Oppenheimer funds selected by the Director. The amount
paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Directors' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Director or to pay any particular level
of compensation to any Director. Pursuant to an Order issued by the Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
|X| Major Shareholders. As of February 15, 2000, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:
Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA
01111-0001, which owned 1,543,140.219 Class Y shares (representing
approximately 35.70% of the outstanding Class Y shares).
Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA
01111-0001, which owned 1,059,829.254 Class Y shares (representing
approximately 24.52% of the outstanding Class Y shares).
Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA
01111-0001, which owned 921,134.732 Class Y shares (representing
approximately 21.31% of the outstanding Class Y shares).
Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA
01111-0001, which owned 797,555.655 Class Y shares (representing
approximately 18.45% of the outstanding Class Y shares).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
of the Fund are employed by the Manager and are the persons who are principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the advisory
agreement. The advisory agreement lists examples of expenses paid by the Fund.
The major categories 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 costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class.
------------------------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1997 $1,850,924
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $3,658,650
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $3,663,867
------------------------------------------------------------------------------
The investment advisory agreement states 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 investment 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 under the
agreement.
The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the Manager may withdraw the right of the Fund's parent
corporation to use the name "Oppenheimer" as part of its name and the name of
the Fund.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Directors.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio 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 investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment 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. The investment research received for the
commissions of those other accounts may be useful both to the Fund and one or
more of the Manager's other accounts. Investment research may be supplied to the
Manager by a third party at the instance of a broker through which trades are
placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Directors permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
------------------------------------------------------------------------------
Fiscal Year Ended 10/31: Total Brokerage Commissions Paid by the Fund1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1997 $892,947
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $2,003,638
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $2,227,5152
------------------------------------------------------------------------------
3. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
4.In the fiscal year ended 10/31/99, the amount of transactions directed to
brokers for research services was $1,309,216,784 and the amount of the
commissions paid to broker-dealers for those services was $1,610,077.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund's
parent corporation, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The Distributor is not obligated to sell a specific number of shares. Expenses
normally attributable to sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale
of shares or on the redemption of shares during the Fund's three most recent
fiscal years is shown in the table below.
<PAGE>
- -------------------------------------------------------------------------------
Aggregate Class A
Front-End Front-End Commissions Commissions Commissions
Fiscal Sales Sales on Class A on Class B on Class C
Year Charges on Charges Shares Shares Shares
Ended Class A Retained by Advanced by Advanced by Advanced by
10/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $885,737 $558,864 $18,532 $835,875 $55,818
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $1,667,118 $789,178 $178,820 $1,811,143 $100,603
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $715,853 $384,487 $59,831 $688,909 $35,094
- -------------------------------------------------------------------------------
2. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- -------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent
Year Deferred Sales Deferred Sales Class C Contingent
Ended Charges Retained by Charges Retained by Deferred Sales Charges
10/31 Distributor Distributor Retained by Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $10,546 $368,337 $5,553
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors12, cast in person at a meeting called
for the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the Manager as the sole initial holder of
Class C shares of the Fund.
12 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Directors" in this Statement of Additional Information refers to
those Directors who are not "interested persons" of the Fund (or its parent
corporation) and who do not have any direct or indirect financial interest in
the operation of the distribution plan or any agreement under the plan.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.
Each plan states that while it is in effect, the selection and nomination
of those Directors of the Fund's parent corporation who are not "interested
persons" of the corporation (or the Fund) is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others in the
selection and nomination process as long as the final decision as to selection
or nomination is approved by a majority of the Independent Directors.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Directors. The Board of Directors has set no minimum amount of
assets to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services 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. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended October 31, 1999 payments under the Class A Plan
totaled $1,107,816, all of which was paid by the Distributor to recipients. That
included $686,023 paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution 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 Class B and Class C plans
provide for the Distributor to be compensated for its services at a flat rate,
whether the Distributor's costs in distributing Class B and Class C shares and
servicing accounts are more or less than the amounts paid by the Fund under the
plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A
service plan, described above.
The Class B and the Class C plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of sale
and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing from
its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B or the Class C plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 10/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Amount Unreimbursed Expenses as %
Total Payments Retained by Expenses Under of Net Assets
Class: Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $1,236,713 $1,010,7361 $2,803,501 2.73%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $177,555 $84,0512 $216,125 1.48%
- --------------------------------------------------------------------------------
3. Includes $60,894 paid to and affiliate of the Distributor's parent company.
4. Includes $20,583 paid to and affiliate of the Distributor's parent company.
All payments under the Class B and the 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions. o An investment in the Fund is not
insured by the FDIC or any other government agency.
The principal value of the Fund's shares, and total returns are not
guaranteed and normally will fluctuate on a daily basis.
When an investor's shares are redeemed, they may be worth more or less
than their original cost.
Total returns for any given past period represent historical performance
information and are not, and should not be considered, a prediction of future
returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. There is no sales charge on Class Y
shares.
Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Return. 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
Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) 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 Fund's Total Returns for the Periods Ended 10/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative
Total
Class of Returns (10
Shares years
or Life of
Class) Average Annual Total Returns
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-Year
(or
1-Year life-of-class) 10-Year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A1 243.75% 264.72% -2.36% 3.60% 13.47% 14.83% 13.14% 13.81%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 55.54%2 57.54%2 -2.15% 2.79% 11.43%2 11.78%2 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 39.18%3 39.18%3 1.83% 2.82% 9.91%3 9.91%3 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y 31.70%4 31.70%4 3.81% 3.81% 10.05%4 10.05%4 N/A N/A
- --------------------------------------------------------------------------------
1. Inception of Class A: 9/16/85.
2. Inception of Class B: 10/2/95.
3. Inception of Class C: 5/1/96.
4. Inception of Class Y: 12/16/96.
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is 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 is ranked by Lipper against
all other general U.S. government funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the performance of
all mutual funds in a category that it monitors and averages of the performance
of the funds in particular categories.
Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the intermediate government fund category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the Fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), 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
rating is the Fund's (or class's) overall rating, which is the Fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%, respectively),
depending on the inception date of the Fund (or class). Ratings are subject to
change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star rating. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
- --------------------------------------------------------------------------------
A B O U T Y O U R A C C O U N T
- --------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
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
for your joint accounts, or for trust or custodial accounts on behalf of
your children who are minors, and 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, and
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.
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. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer California Municipal Fund Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund
Oppenheimer Capital Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Champion Income Fund Oppenheimer Municipal Bond Fund
Oppenheimer Convertible Securities Fund Oppenheimer New York Municipal Fund
Oppenheimer Developing Markets Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Global Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Insured Municipal Fund
Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund
Oppenheimer Large Cap Growth Fund
Limited-Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Rochester Fund Municipals
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the 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:
(d) Class A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge,
(e) Class B shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and
(f) Class A or Class B shares acquired by exchange of either (1)
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 (2) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make 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 debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values of some of the Fund's
portfolio securities may change significantly on those days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
Securities Valuation. The Fund's Board of Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(3) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, on that day, or
(4) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation date if it
is within the spread of the closing "bid" and "asked" prices on the
valuation date or, if not, at the closing "bid" price on the valuation
date.
Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways: (4) at the last sale price available to the
pricing service approved by the Board of Directors, or
(5 ) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last trading
session on or immediately before the valuation date, or
(6) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis of
reasonable inquiry, from two market makers in the security.
Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
The following securities are valued at the mean between the "bid" and
"asked" 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:
(4) debt instruments that have a maturity of more than 397 days when
issued,
(5) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(6) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or less.
The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts:
(3) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining maturity
of 60 days or less, and
(4) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
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, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is 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. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
Class B shares that were subject to the Class B contingent deferred sales
charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares or Class Y. 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.
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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
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 account
holds fewer than 100 shares. If the Board exercises this right, it may also fix
the requirements for any notice to be given to the shareholders in question (not
less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so
that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Sending Redemption Proceeds 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.
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
(4) state the reason for the distribution;
(5) state the owner's awareness of tax penalties if the distribution is
premature; and
6) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, 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, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these 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 Appendix C to this
Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another 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. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
Allof the Oppenheimer funds currently offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, and
Centennial America Fund, L.P., which only offer Class A shares.
Oppenheimer Main Street California Municipal Fund currently offers only
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.
Only certain Oppenheimer funds currently offer Class Y shares. Class Y shares of
Oppenheimer Real Asset Fund(sm) may not be exchanged for shares of any other
fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of shares of any class of any other Oppenheimer funds except
Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange of
Class A shares of other Oppenheimer funds. Class A shares of Senior Floating
Rate Fund that are exchanged for shares of the other Oppenheimer funds may
not be exchanged back for Class A shares of Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only
for Class B shares of other Oppenheimer funds and no exchanges may be made to
Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those change whenever it is required to do so by applicable
law. It may be required to provide 60 days' notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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. 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 B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class
of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request.
When you exchange some or all of your shares from one fund to another, any
special account feature such as an Asset Builder Plan or Automatic Withdrawal
Plan, will be switched to the new fund account unless you tell the Transfer
Agent not to do so. However, special redemption and exchange features such as
Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an
account in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A and Class Y shares. That is
because of the effect of the asset-based sales charge on Class B and Class C
shares. Those dividends will also differ in amount as a consequence of any
difference in the net asset values of the different classes of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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 Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Directors and the Manager might determine in a particular year that it
would be in the best interests 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.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent 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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
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. 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. KPMG LLP are the independent auditors of the Fund. They
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>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER DISCIPLINED VALUE FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Disciplined Value Fund as of
October 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended and the ten months ended October 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. The financial
highlights for each of the years in the two-year period 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 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 as of
October 31, 1999, 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 audits provide 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, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended and the ten months ended
October 31, 1996, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 19, 1999
STATEMENT OF INVESTMENTS October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--96.0%
- -------------------------------------------------------------------------------------
BASIC MATERIALS--3.8%
- -------------------------------------------------------------------------------------
CHEMICALS--2.0%
Dow Chemical Co. 53,900 $ 6,373,675
- -------------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 42,600 1,629,450
- -------------------------------------------------------------------------------------
Rohm & Haas Co. 100,100 3,828,825
- ---------------
11,831,950
- -------------------------------------------------------------------------------------
PAPER--1.8%
Georgia-Pacific Group 63,100 2,504,281
- -------------------------------------------------------------------------------------
Georgia-Pacific Group/Timber Group 46,500 1,110,187
- -------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 190,400 2,415,700
- -------------------------------------------------------------------------------------
Rayonier, Inc. 27,500 1,127,500
- -------------------------------------------------------------------------------------
Weyerhaeuser Co. 52,500 3,133,594
- ---------------
10,291,262
- -------------------------------------------------------------------------------------
CAPITAL GOODS--13.4%
- -------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--2.3%
Cordant Technologies, Inc. 30,200 941,862
- -------------------------------------------------------------------------------------
General Dynamics Corp. 177,600 9,845,700
- -------------------------------------------------------------------------------------
Northrop Grumman Corp. 48,500 2,661,437
- ---------------
13,448,999
- -------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.0%
Rockwell International Corp. 55,000 2,664,062
- -------------------------------------------------------------------------------------
SPX Corp.(1) 103,600 8,780,100
- ---------------
11,444,162
- -------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.4%
Valassis Communications, Inc.(1) 54,900 2,360,700
- -------------------------------------------------------------------------------------
MANUFACTURING--8.7%
Avery-Dennison Corp. 30,700 1,918,750
- -------------------------------------------------------------------------------------
Ball Corp. 41,800 1,685,062
- -------------------------------------------------------------------------------------
Briggs & Stratton Corp. 62,900 3,675,719
- -------------------------------------------------------------------------------------
Cooper Industries, Inc. 63,000 2,712,937
- -------------------------------------------------------------------------------------
Dover Corp. 143,100 6,090,694
- -------------------------------------------------------------------------------------
Eaton Corp. 45,500 3,423,875
- -------------------------------------------------------------------------------------
ITT Industries, Inc. 84,300 2,882,006
- -------------------------------------------------------------------------------------
Miller (Herman), Inc. 67,100 1,455,231
- -------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 96,300 9,154,519
12 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING Continued
Parker-Hannifin Corp. 59,600 $ 2,730,425
- -------------------------------------------------------------------------------------
Textron, Inc. 48,200 3,720,437
- -------------------------------------------------------------------------------------
United Technologies Corp. 191,000 11,555,500
- ---------------
51,005,155
- -------------------------------------------------------------------------------------
COMMUNICATION SERVICES--7.8%
TELECOMMUNICATIONS: LONG DISTANCE--4.4%
ADC Telecommunications, Inc.(1) 36,600 1,745,362
- -------------------------------------------------------------------------------------
ALLTELL Corp. 176,100 14,660,325
- -------------------------------------------------------------------------------------
AT&T Corp. 150,500 7,035,875
- -------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 59,200 2,497,500
- ---------------
25,939,062
- -------------------------------------------------------------------------------------
TELEPHONE UTILITIES--3.4%
BellSouth Corp. 187,400 8,433,000
- -------------------------------------------------------------------------------------
SBC Communications, Inc. 224,904 11,456,047
- ---------------
19,889,047
- -------------------------------------------------------------------------------------
CONSUMER CYCLICALS--12.0%
- -------------------------------------------------------------------------------------
AUTOS & HOUSING--3.6%
Cooper Tire & Rubber Co. 86,100 1,447,556
- -------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 51,800 1,842,137
- -------------------------------------------------------------------------------------
Fortune Brands, Inc. 47,300 1,676,194
- -------------------------------------------------------------------------------------
Genuine Parts Co. 217,100 5,658,169
- -------------------------------------------------------------------------------------
Southdown, Inc. 40,900 1,975,981
- -------------------------------------------------------------------------------------
Stanley Works (The) 67,900 1,884,225
- -------------------------------------------------------------------------------------
USG Corp. 57,500 2,849,844
- -------------------------------------------------------------------------------------
Vulcan Materials Co. 65,800 2,718,362
- -------------------------------------------------------------------------------------
York International Corp. 45,100 1,062,669
- ---------------
21,115,137
- -------------------------------------------------------------------------------------
CONSUMER SERVICES--0.8%
Harte-Hanks, Inc. 57,100 1,131,294
- -------------------------------------------------------------------------------------
Hertz Corp., Cl. A 77,300 3,352,887
- ---------------
4,484,181
- -------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.9%
Hasbro, Inc. 55,000 1,134,375
- -------------------------------------------------------------------------------------
MGM Grand, Inc.(1) 42,000 2,142,000
- -------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 138,700 2,019,819
- ---------------
5,296,194
13 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA--2.4%
Central Newspapers, Inc., Cl. A 31,200 $ 1,339,650
- -------------------------------------------------------------------------------------
Deluxe Corp. 53,800 1,519,850
- -------------------------------------------------------------------------------------
Gannett Co., Inc. 94,900 7,319,162
- -------------------------------------------------------------------------------------
Knight-Ridder, Inc. 64,600 4,102,100
- ---------------
14,280,762
- -------------------------------------------------------------------------------------
RETAIL: GENERAL--1.3%
Federated Department Stores, Inc.(1) 55,100 2,352,081
- -------------------------------------------------------------------------------------
May Department Stores Co. 106,800 3,704,625
- -------------------------------------------------------------------------------------
Nordstrom, Inc. 71,000 1,770,562
- ---------------
7,827,268
- -------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.4%
Ross Stores, Inc. 160,000 3,300,000
- -------------------------------------------------------------------------------------
Sherwin-Williams Co. 74,200 1,660,225
- -------------------------------------------------------------------------------------
TJX Cos., Inc. 129,300 3,507,262
- ---------------
8,467,487
- -------------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--1.6%
Jones Apparel Group, Inc.(1) 126,100 3,987,912
- -------------------------------------------------------------------------------------
Liz Claiborne, Inc. 43,800 1,752,000
- -------------------------------------------------------------------------------------
Shaw Industries, Inc. 155,600 2,402,075
- -------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 62,500 1,183,594
- ---------------
9,325,581
- -------------------------------------------------------------------------------------
CONSUMER STAPLES--8.9%
- -------------------------------------------------------------------------------------
BEVERAGES--1.6%
Adolph Coors Co., Cl. B 35,300 1,959,150
- -------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 103,000 7,396,687
- ---------------
9,355,837
- -------------------------------------------------------------------------------------
ENTERTAINMENT--0.7%
Brinker International, Inc.(1) 65,600 1,529,300
- -------------------------------------------------------------------------------------
Darden Restaurants, Inc. 63,000 1,200,937
- -------------------------------------------------------------------------------------
Wendy's International, Inc. 63,000 1,504,125
- ---------------
4,234,362
14 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
FOOD--2.8%
Flowers Industries, Inc. 54,200 $ 914,625
- -------------------------------------------------------------------------------------
Heinz (H.J.) Co. 54,000 2,578,500
- -------------------------------------------------------------------------------------
Hormel Foods Corp. 67,400 2,906,625
- -------------------------------------------------------------------------------------
IBP, Inc. 237,100 5,675,581
- -------------------------------------------------------------------------------------
Keebler Foods Co.(1) 46,000 1,469,125
- -------------------------------------------------------------------------------------
Sara Lee Corp. 103,600 2,803,675
- ---------------
16,348,131
- -------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.8%
Albertson's, Inc. 95,800 3,478,737
- -------------------------------------------------------------------------------------
SUPERVALU, Inc. 44,800 940,800
- ---------------
4,419,537
- -------------------------------------------------------------------------------------
HOUSEHOLD GOODS--2.5%
Kimberly-Clark Corp. 145,900 9,209,938
- -------------------------------------------------------------------------------------
Premark International, Inc. 102,900 5,633,775
- ---------------
14,843,713
- -------------------------------------------------------------------------------------
TOBACCO--0.5%
UST, Inc. 102,100 2,826,894
- -------------------------------------------------------------------------------------
ENERGY--8.4%
- -------------------------------------------------------------------------------------
ENERGY SERVICES--0.9%
Anadarko Petroleum Corp. 43,400 1,337,263
- -------------------------------------------------------------------------------------
ENSCO International, Inc. 100,800 1,953,000
- -------------------------------------------------------------------------------------
Global Marine, Inc.(1) 126,100 1,915,144
- ---------------
5,205,407
- -------------------------------------------------------------------------------------
OIL: DOMESTIC--4.4%
Apache Corp. 52,600 2,051,400
- -------------------------------------------------------------------------------------
Burlington Resources, Inc. 42,000 1,464,750
- -------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 107,700 2,955,019
- -------------------------------------------------------------------------------------
Exxon Corp. 94,300 6,984,094
- -------------------------------------------------------------------------------------
Mobil Corp. 71,900 6,938,350
- -------------------------------------------------------------------------------------
Murphy Oil Corp. 30,500 1,709,906
- -------------------------------------------------------------------------------------
Texaco, Inc. 55,300 3,394,038
- ---------------
25,497,557
15 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
OIL: INTERNATIONAL--3.1%
BP Amoco plc, ADR 138,200 $7,981,050
- -------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 115,200 6,904,800
- -------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 48,700 3,247,681
- ---------------
18,133,531
- -------------------------------------------------------------------------------------
FINANCIAL--23.0%
- -------------------------------------------------------------------------------------
BANKS--4.6%
Bank United Corp., Cl. A 21,500 838,500
- -------------------------------------------------------------------------------------
Chase Manhattan Corp. 39,700 3,468,788
- -------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. 21,400 2,800,725
- -------------------------------------------------------------------------------------
National City Corp. 114,500 3,377,750
- -------------------------------------------------------------------------------------
Old Kent Financial Corp. 69,300 2,823,975
- -------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 37,200 720,750
- -------------------------------------------------------------------------------------
UnionBanCal Corp. 80,800 3,509,750
- -------------------------------------------------------------------------------------
Wachovia Corp. 52,700 4,545,375
- -------------------------------------------------------------------------------------
Wells Fargo Co. 104,800 5,017,300
- ---------------
27,102,913
- -------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--5.5%
AMBAC Financial Group, Inc. 68,200 4,074,950
- -------------------------------------------------------------------------------------
Citigroup, Inc. 255,400 13,823,525
- -------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 22,900 1,625,900
- -------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 66,100 7,291,656
- -------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 82,700 3,132,263
- -------------------------------------------------------------------------------------
PMI Group, Inc. (The) 21,800 1,130,875
- -------------------------------------------------------------------------------------
Radian Group, Inc. 21,900 1,156,594
- ---------------
32,235,763
- -------------------------------------------------------------------------------------
INSURANCE--12.7%
ACE Ltd. 131,400 2,554,088
- -------------------------------------------------------------------------------------
Allstate Corp. 137,000 3,938,750
- -------------------------------------------------------------------------------------
American General Corp. 43,900 3,256,831
- -------------------------------------------------------------------------------------
American International Group, Inc. 74,275 7,645,683
- -------------------------------------------------------------------------------------
AXA Financial, Inc. 266,000 8,528,625
- -------------------------------------------------------------------------------------
Chubb Corp. 67,500 3,704,063
- -------------------------------------------------------------------------------------
Cigna Corp. 99,100 7,407,725
- -------------------------------------------------------------------------------------
Conseco, Inc. 119,700 2,910,206
- -------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 52,600 2,748,350
- -------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 128,300 9,630,519
- -------------------------------------------------------------------------------------
Lincoln National Corp. 148,900 6,868,013
16 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE Continued
Manulife Financial Corp.(1) 91,800 $ 1,107,338
- -------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 57,600 4,554,000
- -------------------------------------------------------------------------------------
Safeco Corp. 44,200 1,215,500
- -------------------------------------------------------------------------------------
St. Paul Cos., Inc. 99,400 3,180,800
- -------------------------------------------------------------------------------------
Torchmark Corp. 41,500 1,294,281
- -------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 114,600 4,125,600
- ---------------
74,670,372
- -------------------------------------------------------------------------------------
SAVINGS & LOANS--0.2%
Greenpoint Financial Corp. 39,300 1,120,050
- -------------------------------------------------------------------------------------
TECHNOLOGY--9.2%
- -------------------------------------------------------------------------------------
COMPUTER HARDWARE--5.0%
Apple Computer, Inc.(1) 67,000 5,368,375
- -------------------------------------------------------------------------------------
Hewlett-Packard Co. 61,700 4,569,656
- -------------------------------------------------------------------------------------
International Business Machines Corp. 107,700 10,594,988
- -------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 115,500 9,016,219
- ---------------
29,549,238
- -------------------------------------------------------------------------------------
COMPUTER SERVICES--1.1%
First Data Corp. 143,300 6,547,019
- -------------------------------------------------------------------------------------
COMPUTER SOFTWARE--0.8%
BISYS Group, Inc. (The)(1) 50,000 2,550,000
- -------------------------------------------------------------------------------------
Synopsys, Inc.(1) 35,600 2,218,325
- ---------------
4,768,325
- -------------------------------------------------------------------------------------
ELECTRONICS--2.3%
Cypress Semiconductor Corp.(1) 87,400 2,234,163
- -------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 25,100 1,477,763
- -------------------------------------------------------------------------------------
Intel Corp. 56,900 4,406,194
- -------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 65,000 1,945,938
- -------------------------------------------------------------------------------------
Teradyne, Inc.(1) 91,800 3,534,300
- ---------------
13,598,358
- -------------------------------------------------------------------------------------
TRANSPORTATION--1.6%
- -------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.8%
Delta Air Lines, Inc. 86,800 4,725,175
- -------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.8%
Union Pacific Corp. 87,900 4,900,425
17 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES--7.9%
- -------------------------------------------------------------------------------------
ELECTRIC UTILITIES--7.0%
Carolina Power & Light Co. 46,700 $ 1,611,150
- -------------------------------------------------------------------------------------
Conectiv, Inc. 86,200 1,680,900
- -------------------------------------------------------------------------------------
Duke Energy Corp. 123,900 7,000,350
- -------------------------------------------------------------------------------------
Entergy Corp. 26,000 778,375
- -------------------------------------------------------------------------------------
FPL Group, Inc. 91,300 4,593,531
- -------------------------------------------------------------------------------------
Montana Power Co. 146,400 4,163,250
- -------------------------------------------------------------------------------------
Peco Energy Co. 74,700 2,852,606
- -------------------------------------------------------------------------------------
Potomac Electric Power Co. 69,400 1,904,163
- -------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 95,000 3,758,438
- -------------------------------------------------------------------------------------
Reliant Energy, Inc. 221,700 6,041,325
- -------------------------------------------------------------------------------------
Texas Utilities Co. 85,800 3,324,750
- -------------------------------------------------------------------------------------
Unicom Corp. 83,000 3,179,938
- ---------------
40,888,776
- -------------------------------------------------------------------------------------
GAS UTILITIES--0.9%
El Paso Energy Corp. 90,800 3,722,800
- -------------------------------------------------------------------------------------
NICOR, Inc. 37,500 1,453,125
- ---------------
5,175,925
- ---------------
Total Common Stocks (Cost $557,205,308) 563,154,255
<CAPTION>
UNITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Concentric Network Corp. Wts., Exp. 12/15/07(2) 100 25,013
- -------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp. 12/12/01(2) 333 117
- -------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp. 6/1/00 50 4,357
- -------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(2) 500 21,375
- -------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/1/07(2) 344 53,320
- -------------------------------------------------------------------------------------
Signature Brands, Inc. Wts.(2) 50 1,006
- ---------------
Total Rights, Warrants and Certificates (Cost $7,533) 105,188
18 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts.,
2/15/01(3) (Cost $46,270) $ 50,000 $ 313
- -------------------------------------------------------------------------------------
SHORT-TERM NOTES--4.4%4
Federal Home Loan Bank, 5.16%, 11/1/99 9,500,000 9,500,000
- -------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.16%, 11/15/99 5,000,000 4,989,966
- -------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.12%, 11/26/99 6,000,000 5,978,667
- -------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.22%, 11/12/99 5,000,000 4,992,025
- ---------------
Total Short-Term Notes (Cost $25,460,658) 25,460,658
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--4.3%
Repurchase agreement with Zion First National Bank,
5.20%, dated 10/29/99, to be repurchased at
$2,510,920 on 11/1/99, collateralized by U.S.
Treasury Nts., 5.50%-7.875%, 12/31/99-11/15/04, with
a value of $25,496,871 and U.S. Treasury Bonds,
5.625%, 9/30/01, with a value of $222,756 (Cost
$25,200,000) 25,200,000 25,200,000
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $607,919,769) 104.7% 613,920,414
- -------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (4.7) (27,548,658)
- ------------------------------
NET ASSETS 100.0% $586,371,756
- ------------------------------
- ------------------------------
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
(1) Non-income-producing security.
(2) Identifies issues considered to be illiquid or restricted -- See Note 5 of
Notes to Financial Statements.
(3) Issuer is in default.
(4) Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
19 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1999
- ------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments, at value (cost $607,919,769)--see accompanying statement $613,920,414
- ------------------------------------------------------------------------------------
Cash 58,636
- ------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,342,852
Interest and dividends 524,687
Shares of capital stock sold 214,960
Other 5,702
--------------
Total assets 618,067,251
- ------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 29,965,555
Shares of capital stock redeemed 1,238,032
Transfer and shareholder servicing agent fees 118,657
Distribution and service plan fees 112,186
Directors' compensation 92,108
Other 168,957
--------------
Total liabilities 31,695,495
- ------------------------------------------------------------------------------------
NET ASSETS $586,371,756
--------------
--------------
- ------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of capital stock $ 28,375
- ------------------------------------------------------------------------------------
Additional paid-in capital 495,967,570
- ------------------------------------------------------------------------------------
Undistributed net investment income 3,669,521
- ------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 80,705,645
- ------------------------------------------------------------------------------------
Net unrealized appreciation on investments 6,000,645
--------------
Net assets $586,371,756
--------------
--------------
</TABLE>
20 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
<S>
<C>
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$392,483,066 and 18,971,232 shares of capital stock
outstanding) $20.69
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering
price) $21.95
- ---------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $102,735,761
and 4,991,407 shares of capital stock
outstanding) $20.58
- ---------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $14,581,618 and
716,627 shares of capital stock outstanding) $20.35
- ---------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $76,571,311 and 3,696,091 shares of capital stock outstanding) $20.72
</TABLE>
See accompanying Notes to Financial Statements.
21 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1999
----------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Dividends (net of foreign withholding taxes $8,588) $ 9,795,238
----------------------------------------------------------------------------------
Interest 1,800,530
-----------
Total income 11,595,768
----------------------------------------------------------------------------------
EXPENSES
Management fees 3,663,867
----------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,107,816
Class B 1,236,713
Class C 177,555
----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 804,279
Class B 222,181
Class C 31,934
Class Y 163,435
----------------------------------------------------------------------------------
Directors' compensation 27,558
----------------------------------------------------------------------------------
Custodian fees and expenses 19,902
----------------------------------------------------------------------------------
Accounting service fees 15,000
----------------------------------------------------------------------------------
Other 337,521
-----------
Total expenses 7,807,761
Less expenses paid indirectly (6,046)
-----------
Net expenses 7,801,715
----------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,794,053
----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 81,509,655
Foreign currency transactions (379)
-----------
Net realized gain 81,509,276
----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (52,160,614)
-----------
Net realized and unrealized gain 29,348,662
----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $33,142,715
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
22 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998
----------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C>
Net investment income $ 3,794,053 $ 5,192,851
----------------------------------------------------------------------------------
Net realized gain 81,509,276 28,715,807
----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (52,160,614) (34,730,525)
---------------------------
Net increase in net assets resulting from operations 33,142,715 (821,867)
----------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment
income:
Class A (3,566,570) (2,053,090)
Class B (140,802) (205,567)
Class C (19,197) (16,094)
Class Y (1,509,823) (722,961)
----------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (18,351,792) (44,818,463)
Class B (5,096,352) (10,405,845)
Class C (726,632) (1,243,556)
Class Y (5,276,985) (11,174,826)
----------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) in net assets resulting from capital stock
transactions:
Class A (61,766,766) 131,069,760
Class B (19,938,207) 52,155,257
Class C (3,572,259) 9,659,857
Class Y (61,262,769) 56,697,598
----------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) (148,085,439) 178,120,203
----------------------------------------------------------------------------------
Beginning of period 734,457,195 556,336,992
---------------------------
End of period (including undistributed net
investment income of $3,669,521 and
$5,144,211, respectively) $586,371,756 $734,457,195
---------------------------
---------------------------
</TABLE>
See accompanying Notes to Financial Statements.
23 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT.
31, DEC. 31,
CLASS A 1999 1998 1997
1996(1) 1995 1994
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
DATA
<S> <C> <C> <C>
<C> <C> <C>
Net asset value, beginning of period $20.91 $23.31 $19.65
$17.84 $14.20 $15.14
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .17 .16 .23(2)
.15 .25 .22
Net realized and unrealized gain (loss) .64 .32 4.91(2)
1.88 4.88 (.32)
- -------------------------------------------------------------
Total income (loss)
from
investment operations .81 .48 5.14
2.03 5.13 (.10)
- -------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.17) (.12) (.07)
(.10) (.25) (.22)
Distributions from net realized gain (.86) (2.76) (1.41)
(.12) (1.24) (.62)
- -------------------------------------------------------------
Total dividends and
distributions
to shareholders (1.03) (2.88) (1.48)
(.22) (1.49) (.84)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.69 $20.91 $23.31
$19.65 $17.84 $14.20
- -------------------------------------------------------------
- -------------------------------------------------------------
Total Return, at Net Asset Value(3) 3.60% 2.24% 27.60%
11.41% 36.40% (0.65)%
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of period (in thousands) $392,483 $456,264 $371,810
$180,784 $118,118 $78,390
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $448,884 $442,138 $234,314
$135,940 $ 98,063 $71,956
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) 0.68% 0.84% 1.05%
1.01% 1.53% 1.50%
Expenses 1.02% 0.98%(5) 1.07%(5)
1.13%(5) 1.22%(5) 1.02%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 135% 106% 103%
74% 70% 99%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $875,161,964 and $1,028,399,607,
respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999
1998 1997 1996(1) 1995(7)
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C> <C>
<C> <C> <C>
Net asset value, beginning of period $20.83 $23.32
$19.77 $18.08 $17.83
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03)
.02 .09(2) .05 .02
Net realized and unrealized gain (loss) .66
.30 4.91(2) 1.83 1.40
- ---------------------------------------------------------------
Total income (loss) from
investment operations .63
.32 5.00 1.88 1.42
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.02)
(.05) (.04) (.07) (.02)
Distributions from net realized gain (.86) (2.76)
(1.41) (.12) (1.15)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (2.81)
(1.45) (.19) (1.17)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.58 $20.83
$23.32 $19.77 $18.08
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(3) 2.79% 1.47%
26.61% 10.43% 8.04%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $102,736 $123,260
$83,291 $5,854 $717
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $123,616 $110,240
$30,019 $2,903 $306
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.08)%
0.08% 0.22% 0.22% 0.21%
Expenses 1.77%
1.73%(5) 1.84%(5) 1.88%(5) 1.97%(5)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 135%
106% 103% 74% 70%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS continued
CLASS C YEAR ENDED OCTOBER 31,
1999 1998 1997 1996(8)
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S> <C>
<C> <C> <C>
Net asset value, beginning of period $20.60
$23.07 $19.57 $18.79
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.02) .01 .10(2) .06
Net realized and unrealized gain (loss)
.65 .31 4.85(2) .94
- --------------------------------------------------
Total income (loss) from investment operations
.63 .32 4.95 1.00
- ------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income
(.02) (.03) (.04) (.10)
Distributions from net realized gain (.86)
(2.76) (1.41) (.12)
- --------------------------------------------------
Total dividends and distributions to shareholders (.88)
(2.79) (1.45) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.35
$20.60 $23.07 $19.57
- --------------------------------------------------
- --------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3)
2.82% 1.47% 26.64% 5.35%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $14,582
$18,204 $10,243 $715
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $17,746
$15,355 $4,477 $342
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss)
(0.07)% 0.06% 0.17% 0.04%
Expenses
1.77% 1.73%(5) 1.86%(5) 1.87%(5)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6)
135% 106% 103% 74%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
See accompanying Notes to Financial Statements.
26 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS Y YEAR ENDED OCTOBER
31, 1999 1998 1997(9)
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
<S>
<C> <C> <C>
Net asset value, beginning of period
$20.97 $23.34 $20.31
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
(loss) .22
.22 .31(2)
Net realized and unrealized gain
(loss) .64 34
4.20(2)
- ------------------------------------
Total income (loss) from investment
operations .86 .56 4.51
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.25) (.17)
(.07)
Distributions from net realized
gain (.86) (2.76) (1.41)
- ------------------------------------
Total dividends and distributions to shareholders
(1.11) (2.93) (1.48)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$20.72 $20.97 $23.34
- ------------------------------------
- ------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(3) 3.81% 2.63%
23.62%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
$76,571 $136,729 $90,994
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$95,765 $118,010 $51,775
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income
(loss) 0.90%
1.19% 1.21%
Expenses
0.76% 0.62%(5) 0.78%(5)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(6) 135%
106% 103%
</TABLE>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period. 3. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period (or inception of offering), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year. 4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund. 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, 1999, were $875,161,964 and $1,028,399,607, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
9. For the period from December 16, 1996 (inception of offering) to October
31, 1997.
See accompanying Notes to Financial Statements.
27 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. The
Fund's investment objective is to seek long-term growth of capital by investing
primarily in common stocks with low price-earnings ratios and
better-than-anticipated earnings. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C
and Class Y shares. Class A shares are sold with a front-end sales charge on
investments up to $1 million. Class B and Class C shares may be subject to a
contingent deferred sales charge (CDSC). Class Y shares are sold to certain
institutional investors without either a front-end sales charge or a CDSC. All
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own expenses directly attributable to
that class and exclusive voting rights with respect to matters affecting that
class. Classes A, B and C have separate distribution and/or service plans. No
such plan has been adopted for Class Y shares. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following is
a summary of significant accounting policies consistently followed by the Fund.
- -------------------------------------------------------------------------------
SECURITIES 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 an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
28 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
- -------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- -------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- -------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. 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 year ended
October 31, 1999, a provision of $4,185 was made for the Fund's projected
benefit obligations and payments of $12,020 were made to retired directors,
resulting in an accumulated liability of $91,998 as of October 31, 1999.
The Board of Directors has adopted a deferred compensation plan for
independent Directors that enables Directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Directors in shares of one or more
Oppenheimer funds selected by the Director. The amount paid to the Director
under the plan will be determined based upon the performance of the selected
funds. Deferral of Directors' fees under the plan will not affect the net assets
of the Fund, and will not materially affect the Fund's assets, liabilities or
net income per share.
29 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- -------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
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 distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts 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 October 31, 1999, amounts have been reclassified to reflect an
increase in additional paid-in capital of $31,972, a decrease in undistributed
net investment income of $32,351, and an increase in accumulated net realized
gain on investments of $379.
- -------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- -------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable 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.
30 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
- -------------------------------------------------------------------------------
2. SHARES OF CAPITAL STOCK
The Fund has authorized 500 million of $0.001 par value shares of capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED
OCTOBER 31, 1998
SHARES AMOUNT
SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
CLASS A:
Sold 2,041,059 $ 44,361,122 6,055,274 $
134,355,655
Dividends and/or
distributions reinvested 978,744 21,317,077
1,943,840 40,173,794
Acquisition--Note 7 -- --
2,464,057 55,909,466
Redeemed (5,865,300) (127,444,965) (4,594,504)
(99,369,155)
- -------------------------------------------------------------------
Net increase (decrease) (2,845,497) $ (61,766,766) 5,868,667 $
131,069,760
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS B:
Sold 1,150,666 $ 24,923,987 2,774,749
$ 61,540,380
Dividends and/or
distributions reinvested 231,740 5,051,920
487,844 10,101,800
Acquisition--Note 7 -- --
269,319 6,105,453
Redeemed (2,308,042) (49,914,114) (1,187,193)
(25,592,376)
- -------------------------------------------------------------------
Net increase (decrease) (925,636) $ (19,938,207) 2,344,719
$ 52,155,257
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS C
Sold 205,937 $ 4,440,151 531,746
$ 11,620,021
Dividends and/or
distributions reinvested 33,679 725,793
59,153 1,212,044
Acquisition--Note 7 -- --
67,517 1,513,732
Redeemed (406,670) (8,738,203)
(218,753) (4,685,940)
- -------------------------------------------------------------------
Net increase (decrease) (167,054) $ (3,572,259) 439,663
$ 9,659,857
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS Y:
Sold 1,062,529 $ 22,726,365 3,047,435
$ 66,033,007
Dividends and/or
distributions reinvested 311,751 6,786,808
575,974 11,897,787
Redeemed (4,199,901) (90,775,942) (1,000,402)
(21,233,196)
- -------------------------------------------------------------------
Net increase (decrease) (2,825,621) $ (61,262,769) 2,623,007
$ 56,697,598
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
31 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- -------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of October 31, 1999, net unrealized appreciation on securities of $6,000,645
was composed of gross appreciation of $42,985,082, and gross depreciation of
$36,984,437.
- -------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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 of the Fund, 0.50% of the
next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for year ended October 31, 1999, was 0.53% of
the average annual net assets for each class of shares.
- -------------------------------------------------------------------------------
ACCOUNTING FEES. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- -------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- -------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS
COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS
B ON CLASS C
SALES CHARGES SALES CHARGES SHARES
SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED
BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1)
DISTRIBUTOR(1) DISTRIBUTOR(1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
October 31, 1999 $715,853 $384,487 $59,831
$688,909 $35,094
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS
B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED
CONTINGENT DEFERRED
SALES CHARGES SALES
CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED
BY DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------
<S> <C>
<C> <C>
October 31, 1999 $10,546
$368,337 $5,553
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
32 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
- -------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended October 31, 1999, payments under
the Class A Plan totaled $1,107,816, all of which was paid by the Distributor to
recipients. That included $686,023 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- -------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 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 or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended October 31, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S
DISTRIBUTOR'S
AGGREGATE
UNREIMBURSED
UNREIMBURSED
EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF
NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN
OF CLASS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
<C> <C>
Class B Plan $1,236,713 $1,010,736
$2,803,501 2.73%
Class C Plan 177,555 84,051
216,125 1.48
</TABLE>
33 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- -------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of October 31, 1999, was $100,831,
which, represents 0.02% of the Fund's net assets.
- -------------------------------------------------------------------------------
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended October 31,
1999.
- -------------------------------------------------------------------------------
7. ACQUISITION OF OPPENHEIMER LIFESPAN GROWTH FUND
On June 12, 1998, the Fund acquired all of the net assets of Oppenheimer
LifeSpan Growth Fund, pursuant to an agreement and plan of reorganization
approved by the Oppenheimer LifeSpan Growth Fund shareholders on June 9, 1998.
The Fund issued (at an exchange ratio of 0.522101 for Class A, 0.523202 for
Class B and 0.524279 for Class C of the Fund to one share of Oppenheimer
LifeSpan Growth Fund) 2,464,057, 269,319 and 67,517 shares of capital stock for
Class A, Class B and Class C, respectively, valued at $55,909,466, $6,105,453
and $1,513,732, in exchange for the net assets, resulting in combined Class A
net assets of $523,396,393, Class B net assets of $128,631,768 and Class C net
assets of $19,081,033 on June 12, 1998. The net assets acquired included net
unrealized appreciation of $4,184,576. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
34 OPPENHEIMER DISCIPLINED VALUE FUND
<PAGE>
A-2
Appendix A
- --------------------------------------------------------------------------------
RATINGS DEFINITIONS
- --------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- --------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high degree
and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category. Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- --------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
- -------------------------------------------------------------------------------
Industry Classifications
- -------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-13
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (7) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(8) non-qualified deferred compensation plans, (9) employee benefit plans3 (10)
Group Retirement Plans4 (11) 403(b)(7) custodial plan accounts (12) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
5. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
6. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
7. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
8. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."13 This waiver provision applies to:
13 However, that commission will not be paid on purchases of shares in amounts
of $1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(4) buys shares costing $500,000 or more, or
(5) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(6) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(3) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(4) 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(4) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(5) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch. On
the date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(6) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by
the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates,
and retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles,
nieces and nephews; relatives by virtue of a remarriage (step-children,
step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) 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 (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| 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 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 through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using the proceeds of
shares redeemed in the prior 30 days from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries) on which an initial
sales charge or contingent deferred sales charge was paid. This waiver also
applies to shares purchased by exchange of shares of Oppenheimer Money
Market Fund, Inc. that were purchased and paid for in this manner. This
waiver must be requested when the purchase order is placed for shares of
the Fund, and the Distributor may require evidence of qualification for
this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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 account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(10) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(11) To return excess contributions.
(12)
<PAGE>
To return contributions made due to a mistake of fact.
(13) Hardship withdrawals, as defined in the plan.14
14 This provision does not apply to IRAs.
(14) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(15) To meet the minimum distribution requirements of the Internal Revenue Code.
(16) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(17) For loans to participants or beneficiaries.
(18) Separation from service.15
15 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
if the plan has made special arrangements with the Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|-|
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for any of
the following purposes:
(15) Following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary. The death or disability must occur
after the participant's account was established in an Oppenheimer fund.
(16) To return excess contributions made to a participant's account.
(17) To return contributions made due to a mistake of fact.
(18) To make hardship withdrawals, as defined in the plan.16
16 This provision does not apply to IRAs.
(19) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(20) To meet the minimum distribution requirements of the Internal Revenue Code.
(21) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(22) For loans to participants or beneficiaries.17
17 This provision does not apply to loans from 403(b)(7) custodial plans.
(23) On account of the participant's separation from service.18
18 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(24) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
offered as an investment option in a Retirement Plan if the plan has made
special arrangements with the Distributor.
(25) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
(26) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the Oppenheimer
funds that had been offered.
(27) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long as the
aggregate value of the distributions does not exceed 10% of the account's
value, adjusted annually. Redemptions of Class B shares under an Automatic
Withdrawal Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the account's
value annually.
B. 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.
Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section
I.A.) of the Fund, the Manager and its affiliates and retirement plans
established by them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Value
Fund
Oppenheimer Quest Balanced Value Oppenheimer Quest Global Value Fund
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Income Quest for Value New York Tax-Exempt
Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest
for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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 who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10%
of the initial value of the account value, adjusted annually, and
|_| liquidation of a shareholder's account if the aggregate net asset value
of shares held in the account is less than the required minimum value
of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B or
Class C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account value; adjusted annually, and
|-|
<PAGE>
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account
value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(3) persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result
of direct purchases or purchases pursuant to the Fund's policies on
Combined Purchases or Rights of Accumulation, who still hold those shares
in that Fund or other Former Connecticut Mutual Funds, and
(4) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
<PAGE>
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
anypurchaser, provided the total initial amount invested in the Fund or
any one or more of the Former Connecticut Mutual Funds totaled $500,000
or more, including investments made pursuant to the Combined Purchases,
Statement of Intention and Rights of Accumulation features available at
the time of the initial purchase and such investment is still held in
one or more of the Former Connecticut Mutual Funds or a Fund into which
such Fund merged;
(8) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(9) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(10) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(11) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(12) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (10) by the estate of a deceased shareholder;
(11) upon the disability of a shareholder, as defined in Section 72(m)(7)
of the Internal Revenue Code;
(12) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(13) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(14)
<PAGE>
in whole or in part, in connection with shares sold to any state, county,
or city, or any instrumentality, department, authority, or agency thereof,
that is prohibited by applicable investment laws from paying a sales charge
or commission in connection with the purchase of shares of any registered
investment management company;
(15) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(16) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund; in connection with automatic redemptions of Class A
shares and Class B shares in certain retirement plan accounts pursuant to
an Automatic Withdrawal Plan but limited to no more than 12% of the
original value annually; or
(18) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as adopted
by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
C-76
- --------------------------------------------------------------------------------
Oppenheimer Disciplined Value Fund
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
67890
PX375.022000
<PAGE>
OPPENHEIMER SERIES FUND, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (i) 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.
(ii) Articles Supplementary dated September 1995: Filed with Registrant's
Post-Effective Amendment No. 28, 3/1/96, and incorporated herein by
reference.
(iii) Articles Supplementary dated May 1995: Filed with Registrant's
Post-Effective Amendment No. 28, 3/1/96, and incorporated herein by
reference.
(iv) Articles Supplementary dated November 15, 1996: Filed with
Registrant's Post-Effective Amendment No. 31, 12/16/96, and incorporated
herein by reference.
(v) Articles of Amendment dated 3/15/96, effective 3/18/96: Filed with
Registrant's Post-Effective Amendment No. 35, 2/26/99, and incorporated
herein by reference.
(b) Amended and Restated By-Laws as of 6/4/98: Filed with Registrant's
Post-Effective Amendment No. 35, 2/26/99, and incorporated herein by reference.
(c) (i) Oppenheimer Disciplined Allocation Fund -Specimen Class A Share
Certificate: Filed herewith.
(ii) Oppenheimer Disciplined Allocation Fund Specimen Class B Share
Certificate: Filed herewith.
(iii) Oppenheimer Disciplined Allocation Fund Specimen Class C Share
Certificate: Filed herewith.
(iv) Oppenheimer Disciplined Value Fund Specimen Class A Share Certificate:
Filed herewith.
(v) Oppenheimer Disciplined Value Fund Specimen Class B Share Certificate:
Filed herewith.
(vi) Oppenheimer Disciplined Value Fund Specimen Class C Share Certificate:
Filed herewith.
(vii) Oppenheimer Disciplined Value Fund Specimen Class Y Share
Certificate: Filed herewith.
(d) Investment Advisory Agreement dated 3/1/96 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.
(e) (i) General Distributor's Agreement dated 3/18/96 between Registrant on
behalf of Oppenheimer Disciplined Allocation Fund and OppenheimerFunds
Distributor, Inc. ("OFDI"): Filed with Registrant's Post-Effective
Amendment No. 29, 4/30/96, and incorporated herein by reference.
General Distributor's Agreement dated 3/18/96 between Registrant on behalf
of Oppenheimer Disciplined Value Fund and OFDI: Filed with Registrant's
Post-Effective Amendment No. 31, 12/16/96 and incorporated herein by
reference.
Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Previously
filed with Pre-Effective Amendment No. 2 to the Registration Statement of
Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99, and
incorporated herein by reference.
(iv) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99,
and incorporated herein by reference.
Form of Broker Agreement of OppenheimerFunds Distributor, Inc.: Previously
filed with Pre-Effective Amendment No. 2 to the Registration Statement of
Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99, and
incorporated herein by reference.
(i) Retirement Plan for Non-Interested Trustees or Directors dated June 7,
1990: Previously filed with Post-Effective Amendment No. 97 to the
Registration Statement of Oppenheimer Fund (File No. 2-14586), 8/30/90,
refiled with Post-Effective Amendment No. 45 of Oppenheimer Growth Fund
(Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(ii) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No.26 to the
Registration Statement of Oppenheimer Gold & Special Minerals Fund (Reg.
No. 2-82590), 10/28/98, and incorporated by reference.
(g) (i) Master Custodian Agreement between Registrant, on behalf of each
series of the Registrant, and State Street Bank and Trust Company: Filed
with Registrant's Post-Effective Amendment No. 28, 3/1/96, and incorporated
herein by reference.
(ii) Custody Agreement on behalf of each series of the Registrant and The
Bank of New York dated June 11, 1997: Previously filed with Registrant's
Post-Effective Amendment No: 33, February 18, 1998 and incorporated herein
by reference.
(iii) Foreign Custody Manager Agreement between Registrant and The Bank of
New York: Previously filed with Pre-Effective Amendment No.2 to the
Registration Statement of Oppenheimer World Bond Fund (Reg. 333-48973),
4/23/98, and incorporated herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 2/28/96: Filed as an exhibit to
24f-2 notice.
(j) Independent Auditors Consents: Filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) (i) Service Plan and Agreement dated 3/18/96 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) Amended and Restated Distribution and Service Plan and Agreement dated
2/12/98 with OppenheimerFunds Distributor, Inc. for Class B Shares of
Oppenheimer Disciplined Allocation Fund. Filed herewith..
(iii) Amended and Restated Distribution and Service Plan and Agreement
dated 2/12/98 with OppenheimerFunds Distributor, Inc. for Class C Shares of
Oppenheimer Disciplined Allocation. Filed herewith.
(iv) Service Plan and Agreement between Oppenheimer Disciplined Value Fund
dated 3/18/96 and OppenheimerFunds Distributor, Inc. for Class A shares:
Filed with Post-Effective Amendment No. 31, 12/16/96, and incorporated
herein by reference.
(v) Amended and Restated Distribution and Service Plan and Agreement dated
2/12/98 with OppenheimerFunds Distributor, Inc. for Class B shares of
Oppenheimer Disciplined Value Fund: Filed herewith.
(vi) Amended and Restated Distribution and Service Plan and Agreement dated
2/12/98 with OppenheimerFunds Distributor, Inc. for Class C shares of
Oppenheimer Disciplined Value Fund: Filed herewith.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/25/98: Previously filed with Post-Effective Amendment No. 70 to the
Registration Statement of Oppenheimer Global Fund (Reg. No. 2-31661),
9/14/98, and incorporated herein by reference.
- -- Powers of Attorney for all Trustees/Directors: Previously filed with
Pre-Effective Amendment No. 1 to the Registration Statement of Oppenheimer
Trinity Value Fund (Reg. No. 333-79707), 8/4/99, and incorporated herein by
reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
- ---------------------------------------------------------------------
None.
Item 25. Indemnification
Reference is made to the provisions of paragraph (b) of Section 7 or
Article SEVENTH of Registrant's Articles of Incorporation filed as Exhibit 23(a)
to this Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a Director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other investment
companies, including with limitation those described in Parts A and B hereof and
listed in Item 26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
<TABLE>
<CAPTION>
<S> <C>
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since April 1998); a
Chartered Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the investment management
subsidiary of The Guardian Life Insurance
Company (since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President, Securities
Analyst for Morgan Stanley Dean Witter (May
1997 - April 1998); and Research Analyst (July
1996 - May 1997), Portfolio Manager (February
1992 - July 1996) and Department Manager (June
1988 to February 1992) for The Bank of New York.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Senior Vice President of HarbourView
Asset Management Corporation; prior to March
1996 he was the senior equity portfolio manager
for the Panorama Series Fund, Inc. (the
"Company") and other mutual funds and pension
funds managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment
adviser, which was a subsidiary of Connecticut
Mutual Life Insurance Company; he was also
responsible for managing the common stock
department and common stock investments of
Connecticut Mutual Life Insurance Co.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Formerly, a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice
President, Group Executive, and Senior
Systems Officer for American International
Group (October 1994 - May 1998).
Richard Bayha,
Senior Vice President None.
John R. Blomfield,
Vice President Formerly Senior Product Manager
(November 1995 - August 1997) of
International Home Foods and American Home
Products (March 1994 - October 1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January
1992 - February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since
May 1996); an officer of other Oppenheimer
funds; formerly, an Assistant Vice President of
OppenheimerFunds, Inc./Mutual Fund Accounting
(April 1994 - May 1996), and a Fund Controller
for OppenheimerFunds, Inc.
Mark Binning None.
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Jeffrey Burns Stradley, Ronen Stevens and Young, LLP
(February 1998-September 1999) Morgan Lewis and
Bockius, LLP (April 1995- February 1998)
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester
Fund Services, Inc.
Christopher Capot,
Assistant Vice President Assistant Vice President of
Public Relations at Webster Financial
Corporation (December 1995 - December 1998).
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management
Corporation.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President
and Chief Investment Officer Chief Investment
Officer (since 6/99); Chief Executive
Officer and Senior Manager of HarbourView
Asset Management Corporation; Trustee (1993
- present) of Awhtolia College - Greece;
formerly Chief Executive Officer (1993-June
1999).
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January 1995 - January 1996),
Fidelity Investments FMR Co. (January 1996 -
June 1997) and Fidelity Investments FTPG (June
1997 - January 1998).
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January 1992) of
the Distributor; Executive Vice President,
General Counsel and a director of HarbourView
Asset Management Corporation Shareholder
Services, Inc., Shareholder Financial Services,
Inc. and Oppenheimer Partnership Holdings, Inc.
since (September 1995); President and a
director of Centennial Asset Management
Corporation (since September 1995); President
and a director of Oppenheimer Real Asset
Management, Inc (since July 1996); General
Counsel (since May 1996) and Secretary (since
April 1997) of Oppenheimer Acquisition Corp.;
Vice President and Director of OppenheimerFunds
International, Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds.
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds; formerly an Assistant
Vice President of OppenheimerFunds, Inc./Mutual
Fund Accounting (April 1994 - May 1996), and a
Fund Controller for OppenheimerFunds, Inc.
Leslie A. Falconio,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Katherine P. Feld,
Vice President and Secretary Vice President and
Secretary of the Distributor; Secretary of
HarbourView Asset Management Corporation,
and Centennial Asset Management Corporation;
Secretary, Vice President and Director of
Centennial Capital Corporation; Vice
President and Secretary of Oppenheimer Real
Asset Management, Inc.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager
of certain Oppenheimer funds; Presently he
holds the following other positions: Director
(since 1995) of ICI Mutual Insurance Company;
Governor (since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at George
Eastman House. Formerly, he held the following
positions: formerly, Chairman of the Board and
Director of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President and
Director of Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester Capital
Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester Tax Managed
Fund, Inc.; Director (1993 - 1997) of VehiCare
Corp.; Director (1993 - 1996) of VoiceMode.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations Department
(July 1996 - November 1998).
Jennifer Foxson,
Vice President None.
Dan Gangemi,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Daniel Garrity,
Vice President None.
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987 - 1997) for
Schroder Capital Management International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and Chief Financial Officer and Treasurer (since
March
Director 1998) of Oppenheimer Acquisition Corp.; a
Member and Fellow of the Institute of Chartered
Accountants; formerly, an accountant for Arthur
Young (London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice
President for Bankers Trust Company (1993 -
1996); Steering Committee Member,
Subcommittee Chairman for American Savings
Education Council (1995 - 1996).
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust
Company (January 1991 - November 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Chairman of OppenheimerFunds Formerly Executive Vice President and
Services, a Division of OFI Chief Executive Officer of
OppenheimerFunds Services, a division of the
Manager.
.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President and None.
Senior Counsel
Merrell Hora,
Assistant Vice President Research Fellow for the University of Minnesota
(July 1997- July 1998).
Scott T. Huebl,
Vice President None.
James Hyland,
Assistant Vice President Formerly Manager of Customer
Research for Prudential Investments
(February 1998 - July 1999).
Kathleen T. Ives,
Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback,
Vice President Senior Vice President and Deputy General
Counsel of Oppenheimer Capital (April
1989-November 1999).
Lewis Kamman,
Vice President Senior Consultant for Bell Atlantic Network
Integration, Inc. (June 1997-December 1998) and
Vice President for JP Morgan, Inc. (August
1994-June 1997).
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds;
formerly, Managing Director and Senior
Portfolio Manager at Prudential Global
Advisors (1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of HarbourView Asset
Management Corporation; prior to March 1996,
the senior bond portfolio manager for Panorama
Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Vice President None.
Steve Macchia,
Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995);
President and director (since June 1991) of
HarbourView Asset Management Corporation; and a
director of Shareholder Services, Inc. (since
August 1994), and Shareholder Financial
Services, Inc. (September 1995); President
(since September 1995) and a director (since
October 1990) of Oppenheimer Acquisition Corp.;
President (since September 1995) and a director
(since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company
subsidiary of OppenheimerFunds, Inc.; a
director of Oppenheimer Real Asset Management,
Inc. (since July 1996); President and a
director (since October 1997) of
OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of
OppenheimerFunds, Inc. and Oppenheimer
Millennium Funds plc (since October 1997);
President and a director of other Oppenheimer
funds; a director of Hillsdown Holdings plc (a
U.K. food company); formerly, an Executive Vice
President of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis,
Graham, & Stubbs (January 1998 - July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C.
(May 1996 - December 1997).
Loretta McCarthy,
Executive Vice President None.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager (May 1996 - June 1997) and Director
of Product Marketing (August 1992 - May
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a Second Vice
President for Guardian Investments (June
1990 - October 1999).
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager of
certain Oppenheimer funds (since April 1998); a
Certified Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the management subsidiary of
The Guardian Life Insurance Company (since
1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995
-November 1996) for Chase Investment Services
Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Frank Pavlak,
Vice President Branch Chief of Investment Company Examinations
at U.S. Securities and Exchange Commission
(January 1981 - December 1998).
James Phillips
Assistant Vice President None.
David Pellegrino None.
Vice President.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April 1995 - January 1998) of Van
Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President
and Business Analyst for Pershing, Jersey
City (August 1997 -November 1997); Senior
Business Consultant, American International
Group (January 1996 - July 1997).
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Jeffrey Rosen,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Marci Rossell,
Vice President and Corporate Economist Economist with Federal
Reserve Bank of Dallas (April 1996 - March
1999).
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Andrew Ruotolo,
Executive Vice President of
Oppenheimer Funds Services, a
division of OFI Formerly Chief Operations Officer for American
International Group (1997-August 1999).
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Jeff Schneider,
Vice President Director, Personal Decisions International.
Ellen Schoenfeld,
Assistant Vice President None.
David Schultz,
Senior Vice President
and Chief Executive Officer Senior Managing
Director, President (since April 1999) and
Chief Executive Officer of HarbourView Asset
Management Corporation (since June 1999).
Stephanie Seminara,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Christian D. Smith
Senior Vice President Formerly Co-head of the
Municipal Portfolio Management Team,
Portfolio Manager for Prudential Global
Asset Management (January 1990 - September
1999).
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer Equity trader.
Vice President
Cathleen Stahl,
Vice President Assistant Vice President & Manager of Women &
Investing Program
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jayne Stevlingson,
Vice President None.
Marlo Stil,
Vice President Investment Specialist and Career
Agent/Registered
Representative for MML Investor services,
Inc.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView Asset Management
Corporation.
Kevin Surrett,
Assistant Vice President Assistant Vice President of Product Development
At Evergreen Investor Services, Inc. (June 1995
- -
May 1999).
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing Company
(January 1997 - March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of Centennial Asset
Management Corporation and Chairman of the
Board of Shareholder Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero,
Vice President Chief Financial officer for the Sovlink Group
(April 1996 - June 1999).
Teresa Ward,
Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed
income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice President
of HarbourView Asset Management Corporation.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView Asset Management
Corporation.
Donna Winn, Senior Vice President/Distribution Marketing.
Senior Vice President
Brian W. Wixted, Formerly Principal and Chief Operating Officer,
Senior Vice President and Bankers Trust Company - Mutual Fund Services
Treasurer Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS
First Boston Investment Management Corp.
(September 1991 - March 1995); and Vice
President and Accounting Manager, Merrill
Lynch Asset Management (November 1987 -
September 1991).
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial
Asset Management Corporation; Vice President,
Finance and Accounting; Point of Contact:
Finance Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
Caleb Wong,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since 6/99) .
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of Shareholder Services,
Inc. (since May 1985), Shareholder Financial
Services, Inc. (since November 1989),
OppenheimerFunds International Ltd. (since
1998), Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer
funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management
Corporation.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Preservation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Europe Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Trinity Core Fund
Oppenheimer Trinity Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Capital Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Small Cap Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which OppenheimerFunds, Inc.
is the investment adviser, as described in Part A and B of this
Registration Statement and listed in Item 26(b) above (except Oppenheimer
Multi-Sector Income Trust and Panorama Series Fund, Inc.) and for
MassMutual Institutional Funds.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30064
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Peter W. Brennan Vice President None
8826 Amberton Lane
Charlotte, NC 28226
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President, Director Oppenheimer funds.
and General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
141 Breon Lane
Elkton, MD 21921
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary & Senior Counsel
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
4734 Highland Place Center
Lakeland, FL 33813
Luiggino Galleto Vice President None
10302 Reisling Court
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale, GA 30002
Lucio Giliberti Vice President None
78 Metro Vista Drive
Hawthorne, NJ 07506
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Linda Harding Vice President/FID None
6229 Love Drive
#413
Irving, TX 75039
Webb Heidinger Vice President None
138 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Tammy Hospodar Vice President None
30864 Paloma Court
Westlake Village, CA 91362
Edward Hrybenko (2) Vice President None
Richard L. Hymes (2) Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Lynn Jensen Vice President None
5120 Patterson Street
Long Beach, CA 90815
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
10687 East Ida Avenue
Englewood, CO 80111
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport, CA 92660
John Nesnay Vice President None
3410 East County Line
#17
Highlands Ranch, CO 80126
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Christopher L. Quinson (2) Vice President/ None
Variable Annuities
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President & Director None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy J. Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Marlo Stil Vice President None
8579 Prestwick Drive
La Jolla, CA 92037
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Sarah Turpin Vice President None
3517 Milton Avenue
Dallas, TX 75205
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
935 Wood Run Court
South Lyon, MI 48178
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Brian W. Wixted (1) Vice President Vice President and
and Treasurer Treasurer of the
Oppenheimer funds.
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 24th day of February, 2000.
Oppenheimer Series Fund, Inc
By: /s/ Bridget A. Macaskill *
-----------------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ Leon Levy* Chairman of the February 24, 2000
- ------------------------------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro* Vice Chairman and February
24, 2000
- ------------------------------------- Trustee
Donald W. Spiro
/s/ Robert G. Galli* Trustee
February 24, 2000
- -------------------------------------
Robert G. Galli
/s/ Phillip A. Griffiths* Trustee
February 24, 2000
- ------------------------------------
Phillip A. Griffiths
/s/ Benjamin Lipstein* Trustee February 24, 2000
- -------------------------------------
Benjamin Lipstein
/s/ Bridget A. Macaskill* President, February
24, 2000
- ------------------------------------- Principal Executive
Bridget A. Macaskill Officer, Trustee
/s/ Elizabeth B. Moynihan* Trustee
February 24, 2000
- -------------------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee February 24, 2000
- -------------------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee
February 24, 2000
- -------------------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee
February 24, 2000
- -------------------------------------
Russell S. Reynolds, Jr.
/s/ Brian W. Wixted* Treasurer February
24, 2000
- -------------------------------------
Brian W. Wixted
/s/ Clayton K. Yeutter* Trustee February 24, 2000
- -------------------------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- ---------------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER SERIES FUND, INC.
EXHIBIT INDEX
Registration No. 2-75276
Post-Effective Amendment No. 36
Exhibit No. Description
23(c)(i) Oppenheimer Disciplined Allocation Fund-Specimen Class A Share
Certificate
(ii) Oppenheimer Disciplined Allocation Fund Specimen Class B Share
Certificate
(iii) Oppenheimer Disciplined Allocation Fund Specimen Class C Share
Certificate
(iv) Oppenheimer Disciplined Value Fund Specimen Class A Share Certificate
(v) Oppenheimer Disciplined Value Fund Specimen Class B Share Certificate
(vi) Oppenheimer Disciplined Value Fund Specimen Class C Share Certificate
(vii) Oppenheimer Disciplined Value Fund Specimen Class Y Share Certificate
23(j) Independent Auditor's Consents
23(m)(ii) Amended and Restated Distribution and Service Plan and
Agreement dated 2/12/98 with OppenheimerFunds Distributor, Inc. for
Class B Shares of Oppenheimer Disciplined Allocation Fund
(iii) Amended and Restated Distribution and Service Plan and Agreement
dated 2/12/98 with OppenheimerFunds Distributor, Inc. for Class C
Shares of Oppenheimer Disciplined Allocation Fund
(v) Amended and Restated Distribution and Service Plan and Agreement
dated 2/12/98 with OppenheimerFunds Distributor, Inc. for Class B
shares of Oppenheimer Disciplined Value Fund
(vi) Amended and Restated Distribution and Service Plan and Agreement
dated 2/12/98 with OppenheimerFunds Distributor, Inc. for Class C
shares of Oppenheimer Disciplined Value Fund
23(n) Representation of Counsel
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
Class A Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS A SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED ALLOCATION FUND,
a series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J105
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS A SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED ALLOCATION FUND
----------------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received .............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class A Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
Class B Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS B SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED ALLOCATION FUND,
a series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J204
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS B SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED ALLOCATION FUND
----------------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class B Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
Class C Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS C SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED ALLOCATION FUND,
a series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J865
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS C SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED ALLOCATION FUND
----------------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class C Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED VALUE FUND
Class A Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS A SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED VALUE FUND, a
series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J303
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS A SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED VALUE FUND
-----------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received .............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class A Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED VALUE FUND
Class B Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS B SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED VALUE FUND, a
series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J402
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS B SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED VALUE FUND
-----------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received .............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class B Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED VALUE FUND
Class C Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS C SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED VALUE FUND, a
series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J857
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS C SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED VALUE FUND
-----------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class C Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
OPPENHEIMER SERIES FUND, INC.
OPPENHEIMER DISCIPLINED VALUE FUND
Class Y Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
-------------------
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box with heading: CLASS Y SHARES (below cert. no.)
(centered below boxes) OPPENHEIMER DISCIPLINED VALUE FUND, a
series of Oppenheimer Series Fund, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68380J816
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS Y SHARES OF CAPITAL STOCK WITH
------------------------------------------------------------------
THE PAR VALUE OF $.001 EACH OF OPPENHEIMER DISCIPLINED VALUE FUND
-----------------------------------------------------------------
(hereinafter called the "Corporation)", transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal with legend
OPPENHEIMER SERIES FUND, INC.
SEAL
1981
MARYLAND
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
-------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class Y Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor by:
_____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
Consent of Independent Auditors
The Board of Directors
Oppenheimer Disciplined Allocation Fund:
We consent to the use in this Registration Statement of Oppenheimer
Disciplined Allocation Fund of our report dated November 19, 1999 included in
the Statement of Additional Information, which is part of such Registration
Statement, and to the reference to our firm under the headings "Financial
Highlights" appearing in the Prospectus which is also a part of such
Registration Statement, and "Independent Auditors" appearing in the Statement
of Additional Information.
/s/ KPMG LLP
_________________________
KPMG LLP
Denver, Colorado
February 24, 2000
Consent of Independent Auditors
The Board of Directors
Oppenheimer Disciplined Value Fund:
We consent to the use in this Registration Statement of Oppenheimer
Disciplined Value Fund of our report dated November 19, 1999 included in the
Statement of Additional Information, which is part of such Registration
Statement, and to the reference to our firm under the headings "Financial
Highlights" appearing in the Prospectus which is also a part of such
Registration Statement, and "Independent Auditors" appearing in the Statement
of Additional Information.
/s/ KPMG LLP
_________________________
KPMG LLP
Denver, Colorado
February 24, 1999
AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Series Fund, Inc.
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Series Fund, Inc. (the "Company") on behalf of its series,
Oppenheimer Disciplined Allocation Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Directors" shall mean the members of the Company's Board
of Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
<PAGE>
-81-
3. Payments for Distribution Assistance and Administrative Support Services.
-------------------------------------------------------------------------
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Directors. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
<PAGE>
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers for no more than six years and for any minimum period that the
Distributor may establish. Distribution assistance fee payments shall be made
only to Recipients that are registered with the SEC as a broker-dealer or are
exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
<PAGE>
(c) A majority of the Independent Directors may at any time or from time
to time increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Directors still is not satisfied after the receipt
of such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Directors at any time may
remove any broker, dealer, bank or other person or entity as a Recipient, where
upon such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of persons to be Directors of the Company who are not
"interested persons" of the Company ("Disinterested Directors") shall be
committed to the discretion of the incumbent Disinterested Directors. Nothing
herein shall prevent the incumbent Disinterested Directors from soliciting the
views or the involvement of others in such selection or nominations as long as
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Company shall
provide written reports to the Company's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
<PAGE>
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such agreement; and
(v) such agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Directors
cast in person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Directors and replaces the Fund's prior Distribution and Service Plan for Class
B Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Directors shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
Oppenheimer Series Fund, Inc.
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld,
Vice President and Secretary
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Series Fund, Inc.
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Series Fund, Inc. (the "Company") on behalf of its series,
Oppenheimer Disciplined Allocation Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Directors" shall mean the members of the Company's Board
of Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
<PAGE>
-86-
3. Payments for Distribution Assistance and Administrative Support Services.
-------------------------------------------------------------------------
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five (45) days
of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Directors. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
<PAGE>
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Directors.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
<PAGE>
(c) A majority of the Independent Directors may at any time or from time
to time (i) increase or decrease the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Directors during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Directors still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Directors at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of persons to be Directors of the Company who are not
"interested persons" of the Company ("Disinterested Directors") shall be
committed to the discretion of the incumbent Disinterested Directors. Nothing
herein shall prevent the incumbent Disinterested Directors from soliciting the
views or the involvement of others in such selection or nomination as long as
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Company shall
provide written reports to the Company's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
<PAGE>
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such agreement; and
(v) such agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Directors
cast in person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Directors and replaces the Fund's prior Distribution and Service Plan for Class
C Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose and all material amendments must be approved by
a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by a vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Directors shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
Oppenheimer Series Fund, Inc.
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld,
Vice President and Secretary
AMENDED AND RESTATED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Series Fund, Inc.
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Series Fund, Inc. (the "Company") on behalf of its series,
Oppenheimer Disciplined Value Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Directors" shall mean the members of the Company's Board
of Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
<PAGE>
-91-
3. Payments for Distribution Assistance and Administrative Support Services.
-------------------------------------------------------------------------
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Directors. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
<PAGE>
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers for no more than six years and for any minimum period that the
Distributor may establish. Distribution assistance fee payments shall be made
only to Recipients that are registered with the SEC as a broker-dealer or are
exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
<PAGE>
(c) A majority of the Independent Directors may at any time or from time
to time increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Directors still is not satisfied after the receipt
of such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Directors at any time may
remove any broker, dealer, bank or other person or entity as a Recipient, where
upon such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of persons to be Directors of the Company who are not
"interested persons" of the Company ("Disinterested Directors") shall be
committed to the discretion of the incumbent Disinterested Directors. Nothing
herein shall prevent the incumbent Disinterested Directors from soliciting the
views or the involvement of others in such selection or nominations as long as
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Company shall
provide written reports to the Company's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
<PAGE>
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such agreement; and
(v) such agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Directors
cast in person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Directors and replaces the Fund's prior Distribution and Service Plan for Class
B Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Directors shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
Oppenheimer Series Fund, Inc.
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld,
Vice President and Secretary
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Series Fund, Inc.
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Series Fund, Inc. (the "Company") on behalf of its series,
Oppenheimer Disciplined Value Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Directors" shall mean the members of the Company's Board
of Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
<PAGE>
-96-
3. Payments for Distribution Assistance and Administrative Support Services.
-------------------------------------------------------------------------
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five (45) days
of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Directors. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
<PAGE>
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Directors.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
<PAGE>
(c) A majority of the Independent Directors may at any time or from time
to time (i) increase or decrease the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Directors during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Directors still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Directors at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of persons to be Directors of the Company who are not
"interested persons" of the Company ("Disinterested Directors") shall be
committed to the discretion of the incumbent Disinterested Directors. Nothing
herein shall prevent the incumbent Disinterested Directors from soliciting the
views or the involvement of others in such selection or nomination as long as
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Company shall
provide written reports to the Company's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
<PAGE>
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such agreement; and
(v) such agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Directors
cast in person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Directors and replaces the Fund's prior Distribution and Service Plan for Class
C Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose and all material amendments must be approved by
a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by a vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Directors shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
Oppenheimer Series Fund, Inc.
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld,
Vice President and Secretary
