Registration No. 2-11052
File No. 811-490
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. 74 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 31 / X /
OPPENHEIMER TOTAL RETURN FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
(Address of Principal Executive Offices)
303-671-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation, Suite 3400
Two World Trade Center, New York, New York 10048-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On April 1, 1994 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On ________________ pursuant to paragraph (a) of Rule 485
Registration of Shares Under the Securities Act of 1933
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1993 was filed on February 28, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER TOTAL RETURN FUND, INC.
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Fund Expenses
3 Financial Highlights; Fund Performance Information
4 Front Cover Page; The Fund and Its Investment Policies;
Special Investment Methods; Investment Restrictions
5 Management of the Fund; Back Cover; Additional Information -
The Custodian and the Transfer Agent; Fund Expenses
5A Fund Performance Information
6 Dividends, Distributions and Taxes; Additional Information;
Management of the Fund; Fund Expenses
7 Exchanges of Shares and Retirement Plans; How to Buy Shares -
- Distribution and Service Plans
8 How to Redeem Shares; Exchanges of Shares and Retirement Plans
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Special Investment Methods;
Investment Restrictions
14 Directors and Officers; Investment Management Services
15 Investment Management Services; Directors and Officers - Major
Shareholders
16 Investment Management Services; Distribution and Service
Plans; Additional Information - Custodian; Additional
Information - General Distributor's Agreement
17 Investment Management Services - Brokerage
18 *
19 Purchase, Redemption and Pricing of Shares; Automatic
Withdrawal Plan Provisions; Letters of Intent
20 Performance and Tax Information
21 Distribution and Service Plans; Brokerage; Additional
Information - General Distributor's Agreement; Investment
Management Services; Financial Statements
22 Performance and Tax Information
23 Financial Statements
__________________
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER TOTAL RETURN FUND, INC.
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Oppenheimer Total Return Fund, Inc. (the "Fund") is a mutual fund with
the investment objective of seeking high total return. The Fund attempts
to achieve its objective through investment in securities which it
believes will provide a high return, including investments which are
expected to provide opportunities for growth or to produce income, or
both. The Fund is not restricted to any specific type of security and may
also use certain hedging instruments. See "The Fund and Its Investment
Policies" and "Special Investment Methods."
The Fund offers two classes of shares which may be purchased at a price
equal to their respective net asset value per share, plus a sales charge.
The investor may elect to purchase shares with a sales charge imposed (i)
at the time of purchase (the "Class A shares"), or (ii) on a contingent
deferred basis (the "Class B shares"). Class B shares are also subject
to an additional asset-based sales charge. The contingent deferred sales
charge will be imposed on most redemptions of Class B shares within six
years of purchase. These alternatives permit an investor to choose the
method of purchasing shares that is more beneficial to that investor
depending on the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. A third class of
shares may be purchased only by certain institutional investors at net
asset value per share (the "Class Y shares"). See "How to Buy Shares -
Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
a prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement"), dated
April 1, 1994, has been filed with the Securities and Exchange Commission
(the "SEC") and is available without charge upon written request to the
Fund's Transfer and Shareholder Servicing Agent, Oppenheimer Shareholder
Services (the "Transfer Agent"), P.O. Box 5270, Denver, Colorado 80217,
or by calling the Transfer Agent at the toll-free number shown above. The
Additional Statement (which is incorporated in its entirety by reference
in this Prospectus) contains more detailed information about the Fund and
its management.
Investors are advised to read and retain this Prospectus for future
reference. Shares of the Fund are not deposits or obligations of any
bank, are not guaranteed by any bank, and are not insured by the FDIC or
any other agency, and involve investment risks, including the possible
loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective April 1, 1994.
<PAGE>
Table of Contents
Page
Fund Expenses
Financial Highlights
The Fund and Its Investment Policies
Special Investment Methods
Investment Restrictions
Management of the Fund
How to Buy Shares
Alternative Sales Arrangements
Class A Shares
Class A Sales Charge Table
Class A Contingent Deferred Sales Charge
Reduced Sales Charges for Class A Purchases
Class A Service Plan
Class B Shares
Class B Contingent Deferred Sales Charge
Class B Conversion Feature
Class B Distribution and Service Plan
Purchase Programs for Class A and Class B Shares
AccountLink
PhoneLink
Asset Builder Plans
Class Y Shares
How to Redeem Shares
Regular Redemption Procedures
Telephone Redemptions
Distributions from Retirement Plans
Automatic Withdrawal and Exchange Plans
Repurchase
Reinvestment Privilege
General Information on Redemptions
Exchanges of Shares and Retirement Plans for Class A or Class B Shares
Performance, Dividend and Tax Information
Additional Information
<PAGE>
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and the expenses paid by the Fund during its fiscal year ended
December 31, 1993 (as to Class A shares) and its fiscal period ended
December 31, 1993 (as to Class B shares). The public sales of Class B
shares commenced on May 1, 1993.
Shareholder Transaction Expenses Class A Class B Class Y
Shares Shares Shares
Maximum Sales Charge on Purchases
(as a percentage of offering price) 5.75% None None
Sales Charge on Reinvested Dividends None None None
Maximum Contingent Deferred Sales
Charge on Redemptions None(1) 5.0%(2) None
Redemption Fee None None None
Exchange Fee $5.00 $5.00 $5.00
Annual Fund Operating Expenses
(as a percentage of average net assets)
Class A Class B Class Y
Shares Shares Shares
Management Fees 0.57% 0.57% 0.57%
12b-1 (Distribution and/or
Service Plan) Fees 0.15% 1.00% None
Other Expenses 0.21% 0.30% 0.27%
----- ------- -----
Total Fund Operating Expense 0.93% 1.87% 0.84%
_______________________
(1) Certain Class A share purchases of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge
(maximum of 1.0%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase,
subject to certain conditions. See "How to Buy Shares - Class A
Contingent Deferred Sales Charge," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within six years of their purchase, subject to
certain exceptions. That charge is imposed as a percentage of net asset
value at the time of purchase or redemption, whichever is less, and
declines from 5.0% in the first year that shares are held, to 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 eliminated thereafter. See "How to Buy Shares
- - Class B Contingent Deferred Sales Charge" below.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly
(shareholder transaction expenses) or indirectly (annual fund operating
expenses). The sales charge rate shown for Class A shares is the current
maximum rate applicable to purchases of Class A shares of the Fund.
Investors in Class A shares may be entitled to reduced sales charges based
on the amount purchased or the value of shares already owned, and may be
subject to a contingent deferred sales charge in limited circumstances
(see "How to Buy Shares - Class A Contingent Deferred Sales Charge"). An
amendment to the Class A Service Plan will be proposed in the current
fiscal year that would, if approved, increase the 12b-1 fees shown above
for Class A shares (see "Class A Service Plan" above). Class Y shares
were not publicly offered during the fiscal year ended December 31, 1993
and are annualized. The "Annual Fund Operating Expenses" as to Class B
shares are based on expenses for the period from May 1, 1993 through
December 31, 1993. The "Annual Fund Operating Expenses" as to Class Y
shares are estimates based on amounts that would have been payable during
the fiscal year ended December 31, 1993, assuming that Class Y shares were
outstanding during such fiscal year. The actual amount of such fees and
expenses in the current and future years will depend on a number of
factors, including the actual average net assets of Class Y shares during
such years. "Other Expenses" includes such expenses as custodial and
transfer agent fees, audit, legal and other business operating expenses,
but excludes extraordinary expenses. For further details, see "Purchase,
Redemption and Pricing of Shares - Multi-Class Methodology" and the Fund's
financial statements, both included in the Additional Statement.
The following examples apply the above-stated expenses and the current
maximum sales charges to a hypothetical $1,000 investment in shares of the
Fund over the time periods shown below, assuming a 5% annual rate of
return on the investment. The amounts shown below are the cumulative
costs of such hypothetical $1,000 investment for the periods shown and,
except as indicated in lines 4, 5 and 6, assume that the shares are
redeemed at the end of each stated period.
1 year 3 years 5 years 10 years(1)
------ ------- ------- -----------
1. Class A shares $66 $85 $106 $165
2. Class B shares $69 $89 $121 $172
3. Class Y shares $ 9 $27 $ 47 $104
4. Class A shares,
assuming no
redemption $66 $85 $106 $165
5. Class B shares,
assuming no
redemption $19 $59 $101 $172
6. Class Y shares,
assuming no
redemption $ 9 $27 $ 47 $104
_________________
(1) Class B shares convert to Class A shares under the terms and
conditions described under "How to Buy Shares - Class B Conversion
Feature." Therefore, years 7 through 10 reflect the Class A expenses
shown above. Long-term shareholders of Class B shares could pay the
economic equivalent, through the asset-based sales charge and contingent
deferred sales charge imposed on Class B shares, of more than the maximum
front-end sales charges permitted under applicable regulatory
requirements. The Class B Conversion Feature is intended to minimize the
likelihood that this will occur.
These examples should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a Class A and Class B share of the Fund outstanding
throughout each period
The information in the table below has been audited by Deloitte &
Touche, independent auditors, whose report on the financial statements of
the Fund for the fiscal year ended December 31, 1993 (as to Class A
shares) and the fiscal period ended December 31, 1993 (as to Class B
shares) is included in the Additional Statement. Class Y shares were not
publicly offered during that period. Accordingly, no information on Class
Y shares is reflected in the table below or in the Fund's other financial
statements.
<TABLE>
<CAPTION>
Class A Class B
Year Period
Ended Ended
Dec. 31, Dec. 31,
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1993(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $7.84 $7.49 $6.13 $6.68 $6.35 $5.95 $6.76 $6.81 $5.40 $5.74 $8.23
Income (loss) from
investment
operations:
Net investment income .18 .17 .24 .24 .27 .26 .25 .35 .25 .26 .09
Net realized and
unrealized gain
(loss) on
investments,
options written and
foreign currency
transactions 1.45 .75 1.91 (.49) .93 .53 .63 1.00 1.58 (.39) 1.03
Total income (loss)
from investment
operations 1.63 .92 2.15 (.25) 1.20 .79 .88 1.35 1.83 (.13) 1.12
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.20) (.20) (.23) (.24) (.28) (.27) (.32) (.37) (.21) (.21) (.11)
Distributions from
net realized gain
on investments,
options written and
foreign currency
transactions (.58) (.37) (.56) (.06) (.59) (.12) (1.37) (1.03) (.21) -- (.58)
Total dividends and
distributions to
shareholders (.78) (.57) (.79) (.30) (.87) (.39) (1.69) (1.40) (.42) (.21) (.69)
Net asset value,
end of period $8.69 $7.84 $7.49 $6.13 $6.68 $6.35 $5.95 $6.76 $6.81 $5.40 $8.66
Total Return, at
Net Asset Value(2) 21.24% 12.83% 36.26% (3.86)% 19.25% 13.35% 12.35% 19.70% 34.36%
(5.74)% 13.91%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands) $1,223,395 $795,474 $555,865 $396,240 $389,413 $314,039 $274,068 $234,674 $229,783
$197,758 $218,716
Average net assets
(in thousands) $992,381 $662,917 $475,741 $394,903 $356,994 $298,509 $277,877 $246,530 $213,803
$199,287 $90,952
Number of shares
outstanding at end
of period (in
thousands) 140,711 101,433 74,245 64,644 58,333 49,464 46,080 34,703 33,720 36,627
25,261
Ratios to average
net assets:
Net investment
income 2.21% 2.68% 3.26% 3.87% 3.96% 4.22% 3.42% 4.37% 3.81% 4.84%
1.09%(3)
Expenses .93% .96% .95% .98% .98% .94% .88% .85% .89% .95%
1.87%(3)
Portfolio turnover
rate(4) 143.9% 143.5% 161.5% 114.1% 151.6% 127.3% 173.4% 88.3% 143.9%
202.6% 143.9%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, 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.
3. Annualized.
4. 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 year ended December 31, 1993 were $1,939,566,810 and
$1,478,337,981, respectively.
</TABLE>
<PAGE>
The Fund and Its Investment Policies
The Fund is an open-end, diversified management investment company. Its
investment objective is high total return. "Total return" is defined as
a change in asset value over a particular period taking into account both
income and capital appreciation. In general, the Fund will attempt to
invest its assets to gain both reasonable income and capital appreciation.
Depending on the assessment of market conditions by the Fund's investment
adviser, Oppenheimer Management Corporation (the "Manager"), the Fund may
emphasize investment in common stocks and securities convertible into
common stocks, or securities which are acquired primarily to produce
income, or a combination of both types of investments. The Fund's
investments, however, are not restricted to any specific type of
securities. When the investment climate is viewed as favorable, common
stocks may be more heavily emphasized. In an uncertain environment when
it would be appropriate to maintain a temporary defensive position,
investment in preferred stocks, bonds, cash equivalents, Treasury bills
or commercial paper may be stressed. The investment policies and
practices described below are not "fundamental" policies unless a
particular policy is identified as "fundamental." "Fundamental" policies
are those that cannot be changed without the approval of a "majority," as
defined in the Investment Company Act of 1940 (the "Investment Company
Act"), of the Fund's outstanding voting securities. The Fund's Board of
Directors may change non-fundamental investment policies without
shareholder approval.
While the Fund may invest in securities having appreciation
possibilities, such securities will not be selected which, in the view of
the Manager, would involve undue risk (e.g., securities of companies
having questionable financial solvency or securities having limited
marketability). The amount of dividends paid by the Fund may fluctuate.
The Fund is not intended for investors whose principal objective is
assured income and conservation of capital. Since market risks are
inherent in all investments to varying degrees, there can be no assurance
that the Fund's investment objective will be met.
Foreign Securities
The Fund may purchase without restriction "foreign securities," that is,
debt and equity securities issued by companies organized under the laws
of countries other than the United States and debt securities issued by
foreign governments that are traded on foreign securities exchanges or in
the foreign over-the-counter markets. The Fund may purchase securities
issued by issuers in any country, developed or undeveloped. Securities
of foreign issuers that are (i) represented by American Depositary
Receipts, (ii) listed on a U.S. securities exchange or (iii) traded in the
U.S. over-the-counter market are not considered "foreign securities"
because they are not subject to many of the special considerations and
risks (discussed below and in the Additional Statement) that apply to
foreign securities traded and held abroad. If the Fund's securities are
held abroad, the countries in which such securities are held and the sub-
custodians holding them must be, in most cases, approved by the Fund's
Board of Directors under applicable SEC rules. The Fund will hold foreign
currency only to effect foreign securities transactions and not as an
investment. Investment in foreign securities involves considerations and
risks not associated with investment in securities of U.S. issuers. For
example, foreign issuers are not required to use generally-accepted
accounting principles. If foreign securities are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), the issuer does
not have to comply with the disclosure requirements of the Securities
Exchange Act of 1934, as amended. The values of foreign securities
investments will be affected by incomplete or inaccurate information
available as to foreign issuers, changes in currency rates, exchange
control regulations or currency blockage, expropriation or nationalization
of assets, application of foreign tax laws (including withholding taxes),
changes in governmental administration or economic or monetary policy in
the U.S. or abroad, or changed circumstances in dealings between nations.
In addition, it is generally more difficult to obtain court judgments
outside the United States. See "Investment Objective and Policies -
Foreign Securities" in the Additional Statement for morer information on
the risks and possible rewards of investing in securities of foreign
corporations and governments.
Special Investment Methods
In pursuing its investment objective, the Fund may use the following
special investment methods.
Loans of Portfolio Securities
To attempt to increase its income, the Fund may lend its portfolio
securities (other than in repurchase transactions) to qualified borrowers
if the loan is collateralized in accordance with applicable regulatory
requirements and if, after any loan, the value of securities loaned does
not exceed 10% of the value of the Fund's total assets. The Fund
presently does not intend that the value of securities loaned will exceed
5% of the value of the Fund's total assets during its current fiscal year.
See "Special Investment Methods - Loans of Portfolio Securities" in the
Additional Statement for further information on loans of portfolio
securities.
Writing Covered Calls
The Fund may write (i.e., sell) call options ("calls") to generate
additional income or for defensive purposes if: (i) after any sale not
more than 25% of the Fund's total assets are subject to calls; (ii) the
calls are listed on a domestic securities exchange, quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. ("NASDAQ") or traded in the over-the-counter market; and
(iii) the calls are "covered" (i.e., the Fund owns the securities or
Futures subject to the call or other securities acceptable for applicable
escrow arrangements) while the call is outstanding. The Fund may write
calls on securities indices.
Hedging
As noted above, the Fund may write covered calls to enhance income. For
hedging purposes as a temporary defensive maneuver, it may purchase
certain put and call options, Stock Index Futures (described below),
options on Stock Index Futures and broadly-based stock indices, and
Interest Rate Swap transactions, all of which are referred to as "Hedging
Instruments." In general, the Fund may use Hedging Instruments (i) to
attempt to protect against declines in the market value of the Fund's
portfolio securities and Stock Index Futures, resulting from downward
market trends, or (ii) to establish a position in the equities markets as
a temporary substitute for purchasing particular equity securities. The
Fund will not use Hedging Instruments for speculation. The Hedging
Instruments the Fund may use are described below and in greater detail in
"Covered Calls Options and Hedging" in the Additional Statement.
-Purchasing Puts and Calls. The Fund may purchase put options ("puts")
which relate to: (i) securities (whether or not held by it); (ii) Stock
Index Futures, whether or not it holds such Stock Index Futures in its
portfolio; or (iii) broadly-based stock indices. The Fund may purchase
calls as to securities, securities indices or Stock Index Futures, or to
effect a "closing purchase transaction" to terminate its obligation as to
a call it has previously written. A call or put may be purchased only if,
after such purchase, the value of all put and call options held by the
Fund would not exceed 5% of the Fund's total assets.
-Stock Index Futures. The Fund may buy and sell futures contracts only
if they relate to broadly-based stock indices ("Stock Index Futures").
A stock index is "broadly-based" if it includes stocks that are not
limited to issuers in any particular industry or group of industries.
Stock Index Futures are settled by payment or acceptance of cash, not by
delivery of the stocks comprising the index. At present, the Fund does
not intend to enter into Stock Index Futures and options on Futures if,
after any such purchase or sale, the sum of margin deposits on Futures and
premiums paid on Futures options exceeds 5% of the value of the Fund's
total assets. The Fund's potential liability generally will be
significantly in excess of such amount.
-Writing Puts. The Fund may write puts on securities, securities
indices or Futures only if such puts are covered by segregated liquid
assets. The Fund may not write puts if, as a result, more than 50% of the
Fund's net assets would be required to be segregated liquid assets.
-Foreign Currency Options. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or over-the-counter market or quoted by major recognized dealers
in such options, for the purpose of protecting against declines in the
dollar value of foreign securities and against increases in the dollar
cost of foreign securities to be acquired. If a rise is anticipated in
the dollar value of a foreign currency in which securities to be acquired
are denominated, the increased cost of such securities may be partially
offset by purchasing calls or writing puts on that foreign currency. If
a decline in the dollar value of a foreign currency is anticipated, the
decline in value of portfolio securities denominated in that currency may
be partially offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and incur
transactions costs.
-Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and
the purchaser to take a specific amount of foreign currency at a specific
future date for a fixed price. The Fund may enter into a Forward Contract
in order to "lock in" the U.S. dollar price of a security denominated in
a foreign currency which it has purchased or sold but which has not yet
settled, or to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S.
dollar and a foreign currency. Forward Contracts include standardized
foreign currency futures contracts which are traded on exchanges and are
subject to procedures and regulations applicable to other Futures. The
Fund may also enter into a Forward Contract to sell a foreign currency
denominated in a currency other than that in which the underlying security
is denominated. This is done in the expectation that there is a greater
correlation between the foreign currency of the Forward Contract and the
foreign currency of the underlying investment than between the U.S. dollar
and the foreign currency of the underlying investment. This technique is
referred to as "cross hedging." The success of cross hedging is dependent
on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the
U.S. dollar. To the extent that the correlation is not identical, the
Fund may experience losses or gains on both the underlying security and
the cross currency hedge.
The Fund will not speculate in foreign currency exchange contracts.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not
enter into such Forward Contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities denominated in that currency, or enter into a cross-hedge
unless it is denominated in a currency or currencies that the Manager
believes will have price movements that tend to correlate closely with the
currency in which the investment being hedged is denominated. See "Tax
Aspects of Covered Calls and Hedging Instruments" in the Additional
Statement for a discussion of the tax treatment of foreign currency
exchange contracts.
-Risks of Options and Futures Trading. "Special Investment Methods -
Covered Call Options and Hedging" in the Additional Statement contains
additional information about options and Futures, Forward Contracts,
segregation arrangements for Forward Contracts, the payment of premiums
for options trades, the tax effects, risks and possible benefits to the
Fund from options trading, and information as to the Fund's other
limitations (which are not fundamental policies) on investment in Futures
and options thereon. There are certain risks in writing calls. If a call
written by the Fund is exercised, the Fund forgoes any profit from any
increase in the market price above the call price of the underlying
investment on which the call was written. In addition, the Fund could
experience capital losses that might cause previously distributed short-
term capital gains to be re-characterized as non-taxable return of capital
to shareholders. In writing puts, there is the risk that the Fund may be
required to buy the underlying security at a disadvantageous price. The
principal risks of Futures trading are: (a) possible imperfect correlation
between the prices of the Futures and the market value of the Fund's
portfolio securities; (b) possible lack of a liquid secondary market for
closing out a Futures position; (c) the need for additional skills and
techniques beyond those required for normal portfolio management; and (d)
losses resulting from market movements not anticipated by the Manager.
-Interest Rate Swap Transactions. The Fund may enter into interest rate
swaps. Interest rate swaps are subject to interest rate risks, in that
the Fund could be obligated to pay more under its swap agreements than it
receives, as a result of interest rate changes. In an interest rate swap,
the Fund and another party exchange their respective commitments to pay
or receive interest on a security, (e.g., an exchange of floating rate
payments for fixed rate payments). The Fund will not use interest rate
swaps for leverage. Swap transactions will be entered into only as to
security positions held by the Fund. The Fund may not enter into swap
transactions with respect to more than 50% of its total assets.
The Fund will segregate liquid assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. There is a risk of loss
on a swap equal to the net amount of interest payments that the Fund is
contractually obligated to make. The credit risk of an interest rate swap
depends on the counterparty's ability to perform. The value of the swap
may decline if the counterparty's creditworthiness deteriorates. If the
counterparty defaults, the Fund risks the loss of the net amount of
interest payments that it is contractually entitled to receive. The Fund
may be able to reduce or eliminate its exposure to losses under swap
agreements either by assigning them to another party, or by entering into
an offsetting swap agreement with the same counterparty or another
creditworthy counterparty. See "Covered Call Options and Hedging" in the
Additional Statement for further details.
Restricted and Illiquid Securities
The Fund will not purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets (taken at current value) would be
invested in securities that are illiquid by virtue of the absence of a
readily available market or because of legal or contractual restrictions
on resale ("restricted securities"). This policy applies to participation
interests, bank time deposits, master demand notes, repurchase
transactions having a maturity beyond seven days, over-the-counter options
held by the Fund and that portion of assets used to cover such options.
This policy is not a fundamental policy and does not limit purchases of
restricted securities eligible for resale to qualified institutional
buyers pursuant to Rule 144A under the Securities Act that are determined
to be liquid by the Board of Directors, or by the Manager under Board-
approved guidelines. Such guidelines take into account, among other
factors, trading activity for such securities and the availability of
reliable pricing information. If there is a lack of trading interest in
particular Rule 144A securities, the Fund's holdings of those securities
may be illiquid. There may be undesirable delays in selling illiquid
securities at prices representing their fair value (see "Special
Investment Methods - Restricted and Illiquid Securities" in the Additional
Statement for further details). Due to various state regulations, the Fund
will not invest more than 10% of its net assets in illiquid or restricted
securities; restricted securities eligible for resale pursuant to Rule
144A are not included within this limitation. In the event that the
Fund's shares cease to be qualified under the laws of such states or if
such regulations are amended or otherwise cease to be operative, the Fund
would not be subject to this 10% restriction.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements to
generate income and for liquidity purposes to meet anticipated
redemptions, or pending the investment of proceeds from sales of Fund
shares or settlement of purchases of portfolio investments. The Fund's
repurchase agreements will be fully collateralized. However, if the
seller of the securities fails to pay the agreed-upon repurchase price on
the delivery date, the Fund's risks may include the costs of disposing of
the collateral for the agreement and losses that might result from any
delays in foreclosing on the collateral. The Fund will not enter into a
repurchase agreement that will cause more than 15% of the Fund's net
assets to be subject to repurchase agreements maturing in more than seven
days. There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements maturing in seven days or less. See
"Special Investment Methods - Repurchase Agreements" in the Additional
Statement for more details.
Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objective, are fundamental policies changeable only by the vote
of a "majority" of the Fund's outstanding voting securities. Under
certain of those restrictions, the Fund cannot: (i) borrow or lend money,
or lend, pledge, mortgage, or hypothecate securities except as provided
above under "Loans of Portfolio Securities" (however, the Fund may
purchase bonds or other debt securities, and enter into escrow
arrangements contemplated by the writing of covered call options or other
collateral or margin arrangements in connection with Hedging Instruments
the Fund may use under its other fundamental policies); (ii) invest more
than 5% of its assets in securities of any one issuer other than the U.S.
Government; (iii) purchase the securities of any one issuer if immediately
thereafter, the Fund would own more than 10% of the outstanding voting
securities or 10% of any one class of securities of such issuer (except
for securities of investment companies acquired in exchange for Fund
shares); or (iv) concentrate investments in a particular industry or group
of industries; therefore, the Fund will not purchase the securities of
companies in any one industry if, thereafter, more than 25% of the value
of the Fund's assets would consist of securities of companies in that
industry. The percentage restrictions described above and in the
Additional Statement are applicable only at the time of investment and
require no action by the Fund as a result of subsequent changes in value
of the investment or the size of the Fund. A supplementary list of
investment restrictions is contained in the Additional Statement.
Management of the Fund
The Fund's Board of Directors has overall responsibility for the
management of the Fund under the laws of Maryland governing the
responsibilities of directors. Subject to the authority of the Board of
Directors, the Manager is responsible for the day-to-day management of the
Fund's business, supervises the investment operations of the Fund and the
composition of its portfolio and furnishes the Fund advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities pursuant to an investment advisory
agreement with the Fund (the "Agreement").
The Agreement contains provisions relating to the selection of brokers
and dealers for the Fund's portfolio transactions. Subject to the
Agreement, the Manager may consider sales of shares of the Fund and other
investment companies managed by the Manager or its affiliates as a factor
in the selection of brokers and dealers for its portfolio transactions.
Under the Agreement, the Fund pays a monthly management fee to the Manager
at the following annual rates, computed on the net assets of the Fund at
the close of business each day, which rates are higher than those paid by
most other investment companies: 0.75% of the first $100 million of net
assets; 0.70% of the next $100 million; 0.65% of the next $100 million;
0.60% of the next $100 million; 0.55% of the next $100 million; and 0.50%
of net assets in excess of $500 million. "Investment Management Services"
in the Additional Statement contains more information about the Agreement,
including a description of expense arrangements, exculpation provisions,
and brokerage practices of the Fund.
John Wallace is a Vice President of the Manager who serves as the
Portfolio Manager and a Vice President of the Fund. Since February, 1990,
he has been the person principally responsible for the day-to-day
management of the Fund's portfolio. During the past five years, Mr.
Wallace has also served as an officer of other OppenheimerFunds, prior to
which he was a securities analyst and assistant portfolio manager for the
Manager. For more information about the Fund's other officers and
Directors, see "Directors and Officers" in the Additional Statement.
The Manager has operated as an investment adviser since April 30, 1959.
The Manager and its affiliates currently advise U.S. investment companies
with assets aggregating over $26 billion as of December 31, 1993, and
having more than 1.8 million shareholder accounts. The Manager is owned
by Oppenheimer Acquisition Corp., a holding company owned in part by
senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company which also advises pension plans and investment companies.
How to Buy Shares
Alternative Sales Arrangements
Two classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements". The investor may elect to purchase
shares with a sales charge imposed (i) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (ii) on a contingent deferred
basis (the "Class B shares"). The contingent deferred sales charge will
be imposed on most redemptions of Class B shares within six years of
purchase. Only certain institutional investors may elect to purchase a
third class of shares at net asset value (the "Class Y Shares"). The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to that investor depending on
the amount of the purchase, the length of time the investor expects to
hold shares and other relevant circumstances. The Fund's distributor,
Oppenheimer Funds Distributor, Inc. (the "Distributor"), will not
knowingly accept any order for $1 million or more for Class B shares of
one or more of the "Eligible Funds" listed in "Right of Accumulation"
below on behalf of a single investor (not including dealer "street name"
or omnibus accounts) because it generally will be more advantageous for
such investor to purchase Class A shares of such Eligible Fund(s) instead.
Investors should understand that the purpose and function of the deferred
sales charge and the asset-based sales charge with respect to Class B
shares are the same as those of the initial sales charge with respect to
Class A shares. Any financial intermediary or other person entitled to
receive compensation for selling or servicing Fund shares may receive
different compensation with respect to one class of shares than the other.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
For each class, the net income allocable to that class and the dividends
payable on its shares will be reduced by incremental expenses borne solely
by that class, including the asset-based sales charge to which Class B
shares are subject and the service plan fees to which Class A and Class
B shares are subject. For further information, see "Purchase, Redemption
and Pricing of Shares" in the Additional Statement.
The Fund's Class A and Class B shares may be purchased through any
dealer or broker that has a sales agreement with the Fund's Distributor,
a subsidiary of the Manager. There are two ways to make an initial
investment in shares of these two classes: either (i) complete an
OppenheimerFunds New Account Application and mail it with payment to the
Distributor at P.O. Box 5270, Denver, Colorado 80217 (if no dealer or
broker is named in the Application, the Distributor will be listed as the
dealer of record), or (ii) order the shares through your dealer or broker.
Be certain to specify whether you intend to purchase Class A shares or
Class B shares. If no such instructions are provided, initial investments
will be made in Class A shares, and subsequent investments will be made
in the same class as the most recent previous investment.
The minimum initial investment in Class A or Class B shares is $1,000,
except as otherwise described in this Prospectus. Subsequent purchases
must be at least $25 and may be made (i) through authorized dealers or
brokers, (ii) by forwarding payment to the Distributor at the above
address with the names of all account owners, the account number(s) and
the name of the Fund, (iii) automatically through Asset Builder Plans or
(iv) by telephone using AccountLink, described below. Under an Asset
Builder Plan, Automatic Exchange Plan, 403(b)(7) custodial plan or
military allotment plan, initial and subsequent investments must be at
least $25. The minimum initial and subsequent purchase requirements are
waived on purchases made by reinvesting dividends from any of the
"Eligible Funds" listed in "Right of Accumulation" below, or by
reinvesting distributions from unit investment trusts for which
reinvestment arrangements have been made with the Distributor. No share
certificates will be issued for Class B shares or Class Y shares, and no
share certificates will be issued for Class A shares unless specifically
requested in writing by an investor or the dealer or broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day The New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Directors has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities (including restricted securities) not
having readily-available market quotations, (ii) short-term debt
securities and (iii) covered calls and Hedging Instruments. For further
details see "Purchase, Redemption and Pricing of Shares" in the Additional
Statement. The net asset values per share of Class A, Class B and Class
Y shares will differ due to differences in expenses borne by each class,
as discussed under "Purchase, Redemption and Pricing of Shares - Multi-
Class Methodology" in the Additional Statement.
All purchase orders received by the Distributor at its office in Denver,
Colorado prior to 4:00 P.M. on a regular business day are processed at
that day's offering price. However, an order received by the Distributor
from a dealer or broker after the offering price is determined that day
will receive such offering price if the order was received by the dealer
or broker from its customer prior to 4:00 P.M., and was transmitted to and
received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Purchase orders received on other than a regular
business day will be executed on the next succeeding regular business day.
The Distributor, in its sole discretion, may accept or reject any order
for purchase of the Fund's shares. The sale of shares will be suspended
during any period when the determination of net asset value is suspended
and may be suspended by the Board of Directors whenever the Board judges
it in the best interest of the Fund to do so.
Class A Shares
Class A shares are sold at their offering price, which (as that term
is used in this Prospectus and the Additional Statement) is net asset
value plus a front-end sales charge, except that as to certain purchases
described below that are not subject to a front-end sales charge, the
offering price is net asset value. The offering price is determined as
of 4:00 P.M. each regular business day. Class A shares may not be
converted into Class B shares.
The table below shows the regular front-end sales charge rates for Class
A shares for a "single purchaser" (defined below), together with the
dealer discounts paid to authorized dealers and the agency commission paid
to authorized brokers (collectively, "commissions"):
<TABLE>
<CAPTION>
Front-End
Front-End Sales Charge
Sales Charge as as Approximate Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------ -------------- --------------- --------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than 50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
$1 million or more None* None* None*
</TABLE>
[FN]
*See "Class A Contingent Deferred Sales Charge," below.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be reallowed to dealers or brokers, who might then
be deemed to be "underwriters" under the Securities Act. Commission rates
may vary among the funds for which the Manager and its affiliates act as
investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (defined below) in a calendar year, the dealer firm is eligible to
send such representative, with a guest, to a three-day sales conference
(generally held in a resort), if one is sponsored and held by the
Distributor; or in lieu of sending such representative, that firm may, at
its option, receive the equivalent cash value of such award as additional
commission. The Distributor may, from time to time, enter into
arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the "Eligible
Funds" held by the dealer and/or its customers or some combination
thereof.
Dealers whose sales of Class A shares of Eligible Funds other than
Money Market Funds under OppenheimerFunds-sponsored custodial plans exceed
a rate of $5 million per year, calculated per calendar quarter, will
receive monthly one-half of the Distributor's retained commission on such
sales. Dealers whose sales of such plans exceed a rate of $10 million per
year, calculated per calendar quarter, will receive the Distributor's
entire retained commission on such sales; such dealers also may be deemed
to be "underwriters" as described above.
-Class A Contingent Deferred Sales Charge. On certain purchases of
Class A shares of any one or more "Eligible Funds" by a "single purchaser"
(both terms are defined below in "Right of Accumulation") aggregating $1
million or more, the Distributor will pay authorized dealers a commission
equal to the sum of 1.0% of the first $2.5 million, 0.50% of the next $2.5
million, and 0.25% of share purchases in excess of $5 million. However,
that commission will be paid only on the amount of those share purchases
in excess of $1 million that were not previously subject to a front-end
sales charge and dealer commission (the shares with respect to which this
commission is paid are called "Class A CDSC Shares"). A contingent
deferred sales charge (the "Class A CDSC") will be deducted from the
redemption proceeds of Class A CDSC Shares redeemed within 18 months of
the end of the calendar month of their purchase. The Class A CDSC will
be an amount equal to 1.0% of the lesser of either (1) the aggregate net
asset value of the Class A CDSC Shares (not including shares purchased by
reinvestment of dividends or capital gains) or (2) the original cost of
the shares. However, the total Class A CDSC paid on the redemption of
those shares will not exceed the aggregate commissions paid to dealers on
all Class A shares of "Eligible Funds" purchased subject to a Class A CDSC
by that "single purchaser."
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" below and will be waived in the case
of redemptions of shares made for: (i) retirement distributions (or loans)
to participants or beneficiaries from retirement plans qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), or from Individual Retirement Accounts ("IRAs"),
403(b)(7) custodial plans, deferred compensation plans created under
Section 457 of the Internal Revenue Code or other employee benefit plans
(collectively, "Retirement Plans"); (ii) returns of excess contributions
to such Retirement Plans; (iii) Automatic Withdrawal Plan payments limited
to no more than 12% of the original account value annually; and (iv)
involuntary redemptions of shares by operation of law or under procedures
adopted by the Board of Directors (collectively, "Involuntary
Redemptions"). See "Transfers of Shares" in "Purchase, Redemption and
Pricing of Shares" in the Additional Statement for further details.
Some or all of the proceeds of redeemed shares on which a Class A
CDSC was paid at the time of redemption and which are subsequently
reinvested under the "Reinvestment Privilege" (described below) may be
reinvested within six months of redemption without sales charge at the net
asset value on the reinvestment date if the investor notifies the
Distributor that the privilege applies. Additionally, no Class A CDSC is
charged on exchanges, pursuant to the Fund's Exchange Privilege (described
below), of shares purchased subject to a Class A CDSC, except that if
Class A shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the initial purchase of the exchanged shares,
the Class A CDSC will apply. In determining whether a Class A CDSC is
payable, and the amount of any such charge, shares not subject to a Class
A CDSC are redeemed first, including shares purchased by reinvestment of
dividends and capital gains distributions, and then other shares are
redeemed in the order of purchase.
-Reduced Sales Charges for Class A Purchases. The Class A sales
charge rates in the table above may be reduced as follows:
Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a "single purchaser"
is entitled to cumulate current purchases with the greater of: (i) amounts
previously paid for, or (ii) the current value (at offering price) of
Class A shares of certain other "Eligible Funds" and of the Fund if sold
subject to an initial sales charge and if the investment is still held in
one of the "Eligible Funds." The Eligible Funds are those for which the
Distributor or an affiliate acts as the distributor and include the
following: (a) the Fund, Oppenheimer Time Fund, Oppenheimer Target Fund,
Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund,
Oppenheimer California Tax-Exempt Fund, Oppenheimer High Yield Fund,
Oppenheimer Champion High Yield Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer Mortgage Income Fund, Oppenheimer Discovery Fund, Oppenheimer
U.S. Government Trust, Oppenheimer Global Bio-Tech Fund, Oppenheimer
Global Environment Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Pennsylvania Tax-Exempt Fund, Oppenheimer Florida Tax-Exempt
Fund, Oppenheimer New Jersey Tax-Exempt Fund, Oppenheimer Global Fund,
Oppenheimer Fund, Oppenheimer Special Fund, Oppenheimer Equity Income
Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Investment
Grade Bond Fund, Oppenheimer Value Stock Fund, Oppenheimer Intermediate
Tax-Exempt Bond Fund, Oppenheimer Insured Tax-Exempt Bond Fund,
Oppenheimer Main Street Income & Growth Fund, Oppenheimer Main Street
California Tax-Exempt Fund, Oppenheimer Government Securities Fund,
Oppenheimer Strategic Income Fund, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Strategic Investment Grade Bond Fund, and Oppenheimer
Strategic Short-Term Income Fund and (b) the following "Money Market
Funds": Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial America Fund, L.P.,
Oppenheimer Money Market Fund, Inc., Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves and Oppenheimer Tax-Exempt Cash Reserves. There
is an initial sales charge on the purchase of Class A shares of each
Eligible Fund except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be
subject to a CDSC). The reduced sales charge applies only to current
purchases.
The term "single purchaser" refers to: (i) an individual; (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer. To
be entitled to a reduced sales charge under the Right of Accumulation, at
the time of purchase the purchaser must ask the Distributor for such
entitlement and provide the account number(s) for shares of Eligible Funds
owned by the single purchaser, and the age of any minor children for whom
shares are held.
Letters of Intent. By initially investing at least $1,000 and
submitting a Letter of Intent (the "Letter") to the Distributor, a single
purchaser may purchase Class A shares of the Fund and other Eligible Funds
(other than the Money Market Funds) during a 13-month period at the
reduced sales charge rates, or at net asset value but subject to the Class
A CDSC, if applicable, applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made
up to 90 days before the date of the Letter. The Fund and the Distributor
reserve the right to amend or terminate such program at any time without
prior notice. For further details, including escrow requirements, see
"Letters of Intent" in the Additional Statement.
Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present or
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers or of financial
institutions that have entered into a sales arrangement with such dealer
or broker or the Distributor (and are identified to the Distributor by
such dealer or broker); the purchaser must certify to the Distributor at
the time of purchase that such purchase is for its own account (or for the
benefit of such employee's spouse or minor children); (v) sold to dealers,
brokers or registered investment advisers 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 the
clients of the dealer, broker or registered investment adviser; or (vi)
purchased by the reinvestment of (a) loan repayments by a participant in
a retirement plan for which the Manager or its affiliates acts as sponsor,
or (b) dividends or other distributions reinvested from the Fund or other
Eligible Funds (other than Cash Reserves Funds) or unit investment trusts
for which reinvestment arrangements have been made with the Distributor.
"Purchase, Redemption and Pricing of Shares -Reduced Sales Charges" in the
Additional Statement discusses this policy.
-Class A Service Plan. The Fund has adopted a service plan (the
"Class A Plan") pursuant to Rule 12b-1 of the Investment Company Act under
which the Fund will reimburse the Distributor quarterly for a portion of
its costs incurred in connection with the personal service and maintenance
of accounts that hold Class A shares at an annual rate not to exceed 0.25%
of the average annual net assets of Class A shares of the Fund sold on or
after April 1, 1988, computed as of the close of each business day during
that quarter. The Distributor will use such fees received from the Fund
in their entirety to (i) compensate brokers, dealers, banks and other
financial institutions ("Recipients") each quarter for providing personal
service and maintenance of accounts that hold Class A shares; and (ii)
reimburse itself (to the extent authorized by the Board) for its other
expenditures under the Class A Plan and its direct costs for personal
service and maintenance of accounts. The Board of Directors has not
presently authorized any reimbursement to the Distributor under (ii)
above. The services to be provided under the Class A Plan include, but
are not limited to, the following: answering routine inquiries from the
Recipient's customers concerning the Fund, providing such customers with
information on their investment in Class A shares, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund,
making the Fund's investment plans and dividend payment options available,
and providing such other information and customer liaison services and the
maintenance of accounts as the Distributor or the Fund may reasonably
request. Payments by the Distributor to Recipients will be made quarterly
and computed as of the close of business each day during that quarter at
an annual rate not to exceed 0.25% of the net asset value of Class A
shares of the Fund held in accounts of the Recipient or its customers;
provided, however, no payment will be made by the Distributor to any
Recipient if the aggregate net asset value of the Fund shares held by the
Recipient or its customer at the end of a calendar quarter is less than
the minimum level of qualified holdings, if any, established under the
Class A Plan by the Board from time to time.
An amendment to the Fund's Class A Plan has been approved by the
Fund's Board of Directors and is expected to be proposed to shareholders
during the Fund's current fiscal year. If approved and implemented, the
amended Plan would allow payments to be made with respect to all Class A
shares, including those sold prior to April 1, 1988, thereby increasing
the Fund's expenses from what they would otherwise be.
The Class A Plan in its present and proposed form, has the effect
of increasing annual expenses of Class A shares of the Fund by up to 0.25%
of the class's average annual net assets from what its expenses would
otherwise be. In addition, the Manager and the Distributor may, under the
Class A Plan, from time to time from their own resources (which, as to the
Manager, may include profits derived from the advisory fee it receives
from the Fund) make payments to Recipients for distribution and
administrative services they perform. For further details, see
"Distribution and Service Plans" in the Additional Statement.
Class B Shares
Class B shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase.
-Class B Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class B CDSC") will be deducted from the redemption
proceeds of Class B shares redeemed within six years of their purchase
(not including shares purchased by reinvestment of dividends or capital
gains). The charge will be assessed on an amount equal to the lesser of
the then net asset value or the original purchase price of the Class B
shares being redeemed. Accordingly, no Class B CDSC will be imposed on
amounts representing increases in net asset value above the initial
purchase price. In determining whether a Class B CDSC applies to a
redemption, Class B shares are redeemed in the following order: (i) those
acquired pursuant to reinvestment of dividends or distributions, (ii)
those held for over six years, and (iii) those held longest during the
six-year period.
Proceeds from the Class B CDSC are paid to the Distributor to
reimburse it for its expenses related to providing distribution-related
services to the Fund in connection with the sale of Class B Shares. The
combination of the Class B CDSC and the distribution fee retained by the
Distributor (as described under "Class B Distribution and Service Plan")
facilitate the sale of Class B shares without a sales charge being
deducted at the time of purchase. Any Class B CDSC required to be imposed
on Class B share redemptions will be assessed according to the following
schedule:
Year(s) Since End of Month Contingent Deferred Sales Charge
In Which Purchase Order in That Year (as % of
Was Accepted Applicable Proceeds)
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 or more None
In the table above, a "year" is twelve months. In determining the
amount of the Class B CDSC that applies and when Class B shares convert
as described in the following paragraph, all purchases shall be considered
as having been made on the first regular business day of the month in
which the purchase was made. The Class B CDSC will be waived upon the
request of the investor in the case of redemptions of shares made for: (1)
distributions to participants or beneficiaries from Retirement Plans,
which distributions are made either (a) under an Automatic Withdrawal Plan
(described under "How to Redeem Shares") after the participant attains age
59-1/2, and which are limited to no more than 10% of the account value
annually (determined in the first year, as of the date the redemption
request is received by the Transfer Agent, and in subsequent years, as of
the most recent anniversary of that date) or (b) following the
participant's or beneficiary's (i) "disability" (as defined in the
Internal Revenue Code) that occurs since the account was established or
(ii) death; (2) redemptions other than from Retirement Plans following the
(i) death or (ii) complete disability (as evidenced by a certificate from
the U.S. Social Security Administration), of all persons individually
owning such shares of record and not as fiduciaries or agents, that occurs
since the account was established, and (3) returns of excess contributions
to such Retirement Plans. In addition, no Class B CDSC is imposed on
shares of the Fund (i) sold to the Manager or its affiliates; (ii) sold
to registered investment companies or separate accounts of insurance
companies having an agreement with the Manager or the Distributor; (iii)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (iv) redeemed in
Involuntary Redemptions. See "Transfers of Shares" in "Purchase,
Redemption and Pricing of Shares" in the Additional Statement for further
details.
-Class B Conversion Feature. At the end of the month, seventy-two
months after an investor's purchase order for Class B shares is accepted,
such "Matured Class B Shares" automatically will convert to Class A
shares, on the basis of the relative net asset value of the two classes,
without the imposition of any sales load or other charge. Each time any
Matured Class B shares convert to Class A shares, any Class B shares
acquired by the reinvestment of dividends or distributions on such Matured
Class B shares that are still held will also convert to Class A shares,
on the same basis. The conversion feature is intended to relieve holders
of Matured Class B shares of the asset-based sales charge under the Class
B Distribution and Service Plan (as defined below) after such shares have
been outstanding long enough that the Distributor may have been
compensated for distribution expenses related to such shares.
The conversion of Matured Class B shares to Class A shares is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or a tax adviser, to
the effect that the conversion of Matured Class B shares does not
constitute a taxable event for the holder under the Internal Revenue Code
or Federal income tax law. If such a private letter ruling or opinion is
no longer available, the automatic conversion feature may be suspended,
in which event no further conversions of Matured Class B shares would
occur while such suspension remained in effect. Although Matured Class
B shares could then be exchanged for Class A shares on the basis of the
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
-Class B Distribution and Service Plan. The Fund has adopted a plan
of distribution (the "Class B Plan") under Rule 12b-1 of the Investment
Company Act, pursuant to which it will compensate the Distributor for its
services and costs incurred in connection with the distribution and
service of the Fund's Class B shares. Pursuant to the Class B Plan, the
Fund will pay the Distributor an asset-based sales charge of 0.75% per
annum on Class B shares outstanding for six years or less, plus a service
fee of 0.25% per annum, each of which is computed on the average annual
net assets of Class B shares of the Fund.
The Distributor will use the service fee payment to compensate
Recipients for providing personal service and maintenance of accounts that
hold Class B shares, examples of which are described under "Class A
Service Plan," above.
The Distributor will pay the 0.25% service fee to dealers in advance
for the first year after Class B shares have been sold by the dealer.
After the shares have been held for a year, the Distributor will pay the
fee on a quarterly basis. The Distributor expects to pay sales
commissions of 3.75% of the purchase price to dealers from its own
resources at the time of sale. The Distributor will retain the asset-
based sales charge to recoup the sales commissions it pays, the advances
of service fee payments it makes, and its financing costs. Asset-based
sales charges and service fees will be paid by the Fund to the Distributor
monthly and quarterly, respectively.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 3.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The asset-
based sales charge payments by the Fund to the Distributor under the Class
B Plan are intended to allow it to recoup such sales commissions plus
financing costs. The Distributor anticipates that it will take a number
of years to recoup the sales commissions paid to authorized brokers or
dealers from the Fund's payments to the Distributor under the Class B
Plan.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
At December 31, 1993, the end of the Class B Plan year, the Distributor
had incurred unreimbursed expenses under the Class B Plan of $9,116,421
(equal to 4.2% of the Fund's net assets attributable to Class B shares of
the Fund on that date) which have been carried over into the present Class
B Plan year.
The Class B Plan contains a provision which contractually obligates
the Fund to continue payments to the Distributor for certain expenses
incurred for Class B shares sold prior to termination of the Class B Plan.
If the Class B Plan is terminated, the Distributor is entitled to continue
to receive the asset-based sales charge of 0.75% per annum on Class B
shares sold prior to termination until the Distributor has recovered its
Class B distribution expenses (incurred prior to termination) from such
payments and from the Class B CDSC.
The Fund believes that under applicable accounting standards, its
obligation under the Class B Plan to pay any asset-based sales charges in
future periods is not required to be recognized as a liability. In the
future, if applicable accounting standards should be deemed to require
that obligation to be recognized as a liability, a decrease in the net
asset value per share of Class B shares could result. Were that to occur,
such decrease would affect all Class B shares regardless of how long the
shares were held. Furthermore, Class B shareholders would continue to
remain subject to the Class B CDSC. The accounting treatment of the
Fund's obligations under the Class B Plan for future payments is discussed
in "Distribution and Service Plans" in the Additional Statement. The
accounting standards now used are currently under review by the American
Institute of Certified Public Accountants and it is possible that those
standards will change and that the Fund's Class B Plan would be changed
as a result.
The Class B Plan has the effect of increasing annual expenses of
Class B shares of the Fund by up to 1.00% of its average annual net assets
from what its expenses would otherwise be. In addition, the Manager and
the Distributor may, under the Class B Plan, from time to time from their
own resources (which, as to the Manager, may include profits derived from
the advisory fee it receives from the Fund) make payments to Recipients
for distribution and administrative services they perform. For further
details, see "Distribution and Service Plans" in the Additional Statement.
Purchase Programs for Class A and Class B Shares
-AccountLink. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House ("ACH") member.
AccountLink can be used to transmit funds by electronic funds transfers
for account transactions, including subsequent share purchases. The
minimum investment by AccountLink is $25. Purchases of up to $250,000 may
be made by telephone using AccountLink (the maximum is $100,000 if the
transaction is done by PhoneLink, described below). To speak to service
operators to initiate such purchases, call the Distributor at 1-800-852-
8457. All such calls will be recorded. To initiate such purchases
automatically using PhoneLink, call 1-800-533-3310. Shares will be
purchased on the regular business day the Distributor is instructed to
initiate the ACH transfer to buy the shares. Dividends will begin to
accrue on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally three
days after the ACH transfer is initiated. If such Federal Funds are
received after that time, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How to Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends and Distributions"). AccountLink privileges must be requested
on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent signature-
guaranteed instructions to the Transfer Agent from all shareholders of
record for an account, and such privileges thereupon apply to each
shareholder of record and the dealer representative of record unless and
until the Transfer Agent receives written instructions from a shareholder
of record canceling such privileges. Changes of bank account information
must be made by signature-guaranteed instructions to the Transfer Agent
by all shareholders of record for an account. The Transfer Agent, the
Fund and the Distributor have adopted reasonable procedures to confirm
that telephone instructions under AccountLink (described above) and
"PhoneLink," "Telephone Redemptions" and the "Exchange Privilege"
(described below) are genuine, by requiring callers to provide tax
identification number(s) and other account data and by recording calls and
confirming such transactions in writing. If the Transfer Agent and the
Distributor do not use such procedures, they may be liable for losses due
to unauthorized transactions, but otherwise they will not be responsible
for losses or expenses arising out of telephone instructions reasonably
believed to be genuine.
-PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege" below), redemptions (see "How
to Redeem Shares - Telephone Redemptions," below) and purchases (see
"AccountLink" above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Identification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-Asset Builder Plans. Investors may purchase shares of the Fund
(and up to four other Eligible Funds) automatically under Asset Builder
Plans. With AccountLink, Asset Builder Plans may be used to make regular
monthly investments ($25 minimum) from the investor's account at a bank
or other financial institution. See "AccountLink" above for details. To
establish an Asset Builder Plan from a bank account, a check (minimum $25)
for the initial purchase must accompany the application. Shares
purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To
Redeem Shares." Asset Builder Plans also enable shareholders of
Oppenheimer Tax-Exempt Cash Reserves or Oppenheimer Cash Reserves to use
those accounts for monthly automatic purchases of shares of up to four
other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after receipt of
such instructions to implement them. The Fund reserves the right to
amend, suspend, or discontinue offering such plans at any time without
prior notice.
Class Y Shares
Class Y shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase to separate accounts
of insurance companies and other institutional investors ("Class Y
Sponsors") having an agreement ("Class Y Agreements") with the Manager or
the Distributor. The intent of Class Y Agreements is to allow tax
qualified institutional investors to invest indirectly (through separate
accounts of the Class Y Sponsor) in Class Y shares of the Fund and to
allow institutional investors to invest directly in Class Y shares of the
Fund. Individual investors are not permitted to invest directly in Class
Y shares. As of the date of this Prospectus, it is anticipated that
Massachusetts Mutual Life Insurance Company (an affiliate of the Manager
and the Distributor) will act as Class Y Sponsor for any outstanding Class
Y shares of the Fund. While Class Y shares are not subject to a
contingent deferred sales charge, asset-based sales charge or service fee,
a Class Y Sponsor may impose charges on separate accounts investing in
Class Y shares.
None of the instructions described elsewhere in this Prospectus or
the Additional Statement for the purchase, redemption, reinvestment,
exchange or transfer of shares of the Fund or the reinvestment of
dividends apply to its Class Y shares. Clients of Class Y Sponsors must
request their Sponsor to effect all transactions in Class Y shares on
their behalf.
How to Redeem Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates) under the Fund's regular redemption
procedures, a shareholder must send the following items to the Transfer
Agent, Oppenheimer Shareholder Services, P.O. Box 5270, Denver, Colorado
80217 (send courier or Express Mail deliveries to 10200 E. Girard Avenue,
Building D, Denver, Colorado 80231): (i) a written request for redemption
signed by all registered owners exactly as the shares are registered,
including fiduciary titles, if any, and specifying the account number and
the dollar amount or number of shares to be redeemed; (ii) a guarantee of
the signatures of all registered owners on the redemption request or on
the endorsement on the share certificate or accompanying stock power, by
a U.S. bank, trust company, credit union or savings association, or a
foreign bank having a U.S. correspondent bank, or by a U.S.-registered
dealer or broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, registered
securities association or clearing agency; (iii) any share certificates
issued for any of the shares to be redeemed; and (iv) any additional
documents which may be required by the Transfer Agent for redemption by
corporations, partnerships or other organizations, executors,
administrators, trustees, custodians, guardians, or from an
OppenheimerFunds-sponsored Retirement Plan, or if the redemption is
requested by anyone other than the shareholder(s) of record, or to
demonstrate eligibility for waiver of the Class B CDSC on the grounds of
age or disability. Transfers of shares are subject to similar
requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record, to be sent
to the address of record for that account. To avoid delay in redemption
or transfer, shareholders having questions about these requirements should
contact the Transfer Agent in writing or by calling 1-800-525-7048 before
submitting a request. From time to time the Transfer Agent in its
discretion may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in proper form.
Shareholders owning shares of more than one class must specify whether
they intend to redeem Class A or Class B shares.
Telephone Redemptions
To redeem shares by telephone through a service representative, call
the Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically without a service representative, call 1-800-533-3310.
Under either method of telephone redemptions, proceeds may be paid by
check or through AccountLink as described below. The Transfer Agent may
record any calls. Telephone redemptions may not be available if all lines
are busy, and shareholders would have to use the Fund's regular redemption
procedures described above. Requests received by the Transfer Agent prior
to 4:00 P.M. on a regular business day will be processed at the net asset
value per share determined that day. Telephone redemption privileges are
not available for newly purchased (within the prior 15 days) shares,
OppenheimerFunds-sponsored Retirement Plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from a shareholder of record.
If an account has multiple owners, the Transfer Agent may rely on the
instructions of any one owner. Telephone redemption privileges may be
amended, suspended or discontinued by the Fund at any time without prior
notice.
-Telephone Redemptions Paid by Check. If redemption proceeds are
paid by check, amounts up to $50,000 may be redeemed by telephone, once
in every seven-day period. The check must be payable to the
shareholder(s) of record and sent to the address of record for the
account. Telephone redemptions paid by check are not available within 30
days of a change of the address of record.
-Redemptions Paid Through AccountLink. If AccountLink privileges
have been established for an account, any amount may be redeemed by
telephone, wire or written instructions to the Transfer Agent, and the ACH
transfer of the redemption proceeds to the designated bank account
normally will be initiated by the Transfer Agent on the next bank business
day after the redemption. There are no dollar or frequency limitations
on telephone redemptions sent to a designated bank account through
AccountLink. No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by ACH transfer. See "AccountLink" under "How to Buy
Shares - Purchase Programs for Class A and Class B Shares" above for
instructions on establishing this privilege.
Distributions From Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, or pension or profit-sharing plans for which
the Manager or its affiliates act as sponsors should be addressed to
"Trustee, OppenheimerFunds Retirement Plans, c/o Oppenheimer Shareholder
Services" at the above address, and must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's redemption requirements above. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts; the employer or plan administrator must sign the request.
Distributions from such plans are subject to additional requirements under
the Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be made.
Distributions from Retirement Plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any penalties assessed.
Automatic Withdrawal and Exchange Plans
Investors owning shares of the Fund valued at $5,000 or more can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior to the
date requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone if
payments are by check payable to all shareholders of record and sent to
the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of the payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on Class A share purchases, shareholders
should not make regular additional Class A purchases while participating
in an Automatic Withdrawal Plan. Class B shareholders should not
establish withdrawal plans, because of the imposition of the Class B CDSC
on such withdrawals (except where the Class B CDSC is waived as described
in "Class B Contingent Deferred Sales Charge"). For further details,
refer to "Automatic Withdrawal Plan Provisions" in the Additional
Statement.
Shareholders can also authorize the Transfer Agent to exchange a
predetermined amount of shares of the Fund for shares of up to five other
"Eligible Funds" (minimum purchase is $25 per fund account) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. Exchanges made pursuant to such plans are subject to the
conditions and terms applicable to exchanges described in "Exchange
Privilege," below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received by the Distributor from dealers or
brokers after 4:00 P.M. on a regular business day will be processed at
that day's net asset value if such orders were received by the dealer or
broker from its customers prior to 4:00 P.M., and were transmitted to and
received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required documents, with
signature(s) guaranteed as described above.
Reinvestment Privilege
Within six months of a redemption of Class A shares or of Class B
shares on which a Class B CDSC was paid, the investor may reinvest all or
part of the redemption proceeds in Class A shares of the Fund or any of
the Eligible Funds into which shares of the Fund are exchangeable as
described below. The reinvestment price will be the net asset value next
computed after the Transfer Agent receives the reinvestment order and will
not be subject to sales charges, but only if the reinvestment order
requests this privilege. The shareholder must ask the Distributor for
such entitlement at the time of reinvestment. A realized gain on the
redemption is taxable, and reinvestment will not alter any capital gains
tax payable on that gain. If there has been a loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount reinvested in the Fund. 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 Eligible Fund within 90
days of payment of the sales charge, the shareholder's basis in the Fund
shares redeemed may not include the amount of the sales charge paid,
thereby reducing the loss or increasing the gain recognized from the
redemption. 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.
General Information on Redemptions
The redemption price will be the net asset value per share of the
class next determined after the Transfer Agent receives redemption
instructions in proper form. The market value of the securities in the
Fund's portfolio is subject to daily fluctuations and the net asset value
of each class of the Fund's shares will fluctuate accordingly. Therefore,
the redemption value may be more or less than the investor's cost. Under
certain unusual circumstances shares may be redeemed in kind (i.e., by
payment in portfolio securities). Under certain circumstances, and in
compliance with applicable law, the Fund may involuntarily redeem small
accounts (if the value of the account has fallen below $500 for reasons
other than market value fluctuations) and may redeem shares in amounts
sufficient to compensate the Distributor for any loss due to cancellation
of a share purchase order; for details, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. Under the Internal
Revenue Code, the Fund may be required to impose "backup" withholding of
Federal income tax at the rate of 31% from dividends, distributions and
redemption proceeds (including exchanges), if the shareholder has not
furnished the Fund a certified tax identification number or has not
complied with provisions of the Internal Revenue Code relating to
reporting dividends.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently purchased shares only until the purchase
payment has cleared, which may take up to 15 or more days from the
purchase date. Such delay may be avoided if the shareholder arranges
telephone or written assurance satisfactory to the Transfer Agent from the
bank on which the purchase payment was drawn. The Fund makes no charge
for redemption. Dealers or brokers may charge a fee for handling
redemption transactions, but such charge can be avoided by requesting the
redemption directly by the Fund through the Transfer Agent. Under certain
circumstances, the Class A and Class B CDSCs described under "How to Buy
Shares" may apply to the proceeds of redemptions.
Exchanges of Shares and Retirement Plans for Class A or Class B Shares
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed in "Right
of Accumulation" may be exchanged at net asset value per share at the
time of exchange, without sales charge, if all of the following conditions
are met: (i) shares of the fund selected for exchange are available for
sale in the shareholder's state of residence; (ii) the respective
prospectuses of the funds whose shares are to be exchanged and acquired
offer the Exchange Privilege to the investor; (iii) newly-purchased (by
initial or subsequent investment) shares are held in an account for at
least seven days and all other shares at least one day prior to the
exchange; and (iv) the aggregate net asset value of shares surrendered
for exchange is at least equal to the minimum investment requirements of
the fund whose shares are to be acquired.
In addition to the conditions stated above, shares of a particular
class of an Eligible Fund may be exchanged only for shares of the same
class of another Eligible Fund. If a Fund has only one class of shares
that is not otherwise denominated, its shares shall be considered "Class
A" shares for this purpose. Certain of the Eligible Funds offer Class A,
Class B, and/or Class Y shares, and a list can be obtained by calling the
Distributor at 1-800-525-7048, or by referring to "Purchase, Redemption
and Pricing of Shares" in the Additional Statement. In addition, Class
A shares of Eligible Funds may be exchanged for shares of any Money Market
Fund; shares of any Money Market Fund purchased without a sales charge may
be exchanged for shares of Eligible Funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to purchase
shares of Eligible Funds subject to a CDSC); and shares of the Fund
acquired by reinvestment of dividends or distributions from any other
Eligible Fund 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 Eligible Fund. No CDSC is imposed on
exchanges of shares of any class purchased subject to a CDSC. However,
when Class A shares acquired by exchange of Class A shares purchased
subject to a Class A CDSC 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 CDSC is imposed on the redeemed shares (see "Class A
Contingent Deferred Sales Charge" above), and the Class B CDSC is imposed
on Class B shares redeemed within six years of the initial purchase of the
exchanged Class B shares (see "Class B Contingent Deferred Sales Charge"
above).
-How to Exchange Shares. An exchange may be made by either: (i)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (ii) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time and will do
so on 60 days' notice if such notice is required by regulations adopted
under the Investment Company Act. The Fund reserves the right to reject
telephone or written exchange requests submitted in bulk on behalf of 10
or more accounts. Telephone and written exchange requests must be
received by the Transfer Agent by 4:00 P.M. on a regular business day to
be effected that day. The number of shares exchanged may be less than the
number requested if the number requested would include shares subject to
a restriction cited above or shares covered by a certificate that is not
tendered with such request. Only the shares available for exchange
without restriction will be exchanged.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How to Buy Shares" for the imposition of the
Class B CDSC will be followed in determining the order in which shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any CDSC that may be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of more than one class must specify whether they intend to exchange Class
A, or Class B shares.
-Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink by calling 1-800-533-3310.
If all telephone exchange lines are busy (which might occur, for example,
during periods of substantial market fluctuations), shareholders might not
be able to request telephone exchanges and will have to submit written
exchange requests. Telephone exchange calls may be recorded by the
Transfer Agent. Telephone exchanges are subject to the rules described
above. By exchanging shares by telephone, the shareholder is
acknowledging receipt of a prospectus of the fund to which the exchange
is made and that for full or partial exchanges, any special account
features such as Asset Builder Plans, Automatic Withdrawal or Exchange
Plans and retirement plan contributions will be switched to the new
account unless the Transfer Agent is otherwise instructed. Telephone
exchange privileges automatically apply to each shareholder of record and
the dealer representative of record unless and until the Transfer Agent
receives written instructions from a shareholder of record canceling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on the instructions of any one owner. The Transfer Agent reserves
the right to require shareholders to confirm in writing their election of
telephone exchange privileges for an account. Shares acquired by
telephone exchange must be registered exactly as the account from which
the exchange was made. Certificated shares are not eligible for telephone
exchange.
-General Information on Exchanges. 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 in its discretion reserves the right to
refuse any exchange request that will disadvantage it, for example, if the
receipt of multiple exchange requests from a dealer might require the
disposition of securities at a time or at a price disadvantageous to the
Fund.
The Eligible Funds have different investment objectives and
policies. For complete information, including charges and expenses, a
prospectus of the fund into which the exchange is being made should be
read prior to an exchange. A $5 service charge will be deducted from the
account to which the exchange is made to help defray administrative costs.
That charge is waived for telephone exchanges made by PhoneLink between
existing accounts. Dealers or brokers who process exchange orders on
behalf of customers may charge for their services. Those charges may be
avoided by requesting the Fund directly to exchange shares. For Federal
tax purposes an exchange is treated as a redemption and purchase of shares
(see "How to Redeem Shares - Reinvestment Privilege" for a discussion of
certain tax effects of exchanges). No sales commissions are paid by the
Distributor on exchanges of shares (unless a front-end sales charge is
assessed on the exchange).
Retirement Plans
The Distributor has available forms of: (i) pension and profit-
sharing plans for corporations and self-employed individuals, (ii) IRAs,
including Simplified Employee Pension Plans ("SEP IRAs") and (iii)
403(b)(7) tax-deferred custodial plans for employees of qualified
employers. The minimum initial investment for pension and profit-sharing
plans is $250, and for IRAs also unless made under an Asset Builder Plan.
The Fund reserves the right to discontinue offering its shares to such
plans at any time without prior notice. For further details, including
the administrative fees, the appropriate retirement plan should be
requested from the Distributor.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws and is not
exhaustive; a qualified tax adviser should be consulted. The Fund's
dividends and distributions may also be subject to state and local
taxation. See "Special Investment Methods - Covered Call Options and
Hedging Instruments" and "Performance and Tax Information - Tax Status of
the Fund's Dividends and Distributions" in the Additional Statement for
additional information on tax aspects of the Fund's investments in Hedging
Instruments and other tax matters.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A, Class
B and Class Y shares on a quarterly basis, payable in March, June,
September and December on a date set by the Fund's Board. In addition,
distributions may be made annually in December out of any net short-term
or long-term capital gains derived from the sale of securities, premiums
from expired calls written by the Fund and net profits from hedging
transactions, realized in the twelve months ending on October 31 of that
year. The difference in net asset value between Class A, Class B and
Class Y shares will reflect such distributions. The Fund may make a
supplemental distribution of capital gains and ordinary income following
the end of its fiscal year. A shareholder purchasing Fund shares
immediately prior to the declaration of a dividend or capital gain
distribution will receive a distribution subject to income tax, and the
distribution will have the effect of reducing the Fund's net asset value
per share by the amount of the distribution. Any long-term capital gains
distribution and any non-taxable return of capital will be identified
separately when tax information is distributed by the Fund. There is no
fixed dividend rate and there can be no assurance as to the payment of any
dividends or the realization of any gains.
All dividends and capital gains distributions are automatically
reinvested in shares of the same class at net asset value, as of a date
selected by the Board of Directors, unless the shareholder notifies the
Transfer Agent in writing to pay dividends and capital gains distributions
in cash, or to reinvest them in another Eligible Fund, as described in
"Purchase, Redemption and Pricing of Shares" in the Additional Statement.
That request must be received prior to the record date for a dividend to
be effective as to that dividend. Under AccountLink, dividends and
distributions may be automatically transferred to a designated account at
a financial institution. See "AccountLink" in "How to Buy Shares" and
the OppenheimerFunds New Account Application for more details. For
existing accounts, such privileges may be established only by signature-
guaranteed instructions from all shareholders to the Transfer Agent.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle
funds.
The amount of a Class's distribution may vary from time to time
depending upon market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by that Class as
described under "Purchase, Redemption and Pricing of Shares - Multi-Class
Methodology" in the Additional Statement. Dividends are calculated in the
same manner, at the same time and on the same day for shares of each
Class. However, dividends on Class B shares are expected to be lower than
on Class A or Class Y shares on a pro rata basis as a result of the asset-
based sales charge on Class B shares, and such dividends will also differ
in amount as a consequence of any difference in net asset value between
Class A, Class B and Class Y shares.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or net
short-term capital gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested. Long-term capital gains
distributions, if any, are taxable as long-term capital gains whether
received in cash or reinvested and regardless of how long Fund shares
have been held. For information as to "backup" withholding on dividends,
see "How to Redeem Shares."
Tax Status of the Fund
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
during its past fiscal year, and intends to qualify in current and future
fiscal years, but reserves the right not to do so. The Internal Revenue
Code contains a number of complex tests relating to qualification which
the Fund might not meet in any particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held
less than three months, it may fail to qualify (see "Tax Aspects of
Covered Calls and Hedging Instruments" in the Additional Statement for
more information). 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.
Fund Performance Information
Total Return Information
From time to time, the "average annual total return," "total
return," "total return at net asset value" and "dividend yield" of an
investment in each class of shares of the Fund may be advertised. The
"average annual total return" of each class for a particular period is
computed by determining the average annual compounded rate of return over
the period, using the initial amount invested at the beginning of the
period and the redeemable value of the investment at the end of the
period. The "total return" of each class for a period is a cumulative
rate of return of a hypothetical investment over the entire period, also
using the initial amount invested and the redeemable value at the end of
the period. The initial amount invested assumes the payment of the Fund's
current maximum initial sales charge applicable to Class A shares, or the
Class B CDSC applicable to the period for which the Class B shares are
outstanding. The Fund may also quote a "total return at net asset value"
of each class which is total return calculated without considering either
sales charge. The redeemable value of the investment assumes that all
dividends and capital gains distributions have been reinvested at net
asset value without sales charge. The "average annual total return,"
"total return" and "total return at net asset value" indicate the
investment results an investor would have experienced over the stated
period from changes in share price and reinvestment of dividends and
distributions. The "dividend yield" of a class of shares represents
dividends derived from net investment income during a stated period
divided by the maximum offering price of shares on the last day of the
period, to show the rate of return based on actual distributions paid to
shareholders. All such performance information is based on historical
earnings and is not intended to indicate future performance. "Performance
and Tax Information" in the Additional Statement contains more information
about calculating the Fund's returns and other performance information.
Management's Discussion of Performance. During the Fund's fiscal year
ended December 31, 1993, the Manager emphasized (1) stocks of small or
mid-size companies, in an effort to maximize potential capital
appreciation and (2) high-dividend paying stocks, convertible bonds, and
debt securities, in an effort to enhance current income and help to
minimize volatility. Major areas of investment for the Fund included
companies in the telecommunications, home building supplies, computer
software and entertainment industries. A number of economic factors
influenced the performance of the equity securities markets during the
Fund's fiscal year, including modest growth in the U.S. economy, movement
in U.S. stock markets to near record-high levels, and the emergence of
certain Latin American economies from extended economic downturns.
The performance graph set forth below compares the total return of
the Fund's Class A shares over a ten year period and of the Fund's Class
B shares since May 1, 1993 (inception of the class) against the
performance of the S&P 500 Index. The S&P 500 Index is an unmanaged index
of 500 widely-held common stocks traded on the New York Stock Exchange and
the American Stock Exchange and the over-the-counter market, and is widely
recognized as a general measure of stock market performance. The index
includes a factor for the reinvestment of dividends but does not reflect
the expenses or taxes. The Fund's total return reflects the deduction of
the current maximum sales charge of 5.75% for Class A shares and includes
reinvestment of all dividends and capital gains distributions, but does
not consider taxes. The Fund's Class Y shares were not publicly sold
prior to April 1, 1994 and, accordingly, average annual total return
information for such shares is not included herein.
(Chart comparing total return of Class A and Class B shares of
Oppenheimer Total Return Fund, Inc. to performance of S&P 500 Index)
Past performance is not predictive of future performance.
Description of the Fund and Its Capital Stock
The Fund was organized in 1944. Since 1979, it has been a Maryland
corporation. Unissued shares of the Fund may be divided by the Board of
Directors, without shareholder approval, into two or more classes, each
having its own dividends, distributions and expenses. Each class may have
a different net asset value per share. The Fund currently has three
classes of shares, Class A and Class B and Class Y, which constitute the
shares of capital stock described herein. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally.
Shares of a class vote together as a single class on matters that affect
only that class. Shares are freely transferrable. Under the provisions
of the Fund's By-Laws, as permitted by Maryland law, the Fund does not
anticipate holding annual shareholder meetings.
The Custodian and the Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York.
The Manager and its affiliates have banking relationships with the
Custodian. See "Additional Information" in the Additional Statement for
further information. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances may at times be substantial.
The Transfer Agent, a division of the Manager, acts as transfer and
shareholder servicing agent on an at-cost basis for the Fund and certain
other open-end funds advised by the Manager. It also acts as transfer
agent for unit investment trusts for the accumulation of shares of one of
such funds. The fees to the Transfer Agent do not include payments for
any services of the type paid, or to be paid, by the Fund to Recipients
under the Distribution Plans. Shareholders should direct any inquiries
to the Transfer Agent at the address or toll-free phone number listed on
the back cover of this Prospectus.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER TOTAL RETURN FUND, INC.
Graphic material included in Prospectus of Oppenheimer Total Return
Fund, Inc.: "Comparison of Total Return of Oppenheimer Total Return Fund,
Inc. with the S&P 500 Index - Change in Value of a $10,000 Hypothetical
Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Total Return Fund, Inc. (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in (i)
Class A shares of the Fund for each of the Fund's most ten recently
completed fiscal years, and (ii) Class B shares of the Fund for the period
May 1, 1993 (commencement of class) to December 31, 1993, and comparing
such values with the same investments over the same time periods in the
S&P 500 Index. Set forth below are the relevant data points that will
appear on the linear graph. Additional information with respect to the
foregoing, including a description of the S&P 500 Index, is set forth in
the Prospectus under "Fund Information - Management's Discussion of
Performance." Class Y shares of the Fund were not publicly sold during
the Fund's fiscal year ended December 31, 1993 and, accordingly,
performance information for such shares is not included herein.
<TABLE>
<CAPTION>
Fiscal Oppenheimer Total Return S&P 500
Year Ended Fund, Inc. Class A Shares Index
- ---------- ------------------------- --------
<S> <C> <C>
12/31/83 $ 9,425 $10,000
12/31/84 $ 8,884 $10,627
12/31/85 $11,937 $13,999
12/31/86 $14,289 $16,613
12/31/87 $16,053 $17,485
12/31/88 $18,196 $20,380
12/31/89 $21,698 $26,826
12/31/90 $20,860 $25,992
12/31/91 $28,423 $33,894
12/31/92 $32,069 $36,473
12/31/93 $38,881 $40,142
Fiscal Oppenheimer Total Return S&P 500
Period Ended Fund, Inc. Class B Shares Index
05/01/93 $10,000 $10,000
12/31/93 $10,891 $10,807
</TABLE>
Average Annual Total Return at 12/31/93
1 Year 5 Years 10 Years
Class A 14.27% 15.03% 14.54%
Class B 8.91%(1)
________________
(1) Since May 1, 1993 (inception of the Class).
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Additional Statement, and if given or made, such
information and representations must not be relied upon as having been
authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer
Funds Distributor, Inc. or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
<PAGE>
Prospectus
OPPENHEIMER
Total Return
Fund, Inc.
Effective April 1, 1994
(OppenheimerFunds Logo)
PR421.0494.N
<PAGE>
Prospectus and
New Account Application
OPPENHEIMER
Total Return
Fund, Inc.
Effective April 1, 1994
(OppenheimerFunds Logo)
PR420.0494.N
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER TOTAL RETURN FUND, INC.
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read in
conjunction with the Prospectus dated April 1, 1994 of Oppenheimer Total
Return Fund, Inc. (the "Fund"), which may be obtained upon written request
to the Fund's Transfer and Shareholder Servicing Agent, Oppenheimer
Shareholder Services (the "Transfer Agent"), P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies. . . . . . . . . . . . . .
Special Investment Methods . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . .
Directors and Officers . . . . . . . . . . . . . . . . . . .
Investment Management Services . . . . . . . . . . . . . . .
Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase, Redemption and Pricing of Shares . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . . .
Performance and Tax Information. . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . .
Automatic Withdrawal Plan Provisions . . . . . . . . . . . .
Letters of Intent. . . . . . . . . . . . . . . . . . . . . .
Report of Independent Auditors . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . .
This Additional Statement is effective April 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are discussed in
the Prospectus. Supplemental information about these policies is set
forth below. Certain capitalized terms used in this Additional Statement
and not otherwise defined herein are defined in the Prospectus.
Foreign Securities. Investments in foreign securities offer potential
benefits not available from investing solely in securities of domestic
issuers, by offering the opportunity to invest in foreign issuers that
appear to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by investing in foreign stock markets that
do not move in a manner parallel to U.S. markets. If the Fund's
securities are held abroad, the countries in which such securities may be
held and the sub-custodians holding them must be approved by the Fund's
Board of Directors under applicable SEC rules. In buying foreign
securities, the Fund may convert U.S. dollars into foreign currency, but
only to effect securities transactions on foreign securities exchanges and
not to hold such currency as an investment.
Investing in foreign securities involves special additional risks and
considerations not typically associated with investing in securities of
issuers traded in the U.S. These include: reduction of income by foreign
taxes; fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity in foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits against foreign
issuers; higher brokerage commission rates than in the U.S.; increased
risks of delays in settlement of portfolio transactions or loss of
certificates for portfolio securities because of the lesser speed and
reliability of mail service between the U.S. and foreign countries than
in the U.S.; possibilities in some countries of expropriation or
nationalization of assets, confiscatory taxation, political, financial or
social instability or adverse diplomatic developments; and differences
(which may be favorable or unfavorable) 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.
Derivatives. The most common derivatives, also known as structured
financial products, in which the Fund may invest include: (i) index-linked
notes whose final payouts are dependent upon the performance of one or
more market indices, and (ii) relative performance options whose cash
settlement is a function of the differential returns between two market
indices. A risk of these derivatives is a decline in value of the
underlying instrument due to adverse movements in the index.
SPECIAL INVESTMENT METHODS
Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus, to attempt to
increase the Fund's income. Under applicable regulatory requirements
(which are subject to change), the loan collateral must, on each business
day, be marked to market and be at least equal to the value of the loaned
securities and must consist of cash, bank letters of credit or securities
of the U.S. Government (or its agencies or instrumentalities), 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.
Such terms and the issuing bank must be satisfactory to the Fund. The
Fund receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of: (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term
debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms of the
Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter.
Covered Call Options and Hedging. As described in the Prospectus, the
Fund may write covered calls or employ one or more types of Hedging
Instruments. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) sell Stock Index Futures, (ii) buy puts, (iii) write
covered calls on securities, securities indices or on Stock Index Futures
(as described in the Prospectus) or (iv) enter into Interest Rate Swap
transactions. Covered calls and puts may also be written on debt
securities to attempt to increase the Fund's income. When hedging to
permit the Fund to establish a position in the equities market as a
temporary substitute for purchasing individual equity securities (which
the Fund will normally purchase, and then terminate that hedging
position), the Fund may: (i) buy Stock Index Futures, or (ii) buy calls
on such Futures or securities held by it. 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. Additional information about
covered calls and the Hedging Instruments the Fund may use is provided
below. The Fund may, in the future, employ hedging instruments and
strategies that are not presently contemplated to the extent such
investment methods are consistent with the Fund's investment objective,
are legally permissible and are adequately disclosed.
Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call during the call period (usually not
more than nine months) at a fixed exercise price (which may differ from
the market price of the underlying investment) regardless of market price
changes during the call period. To terminate its obligation on a call it
has written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of the option transaction costs and the
premium received on the call written was more or less than the price of
the call subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the related investment
and the premium received. Any such profits are considered short-term
capital gains for federal income tax purposes, and when distributed by the
Fund are taxable as ordinary income. If the Fund could not effect a
closing purchase transaction due to lack of a market, it would have to
hold the callable securities until the call lapsed or was exercised.
Writing Put Options. A put option on securities gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. Writing a put
covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The
premium the Fund receives from writing a put option represents a profit,
as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the
put at the exercise price, even though the value of the investment may
fall below the exercise price. If the put lapses unexercised, the Fund
(as the writer of the put) realizes a gain in the amount of the premium
less transaction costs. If the put is exercised, the Fund must fulfill
its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at
that time. In that case, the Fund may incur a loss, equal to the sum of
the current market value of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore foregoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as
to calls on securities indices or Stock Index Futures, has the right to
buy the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. When
the Fund purchases a call on a securities index or Stock Index Future,
settlement is in cash rather than by delivery of the underlying investment
to the Fund. In purchasing a call, the Fund benefits only if the call is
sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the call is
exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Fund will
lose its premium payment and the right to purchase the underlying
investment.
When the Fund purchases a put, it pays a premium and, except as to
puts on stock indices or Stock Index Futures, has the right to sell the
underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put
on an investment the Fund owns enables the Fund to attempt to protect
itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling such underlying
investment at the exercise price to a seller of a corresponding put. If
the market price of the underlying investment is equal to or above the
exercise price and, as a result, the put is not exercised or resold, the
put will become worthless at its expiration date and the Fund will lose
its premium payment and the right to sell the underlying investment. The
put may, however, be sold prior to expiration (whether or not at a
profit).
Purchasing a put on either a stock index or a Stock Index Future
permits the Fund to either resell the put or buy the underlying investment
and sell it at the exercise price. The resale price of the put will vary
inversely with the price of the underlying investment. If the market
price of the underlying investment is above the exercise price and, as a
result, the put is not exercised, the put will become worthless on its
expiration date. In the event of a decline in the stock market, the Fund
could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities. When the Fund purchases a
put on a stock index, or on a Stock Index Future not held by it, the put
protects the Fund to the extent that the index moves in a similar pattern
to the securities held. In the case of a put on a stock index or Stock
Index Future, settlement is in cash rather than by the Fund's delivery of
the underlying investment.
Stock Index Futures. A stock index, which cannot be purchased or
sold directly, assigns relative values to the common stocks included in
the index and fluctuates with the changes in the market value of those
stocks. No payment is paid or received by the Fund on the purchase or
sale of a Stock Index Future. Stock Index Futures are settled by payment
or acceptance of cash, not by the stocks comprising the index. No
physical delivery of the underlying stocks in the index is made.
Generally, contracts are closed out with offsetting transactions prior to
the expiration date of the contract. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, in cash or U.S. Treasury bills, with the futures commission
merchant (the "futures broker"). The initial margin payments will be
deposited with the Fund's Custodian in an account registered in the
futures broker's name; however, the futures broker can gain access to that
account only under specified conditions. As the Future is marked-to-
market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be paid to or by the futures broker on a
daily basis. At any time prior to the expiration of the Future, the Fund
may elect to close out its position by taking an opposite position, at
which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund. Any
gain or loss is then realized. Although Stock Index Futures by their
terms call for settlement by the delivery of cash, in most cases the
obligation is fulfilled by entering into an offsetting transaction. All
Futures transactions are effected through a clearing house associated with
the exchange on which the contracts are traded.
Forward Contracts. A Forward Contract involves bilateral obligations
of one party to purchase, and another party to sell, a specific currency
at a future date (which may be any fixed number of days from the date of
the contract agreed upon by the parties), at a price set at the time the
contract is entered into. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase. The Fund will not speculate with Forward Contracts or foreign
currency exchange rates.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities denominated in that currency.
The Fund, however, in order to avoid excess transactions and transaction
costs, may maintain a net exposure to Forward Contracts in excess of the
value of the Fund's portfolio securities denominated in that currency
provided the excess amount is "covered" by liquid, high grade debt
securities, denominated in either that foreign currency or U.S. dollars,
at least equal at all times to the amount of such excess. As an
alternative to maintaining all or part of the separate account, the Fund
may purchase a call option permitting the Fund to purchase the amount of
foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
forward contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not
entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense
of such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and incur
transaction costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
Additional Information about Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) a portion of
the assets used to cover OTC options written, equal to the formula price
for the repurchase of the OTC option less the amount by which the OTC
option is "in-the-money." The Fund will also treat as illiquid any OTC
option held by it. The SEC is evaluating whether OTC options should be
considered liquid securities, and the procedure described above could be
affected by the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
portfolio turnover rate in a manner beyond the Fund's control. The
exercise by the Fund of puts on securities may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to sell
the related investments for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys
a call or put, sells a call, or buys or sells an underlying investment in
connection with the exercise of a call or put. Such commissions may be
higher on a relative basis than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options as to underlying investments are small in relation to the market
value of such investments and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes
in the value of the underlying investments.
Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule ("CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC)" under the Commodity Exchange Act (the
"CEA"), which exempts the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA) if it complies with
CFTC Rule. Under these restrictions the Fund will not, as to any
positions, whether long, short or a combination thereof, enter into
Futures and options thereon for which the aggregate initial margins and
premiums exceed 5% of the fair market value of its assets, with certain
exclusions as defined in the CFTC Rule. Under the restrictions, the Fund
also must, as to its short positions, use Futures and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions under the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or futures
brokers. Thus, the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions. Due to requirements under the Investment
Company Act, when the Fund purchases a Stock Index Future, the Fund will
maintain in a segregated account or accounts with its Custodian, cash or
readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized from the sale of securities held for less than three
months. Due to this limitation, the Fund will limit the extent to which
it engages in the following activities, but will not be precluded from
them: (i) selling investments, including Stock Index Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) writing calls on investments held for
less than three months; (iii) purchasing calls or puts which expire in
less than three months; (iv) effecting closing transactions with respect
to calls or puts purchased less than three months previously; and (v)
exercising puts held by the Fund for less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including foreign currency
forward contracts) generally are treated as ordinary income or loss. In
addition, section 1256 contracts held by the Fund at the end of each
taxable year are "marked-to-market" with the result that unrealized gains
or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can be made
by the Fund to exempt these transactions from this marked-to-market
treatment.
Certain foreign currency forward contracts entered into by the Fund
may result in "straddles" for Federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the disposition of
a position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk
in using short hedging by (i) selling Stock Index Futures or (ii)
purchasing puts on stock indices or Stock Index Futures to attempt to
protect against declines in the value of the Fund's equity securities that
the prices of the Futures or applicable index (and thus the prices of the
Hedging Instruments) will correlate imperfectly with the behavior of the
cash (i.e., market value) prices of the Fund's equity securities. 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 out 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 market.
Therefore, increased participation by speculators in the futures market
may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of such equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that where the Fund has used Hedging Instruments in
a short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If this occurred, the Fund
would lose money on the Hedging Instruments and also experience a decline
in value in its equity securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the
equities markets as a temporary substitute for the purchase of particular
equity securities by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market
may decline. If the Fund then concludes not to invest in equity
securities at that time because of concerns as to possible further market
decline or for other reasons, the Fund will realize a loss on the Hedging
Instruments that is not offset by a reduction in the price of the equity
securities purchased.
Restricted and Illiquid Securities. The expenses of registration of
restricted securities (excluding securities that may be resold by the Fund
pursuant to Rule 144A, as explained in the Prospectus) may be negotiated
at the time such securities are purchased by the Fund. When registration
is required before such securities may be sold, a considerable period may
elapse between the decision to sell the securities and the time the Fund
would be permitted to sell them. Thus, the Fund may not be able to obtain
as favorable a price as that prevailing at the time of the decision to
sell. The Fund also may acquire, through private placements, securities
with contractual resale restrictions, which might lower the amount
realizable upon the sale of such securities.
Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank or the U.S. branch of a foreign bank having total
domestic assets of at least $1 billion or a broker-dealer with a net
capital of at least $50 million and which has been designated a primary
dealer in government securities) for delivery on an agreed-on future date.
The resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to the resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund and, together with the Fund's fundamental policies
and investment objective described in the Prospectus, cannot be changed
without the approval of a "majority" of the Fund's outstanding voting
securities. Such a "majority" vote is defined under the Investment
Company Act as the vote of the holders of the lesser of: (i) 67% or more
of the shares present or represented by proxy at a shareholders meeting
if the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) purchase
securities on margin or sell securities short; however, the Fund may make
margin deposits in connection with any of the Hedging Instruments which
it may use as permitted by any of its other investment policies; (2)
invest in other companies for the purpose of exercising control or
management; (3) purchase the securities of other investment companies,
except in connection with a merger or consolidation; (4) purchase or sell
real estate, including interests in real estate investment trusts; (5)
purchase or sell commodities or commodity contracts or purchase securities
for speculative short-term purposes; however, the Fund may buy or sell any
of the Hedging Instruments which it may use as permitted by any of its
other investment policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract; (6) accept the
purchase price for any of its shares without immediately thereafter
issuing an appropriate number of shares; (7) invest in securities of any
corporation which has a record of less than three years' continuous
operation; or (8) purchase or retain securities of any issuer if those
officers and directors of the Fund or its adviser who own beneficially
more than .5% of the securities of such issuer together own beneficially
more than 5% of the securities of such issuer.
In connection with the qualification of its shares in certain states,
the Fund has undertaken that in addition to the above, as a non-
fundamental policy, it will not (i) invest in real estate limited
partnerships, (ii) invest in oil, gas and other mineral leases and (iii)
invest more than 5% of the value of its net assets in warrants (valued at
the lower of cost or market) of which no more than 2% of the value of the
Fund's net assets will be invested in warrants that are not listed on the
New York Stock Exchange or the American Stock Exchange; warrants acquired
in units or attached to other securities are not subject to this
restriction. In the event that the Fund's shares cease to be qualified
under such laws or if such undertaking(s) otherwise cease to be operative,
the Fund would not be subject to such restrictions.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund and their principal
occupations and business affiliations during the past five years are set
forth below. Each Director is also a trustee, director or managing
general partner of Oppenheimer Equity Income Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Cash Reserves,
Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Government Securities Fund,
The New York Tax-Exempt Income Fund, Inc., Oppenheimer Champion High Yield
Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic Funds
Trust, Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic
Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund,
Oppenheimer Variable Account Funds, Oppenheimer Integrity Funds, Daily
Cash Accumulation Fund, Inc., Centennial America Fund, L.P., Centennial
Money Market Trust, Centennial Government Trust, Centennial New York Tax
Exempt Trust, Centennial Tax Exempt Trust and Centennial California Tax
Exempt Trust (all of the foregoing funds are collectively referred to as
the "Denver-based OppenheimerFunds"). Mr. Fossel is President and Mr.
Swain is Chairman of the Denver-based OppenheimerFunds. As of March 18,
1994, the Directors and officers of the Fund as a group owned less than
1% of the outstanding shares of any class of the Fund's shares.
ROBERT G. AVIS, Director*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
WILLIAM A. BAKER, Director
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Director
19411 Merion Cr., Huntington Beach, California 92648
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
__________________________
* A Director who is an "interested person" of the Fund as defined in
the Investment Company Act.
JON S. FOSSEL, President and Director*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
RAYMOND J. KALINOWSKI, Director
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was a Senior Vice President.
C. HOWARD KAST, Director
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
ROBERT M. KIRCHNER, Director
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
NED M. STEEL, Director
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director of Van Gilder Insurance Corp. (insurance
brokers).
JAMES C. SWAIN, Chairman and Director*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and a Director of Centennial Asset
ManagementCorporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly President and Director of Oppenheimer Asset
Management Corporation ("OAMC"), aninvestment adviser which was a subsidiary of
the Manager and Chairman of the Board of SSI.
JOHN L. WALLACE, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly a Securities Analystand Assistant Portfolio Manager for the Manager.
__________________________
* A Director who is an "interested person" of the Fund as defined in
the Investment Company Act.
ANDREW J. DONOHUE, Vice President
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor, Partner in Kraft &
McManimon (a law firm), an officer of First Investors Corporation (a
broker-dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), director and an officer of First Investors Family
of Funds and First Investors Life Insurance Company.
GEORGE C. BOWEN, Vice President, Secretary and Treasurer
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributorand HarbourView; Senior Vice President, Treasurer,
Assistant Secretary and a director ofCentennial; Vice President, Treasurer and
Secretary of SSI and SFSI; and an officer of other OppenheimerFunds;
formerly Senior Vice President/Comptroller and Secretary of OAMC.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of other
OppenheimerFunds; formerly Vice President/Director of Internal Audit of
the Manager.
ROBERT G. ZACK, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Remuneration of Directors. The officers of the Fund (including Messrs.
Fossel and Swain) are affiliated with the Manager and receive no salary
or fee from the Fund. During the fiscal year ended December 31, 1993, the
remuneration (including expense reimbursements) paid to all Directors of
the Fund (excluding Messrs. Fossel and Swain) for services as Directors
and as members of one or more committees totalled $40,205. The Fund has
an Audit and Review Committee, composed of William A. Baker (Chairman),
Charles Conrad, Jr. and Robert M. Kirchner. This Committee meets
regularly to review audit procedures, financial statements and other
financial and operational matters of the Fund.
Major Shareholders. As of March 18, 1994, no person owned of record or
was known by the management of the Fund to be the record or beneficial
owner of 5% or more of the outstanding shares of any class of the Fund.
INVESTMENT MANAGEMENT SERVICES
The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
OAC is also owned in part by certain of the Manager's directors and
officers, some of whom may also serve as officers of the Fund and two of
whom (Messrs. Fossel and Swain) serve as Directors of the Fund.
The management fee is payable monthly to the Manager under the terms
of the investment advisory agreement between the Manager and the Fund (the
"Agreement"), and is computed on the aggregate net assets of the Fund as
of the close of business each day. The Agreement requires the Manager,
at its expense, to provide the Fund with adequate office space, facilities
and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
administration for the Fund, including the compilation and maintenance
of records with respect to its operations, the preparation and filing of
specified reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund. Expenses not
expressly assumed by the Manager under the Agreement or by the Distributor
are paid by the Fund. The Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to unaffiliated Directors, legal and audit
expenses, custodian and transfer agent expenses, stock issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation. For the fiscal years ended December 31, 1991, 1992
and 1993, the management fees paid by the Fund to the Manager were
$3,113,183, $4,067,024 and $6,012,518, respectively.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Fund in any year (including the management fee but excluding taxes,
interest, distribution plan payments, brokerage commissions, and
extraordinary expenses such as litigation costs) will not exceed (and the
Manager undertakes to reduce the Fund's management fee in the amount by
which such expenses will exceed) the most stringent state regulatory
limitation on fund expenses applicable to the Fund. At present, this
limitation, imposed by California, limits expenses (with specified
exclusions) to 2.5% of the first $30 million of average net assets, 2.0%
of the next $70 million of average net assets and 1.5% of average net
assets in excess of $100 million. The payment of the management fee at
the end of any month will be reduced or eliminated so that there will not
be any accrued but unpaid liability under this expense limitation. The
Manager reserves the right to terminate or amend the undertaking at any
time. Any assumptions of the Fund's expenses under this undertaking would
lower the Fund's overall expense ratio and increase its total return
during any period in which expenses are limited.
The Agreement provides that so long as it shall have acted with due
care and in good faith, the Manager shall not be liable for any loss
sustained by reason of any investment, the adoption of any investment
policy, or the purchase, sale or retention of any security irrespective
of whether the determinations of the Manager relative thereto shall have
been based, wholly or partly, upon the investigation or research of any
other individual, firm or corporation believed by it to be reliable. The
Agreement shall not, however, be construed to protect the Manager against
any liability to the Fund or its shareholders by reasons of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under the Agreement, or against any liability imposed by law.
BROKERAGE
Provisions of the Investment Advisory Agreement. One of the duties of the
Manager under the Agreement is to arrange the portfolio transactions of
the Fund. In doing so, the Manager is authorized by the Agreement to
employ broker-dealers ("brokers"), including "affiliated" brokers (as that
term is defined in the Investment Company Act), as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Directors.
Under the Agreement, the Manager is authorized to select brokers
which provide brokerage and/or research services for the Fund and/or other
accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies advised by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement, when brokers are used for the Fund's portfolio transactions,
allocations of brokerage are made by portfolio managers under the
supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market
are generally done with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the
option relates. Option commissions may be relatively higher than those
which would apply to direct purchases and sales of portfolio securities.
When possible, concurrent orders to purchase or sell the same security by
more than one of the accounts managed by the Manager or its affiliates are
combined. Transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase or sale
orders actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies, issuers and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by brokers broaden the
scope and supplement the research activities of the Manager by making
available additional views for consideration and comparisons, and enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Fund's
Board of Directors, including the independent Directors of the Fund,
annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain that the amount of such commissions was reasonably related to
the value or the benefit of such services.
During the fiscal years ended December 31, 1991, 1992 and 1993 total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were
$1,887,091, $2,028,356 and $4,581,702, respectively. During the fiscal
year ended December 31, 1993, $1,699,923 was paid to brokers as
commissions in return for research services (including special research,
statistical information and execution); the aggregate dollar amount of
those transactions was $776,953,718. The transactions giving rise to
those commissions were allocated in accordance with the internal
allocation procedures described above.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class Y shares of the Fund are determined
as of 4:00 P.M. (all references to time mean New York time) each day The
New York Stock Exchange (the "NYSE") is open (a "regular business day")
by dividing the value of the Fund's net assets attributable to that class
by the total number of shares outstanding. The NYSE's most recent annual
holiday schedule (which is subject to change) states that it will close
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may also
close on other days. Trading may occur in debt securities and in foreign
securities at times when the NYSE is closed (including weekends and
holidays or after 4:00 P.M. on a regular business day). Because the net
asset values of the Fund will not be calculated at such times, if
securities held in the Fund's portfolio are traded at such times, the net
asset values per share of Class A, Class B and Class Y shares of the Fund
may be significantly affected at times when shareholders do not have the
ability to purchase or redeem shares.
The Fund's Board of Directors has established procedures for the
valuation of the Fund's securities as follows: (i) equity securities
traded on a securities exchange or on the NASDAQ are valued at the last
sale prices on their primary exchange or the NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) NASDAQ and
other unlisted equity securities for which last sales prices are not
regularly reported but for which over-the-counter market quotations are
readily available are valued at the highest closing bid price at the time
of valuation, or, if no closing bid price is reported, on the basis of a
closing bid price obtained from a dealer who maintains an active market
in that security; (iii) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under
the Board's procedures; (iv) unlisted debt securities having a maturity
in excess of 60 days are valued at the mean between the bid and asked
prices determined by a portfolio pricing service approved by the Fund's
Board of Directors or obtained from active market makers in the security
on the basis of reasonable inquiry; (v) short-term debt securities having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vi) securities
traded on foreign exchanges or in foreign over-the-counter markets are
valued as determined by a portfolio pricing service approved by the Board,
based upon last sales prices reported on a principal exchange or, if none,
at the mean between closing bid and asked prices and reflect prevailing
rates of exchange taken from the closing price on the London foreign
exchange market that day. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The value
of securities denominated in foreign currency will be converted to U.S.
dollars at the prevailing rates of exchange at the time of valuation.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of its net asset
value unless the Board of Directors, or the Manager under procedures
established by the Board, determines that the particular event would
materially affect the Fund's net asset value, in which case an adjustment
would be made.
In the case of U.S. Government Securities, mortgage-backed securities
and corporate bonds, when last sale information is not generally
available, such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity, and other special factors involved. The Fund's Board of
Directors has authorized the Manager to employ a pricing service to price
U.S. Government Securities, mortgage-backed securities, and foreign
government and corporate bonds. The Directors will monitor the accuracy
of such pricing services by comparing prices used for portfolio evaluation
to actual sales prices of selected securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or on the NASDAQ on which they are traded, or, if
there are no sales that day, in accordance with (i) above. Forward
currency contracts are valued at the closing price on the London foreign
exchange market. When the Fund writes an option, an amount equal to the
premium received by the Fund is included in its Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option.
Multi-Class Methodology. The methodology for calculating the net asset
value, dividends and distributions of the Fund's Class A, Class B and
Class Y shares recognizes two types of expenses. General expenses that
do not pertain specifically to either class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of such
class to the Fund's total net assets, and then equally to each outstanding
share within a given class. Such general expenses include (i) management
fees, (ii) legal, bookkeeping and audit fees, (iii) printing and mailing
costs of shareholder reports, Prospectuses, Additional Statements and
other materials for current shareholders, (iv) fees to unaffiliated
Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a class are allocated
equally to each outstanding share within that class. Such expenses
include (a) Distribution and/or Service Plan fees, (b) incremental
transfer and shareholder servicing agent fees and expenses, (c)
registration fees and (d) shareholder meeting expenses, to the extent that
such expenses pertain to a specific class rather than to the Fund as a
whole.
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 circumstances
described in the Prospectus because the Distributor incurs little or no
selling expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law, sons- and
daughters-in-law, siblings, a sibling's spouse and a spouse's siblings.
Redemptions. The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, if the Fund's Board of
Directors determines that it would be detrimental to the best interests
of the remaining shareholders of the Fund to make payment wholly in cash,
the Fund may pay the redemption proceeds in whole or in part by a
distribution in kind of securities from the portfolio of the Fund, in lieu
of cash, in conformity with applicable SEC rules. If shares are redeemed
in kind, the redeeming shareholder might incur brokerage or other costs
in converting the assets to cash. Any shares issued by the Fund pursuant
to an "in-kind" redemption will be readily marketable. The method of
valuing securities used to make redemptions in kind will be the same as
the method of valuing portfolio securities described above under
"Determination of Net Asset Value Per Share," and such valuation will be
made as of the same time the redemption price is determined.
The Fund's Board of Directors has the right to cause the involuntary
redemption of the shares held in any account if the aggregate net asset
value of such shares is less than $500 or such lesser amount as the Board
may decide. The Board of Directors will not cause the involuntary
redemption of shares held in an account if the aggregate net asset value
of such shares has fallen below the stated minimum solely as result of
market fluctuations. Should the Board elect to exercise the right to
redeem small accounts, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to allow the shareholder to increase the investment so that
the shares would not be involuntarily redeemed.
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 funds listed in the Prospectus as
"Eligible Funds" at net asset value without sales charge. Class B and
Class Y shareholders should be aware that as of the date of this
Additional Statement, not all Eligible Funds offer Class B and/or Class
Y shares. The names of such funds are listed under "Exchanges of Class
B Shares" and "Exchanges of Class Y Shares" below. To elect this option,
the shareholder must notify the Transfer Agent in writing and either must
have an existing account in the fund selected for reinvestment or must
obtain a prospectus for that fund and an application from the Distributor
to establish an account. The investment will be made at the net asset
value per share in effect at the close of business on the payable date of
the dividend or distribution. Dividends and distributions from other
Eligible Funds may be invested in shares of the Fund on the same basis.
Cancellation of Purchase Orders. Cancellation of purchase orders for Fund
shares (for example, when a check to purchase shares is returned to the
Fund unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the date of cancellation is less than on the purchase
date; that loss is equal to the amount of such decline in 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 by seeking other redress.
Transfers of Shares. Shareholders owning Class A or Class B shares must
specify whether they intend to transfer Class A or Class B shares. Shares
are not subject to the payment of a Class A CDSC or Class B CDSC at the
time of transfer (by absolute assignment, gift or bequest, not involving,
directly or indirectly, a public sale). The transferred shares will
remain subject to the CDSC, 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 not all shares in the account would be
subject to a CDSC if redeemed at the time of transfer, then shares will
be transferred in the order described in "How to Buy Shares - Class B
Contingent Deferred Sales Charge" in the Prospectus for the imposition of
the Class B CDSC on redemptions.
Exchanges of Class B Shares. As stated in the Prospectus, shares of a
particular class of Eligible Funds having more than one class of shares
may be exchanged only for shares of the same class or another Eligible
Fund. All of the Eligible Funds offer Class A shares, but only the
following other Eligible Funds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Government Securities Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Discovery Fund
Exchanges of Class Y Shares. As stated in the Prospectus, shares of a
particular class of Eligible Funds having more than one class of shares
may be exchanged only for shares of the same class or another Eligible
Fund. All of the Eligible Funds offer Class A shares, but only the
following other Eligible Funds offer Class Y shares:
Oppenheimer Discovery Fund
Oppenheimer Special Fund
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a separate Distribution Plan for Class A and
Class B shares of the Fund under Rule 12b-1 of the Investment Company Act
pursuant to which the Fund will reimburse the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of shares of that class as described in the Prospectus. No such
plan has been adopted for Class Y shares. Each Plan has been approved by
a vote of (i) the Board of Directors of the Fund, including a majority of
the "Independent Directors," cast in person at a meeting called for the
purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class (for
the Distribution and Service Plan for the Class B shares (the "Class B
Plan"), such vote having been cast by the Manager as the sole initial
holder of Class B shares of the Fund).
Each Plan shall, unless terminated as described below, continue in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of Directors
and its Independent Directors by a vote cast in person at a meeting called
for the purpose of voting on such continuance. Either 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. Neither
Plan may be amended to increase materially the amount of payments to be
made unless such amendment is approved by shareholders of the class
affected by the amendment. All material amendments must be approved by
the Independent Directors.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Directors at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
independent Directors in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Directors of the Fund who are not "interested persons" of the
Fund is committed to the discretion of the Independent Directors. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or nomination is
approved by a majority of the independent Directors.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's independent Directors. Initially, the Board of Directors has set
the fee at the maximum rate and set no minimum amount. The Plans permit
the Distributor and the Manager to make additional distribution payments
to Recipients from their own resources (including profits from advisory
fees) at no cost to the Fund. The Distributor and the Manager may, in
their sole discretion, increase or decrease the amount of distribution
assistance payments they make to Recipients from their own assets.
For the fiscal year ended December 31, 1993, payments under the Class
A Plan totaled $1,459,739, all of which was paid by the Distributor to
Recipients including $78,379 paid to an affiliate of the Distributor. Any
unreimbursed expenses incurred with respect to Class A shares for any
fiscal quarter by the Distributor may not be recovered under the Class A
Plan in subsequent fiscal quarters. Payments received by the Distributor
under the Class A Plan will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
B shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. Although the Class B Plan permits the Distributor to retain
both the asset-based sales charges and the service fee on Class B shares,
or to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan are subject to the limitations imposed by the
National Association of Securities Dealers, Inc. Rules of Fair Practice.
The Class B Plan allows for the carry-forward of distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal
periods, as described in the Prospectus. For the fiscal period from May
1, 1993 (inception of the class) to December 31, 1993 (the "fiscal period
ended December 31, 1993"), payments under the Class B Plan totalled
602,794. The Fund believes that current accounting standards do not
require the Fund to record as a current liability its obligation under the
Class B Plan to carry over and continue payments of the asset-based sales
charge to the Distributor in the future to reimburse it for expenses
incurred as to Class B shares sold prior to the termination of the plan.
Those accounting standards are currently being reviewed by the AICPA, as
discussed in the prospectus. If those accounting standards should be
changed to require the Fund to recognize that obligation for future
payments as a current liability, the Fund's Board would consider other
alternatives to that provision of the Class B Plan, because otherwise the
treatment of such expenses as a current liability could result in a
decrease in the net asset value per Class B share. Such decrease would
affect all then-outstanding Class B shares regardless of how long they had
been held. Furthermore, Class B shareholders whose shares had not matured
would continue to remain subject to the Class B CDSC.
The asset-based sales charge paid to the Distributor by the Fund
under the Class B Plan is intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at the
time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class B shares: (i) financing the advance of the
service fee payment to Recipients under the Class B Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class B shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders).
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. It is the understanding of the
Manager and the Distributor that the Glass-Steagall Act and other
applicable laws and regulations do not prohibit banks and other financial
institutions from providing services required of Recipient. Accordingly,
the Distributor may pay banks only for sales made on an agency basis or
for performance of administrative and shareholder servicing functions
under the Plans. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or
state statutes or regulations relating to the permissible activities of
banks or their subsidiaries or affiliates, could prevent certain banks
from continuing to perform all or a part of these services. If a bank
were so prohibited, shareholders of the Fund who were clients of such bank
would be permitted to remain as shareholders, and if that bank could no
longer provide those service functions, alternate means for continuing the
servicing of such shareholders would be sought. In such event,
shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being
provided by such bank. The Fund's Board of Directors will consider
appropriate modifications to the Fund's operations, including
discontinuance of payments under the Plan to such institutions, in the
event of any future change in such laws or regulations which may adversely
affect the ability of such institutions to provide these services. It is
not expected that shareholders would suffer any adverse financial
consequences as a result of any of those occurrences. In addition, state
securities laws on this issue may differ from the interpretations of
Federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.
PERFORMANCE AND TAX INFORMATION
Fund Performance Information. As described in the Prospectus, from time
to time the "average annual total return," "total return" and "total
return at net asset value" of an investment in the Fund may be advertised.
An explanation of how these returns are calculated for each class and the
components of those calculations are set forth below. No total return
calculations are presented below for Class Y shares because no shares of
that class were publicly sold prior to April 1, 1994.
The Fund's "average annual total return" of each class is an average
annual compounded rate of return. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P" in
the formula below) over a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "total return" calculation uses some of the same factors as
"average annual total return", but does not average the rate of return on
an annual basis. Total return measures the cumulative (rather than
average) change in value of a hypothetical investment over a stated
period. Total return is determined as follows:
ERV - P
- ------- = Total Return
P
Both formulas assume (i) for Class A shares, the payment of the
Fund's current maximum sales charge of 5.75% (as a percentage of the
offering price) on the initial investment ("P"), and (ii) for Class B
shares, the payment of the contingent deferred sales charge of 5.0% for
the first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter,
applied as described in the Prospectus. The formulas also assume that all
dividends and capital gains distributions during the period are reinvested
at net asset value per share, and that the investment is redeemed at the
end of the period. The "average annual total returns" on an investment
in Class A shares of the Fund (using the method described above) for the
one, five and ten-year periods ended December 31, 1993 were 14.27%, 15.03%
and 14.54%, respectively. The "total return" on Class A shares for the
10-year period ended December 31, 1993 was 288.81%. The "average annual
total return" on Class B shares for the period May 1, 1993 (commencement
of the Class) to December 31, 1993 was 13.66%. The "total return" for the
same period on Class B shares was 8.91%.
From time to time the Fund may also quote a "total return at net
asset value" for Class A or Class B shares to describe the rate of return
on an investment in the Fund. It is based on the difference in net asset
value per share at the beginning and the end of the period for that class
of shares (without considering the sales charge) and takes into
consideration the reinvestment of dividends and capital gains (as with
total return, above). For the fiscal year ended December 31, 1993, the
total return at net asset value on the Fund's Class A shares was 21.24%.
The total return at net asset value on Class B shares for the period May
1, 1993 (commencement of the Class) to December 31, 1993, was 13.91%.
From time to time a "dividend yield" or a "distribution return" may
be quoted for each class. Dividend yield is based on dividends derived
from net investment income during a stated period and distribution return
includes dividends derived from net investment income and distributions
from realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class) on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period. The dividend
yields on Class A shares for the 90-day period ended December 31, 1993,
were 2.17% and 2.30% when calculated at maximum offering price and at net
asst value, respectively. The dividend yield on Class B shares for the
90-day period ended December 31, 1993 was 1.07% when calculated at net
asset value.
Total return information may be useful to investors in reviewing the
Fund's performance. However, certain factors should be considered before
using such information as a basis for comparison with alternative
investments. No adjustment is made for taxes payable on distributions.
An investment in the Fund's Class A or Class B shares is not insured; its
total return is not guaranteed and will fluctuate on a daily basis. Total
return for any given past period is not an indication or representation
by the Fund of future rates of return on its shares. The total return of
the Class A and Class B shares of the Fund is affected by portfolio
quality, portfolio maturity, type of investments held and operating
expenses. When comparing total return of an investment in Class A or
Class B shares of the Fund with that of other investment instruments,
investors should understand that certain other investment alternatives
such as money market instruments, certificates of deposit, U.S. Government
securities or bank accounts provide a return which remains relatively
constant over time and also that bank accounts may be insured. Investors
should also understand, when comparing the Fund's total return with that
of other investment alternatives, that since the Fund is an equity fund
seeking capital appreciation, its shares are subject to greater market
risks than certain other investments. The current price per share is
listed daily in newspaper financial sections.
From time to time the Fund may publish the ranking of its Class A,
Class B or Class Y share performance by Lipper Analytical Services, Inc.
("Lipper"), a widely-recognized independent service which monitors the
performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund's classes is ranked
against (i) all other funds, (ii) all other growth & income, and (iii) all
other growth & income funds in a specific size category. The Lipper
performance analysis includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration. The Fund may also compare its performance from
time to time with that of the Morgan Stanley Capital International Index,
a capitalization-weighted index which is widely utilized as a measure of
world-wide stock market performance.
From time to time the Fund may publish the ranking of its Class A,
Class B or Class Y share performance by Morningstar Inc. ("Morningstar"),
an independent mutual fund monitoring service that ranks mutual funds,
including the Fund, based upon the Fund's three, five and ten-year average
annual total returns (when available) and a risk factor that reflects fund
performance relative to three-month U.S. Treasury bill monthly returns.
Such returns are adjusted for fees and sales loads. There are five
rankings with a corresponding number of stars: highest (5), above average
(4), neutral (3), below average (2) and lowest (1). Morningstar ranks the
Class A and Class B shares of the Fund in relation to other rated equity
funds, and includes the maximum sales charge as a factor in its ranking
computations.
The total return on an investment made in Class A, Class B or Class
Y shares of the Fund may be compared with performance for the same period
of either the Dow Jones Industrial Average ("Dow") or the Standard &
Poor's 500 Index ("S&P 500"), both of which are widely recognized indices
of stock market performance. Both indices consist of unmanaged groups of
common stocks; the Dow consists of thirty such issues. The performance
of both indices includes a factor for the reinvestment of income
dividends. Neither index reflects reinvestment of capital gains or takes
sales charges or taxes into consideration as these items are not
applicable to indices.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and distributions is explained in the
Prospectus under the caption "Dividends, Distributions and Taxes."
Special provisions of the Internal Revenue Code apply to the dividends-
received deduction for corporate shareholders. Long-term capital gains
distributions are not eligible for the deduction. In addition, the amount
of dividends paid by the Fund which may qualify for the deduction is
limited to the aggregate amount of qualifying dividends (generally,
dividends from domestic corporations) which the Fund derives from its
portfolio investments held for a minimum period, usually 46 days. A
corporate shareholder will not be eligible for the deduction on dividends
paid on shares held by that shareholder for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option
premiums, interest income, short-term gains from the sale of securities
or dividends from foreign corporations, its dividends will not qualify for
the deduction.
Under the Internal Revenue Code, by December 31 of 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 that year, or else the Fund must pay an excise tax on the amounts
not distributed. While it is presently anticipated that the Fund's
distributions will meet those requirements, the Fund's Board and the
Manager may determine in a particular year that it would be in the best
interest of shareholders not to distribute income or capital gains at the
mandated levels and to pay the excise tax on the undistributed amounts
which would reduce the amount available for distribution to shareholders.
ADDITIONAL INFORMATION
The Custodian and the Transfer Agent. The Custodian's responsibilities
include safeguarding and controlling the Fund's portfolio securities and
handling the delivery of such portfolio securities to and from the Fund.
The Manager has represented to the Fund that its banking relationships
with the Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian. It
will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
The Transfer Agent is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
General Distributor's Agreement. Under the General Distributor's
Agreement between the Fund and the Distributor, the Distributor acts as
the Fund's principal underwriter in the continuous public offering of the
Fund's Class A, Class B and Class Y shares but is not obligated to sell
a specific number of shares. Expenses normally attributable to sales
other than those paid under the Plans of Distribution, including
advertising and the cost of printing and mailing prospectuses (other than
those furnished to existing shareholders), are borne by the Distributor.
During the fiscal years ended December 31, 1991, 1992 and 1993, the
aggregate amount of sales charges on sales of the Fund's shares was
$1,852,923, $6,026,114 and $9,787,762, respectively, of which the
Distributor and an affiliated broker-dealer retained in the aggregate
$481,312, $1,531,266 and $3,438,923, respectively.
Independent Auditors. The independent auditors of the Fund examine the
Fund's financial statements and perform other related audit services.
They also serve as auditors for the Manager and certain other funds
managed by the Manager and its affiliates.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the Class A or Class B
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and elsewhere in the Application for such Plans, and the
Prospectus and this Statement of Additional Information as they may be
amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
Fund shares will be redeemed as necessary to meet withdrawal
payments. Shares acquired without a sales charge will be redeemed first
and thereafter shares acquired with reinvested dividends and distributions
followed by shares acquired with a sales charge will be redeemed to the
extent necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made to
shareholders under such plans should not be considered as a yield or
income on investment. Purchases of additional shares concurrently with
withdrawals are undesirable because of sales charges on purchases when
made. Accordingly, a shareholder may not maintain an Automatic Withdrawal
Plan while simultaneously making regular purchases.
1. The Transfer Agent of the Fund will administer the Automatic
Withdrawal Plan (the "Withdrawal Plan") as agent for the person (the
"Planholder") who executed the Withdrawal Plan authorization and
application submitted to the Transfer Agent.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Withdrawal 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 now held by the Planholder may be
surrendered unendorsed to the Transfer Agent with the Withdrawal Plan
application so that the shares represented by the certificate may be held
under the Withdrawal Plan. Those shares will be carried on the
Planholder's Withdrawal Plan Statement.
3. 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 may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share determined on the redemption
date.
5. Checks or ACH payments will be transmitted three business days
prior to the date selected for receipt of the monthly or quarterly payment
(the date of receipt is approximate), according to the choice specified
in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. The Planholder may, at any time, instruct the Transfer Agent by
written notice (in proper form in accordance with the requirements of the
then-current Prospectus of the Fund) to redeem all, or any part of, the
shares held under the Withdrawal Plan. In such case, the Transfer Agent
will redeem the number of shares requested at the net asset value per
share in effect in accordance with the Fund's usual redemption procedures
and will mail a check for the proceeds of such redemption to the
Planholder.
8. The Withdrawal Plan may, at any time, be terminated by the
Planholder on written notice to the Transfer Agent, or by the Transfer
Agent upon receiving directions to that effect from the Fund. The
Transfer Agent will also terminate the Withdrawal Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of the Withdrawal Plan by the Transfer Agent
or the Fund, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue as
a dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his executor or guardian,
or as otherwise appropriate.
9. For purposes of using shares held under the Withdrawal Plan as
collateral, the Planholder may request issuance of a portion of his shares
in certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares as to which a
certificate may be issued, so as not to cause the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to continue
payments. Should such uncertificated shares become exhausted, Withdrawal
Plan withdrawals will terminate.
10. The Transfer
Agent shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith.
11. In the event
that the Transfer Agent shall cease to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as his agent in administering the Withdrawal Plan.
LETTERS OF INTENT
In submitting a Letter of Intent (the "Letter") to purchase Class A
shares of the Fund and other OppenheimerFunds at a reduced sales charge,
the investor agrees to the terms of the Prospectus, the Application used
to buy such shares, and the language in this Additional Statement as to
Letters, as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters.
A Letter is the investor's statement of intention to purchase Class
A shares of the Fund (and other eligible OppenheimerFunds sold with a
sales charge) during the 13-month period from the investor's first
purchase pursuant to the Letter (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The investor states the intention to make the
aggregate amount of purchases (excluding any reinvestments of dividends
or distributions or purchases made at net asset value without sales
charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in "How To
Buy Shares" in the Prospectus) applicable to purchases of shares in that
amount (the "intended amount"). Each purchase under the Letter will be
made at the public offering price applicable to a single lump-sum purchase
of shares in the intended amount, as described in the applicable
prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of such fund shares on the last day of that period,
do not equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below, as those terms may be amended from time
to time. The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Fund's transfer agent
subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to refer to the Letter in placing any
purchase orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the
Fund's transfer agent. For example, if the intended amount specified
under the Letter is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent of the Fund as attorney-in-fact to surrender
for redemption any or all escrowed shares.
5. The funds whose shares are eligible for purchase under the Letter
(or the holding of which may be counted toward completion of the Letter)
do not include any fund whose shares are sold without a front-end sales
charge or without being subject to a Class A CDSC unless (for the purpose
of determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of a fund
(described as an "Eligible Fund" in the Prospectus) whose shares were
acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders of Oppenheimer Total Return Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Total Return Fund,
Inc. as of December 31, 1993, the related statement of operations for the
year then ended, the statements of changes in net assets for the years ended
December 31, 1993 and 1992, and the financial highlights for the period
January 1, 1984 to December 31, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of securities
owned at December 31, 1993 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Total
Return Fund, Inc. at December 31, 1993, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Denver, Colorado
January 21, 1994
Statement of Investments
December 31, 1993
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <C> <C>
Repurchase Agreements--0.7%
Repurchase agreement with First Chicago Capital Markets, 3.125%, dated
12/31/93 and maturing 1/3/94, collateralized by U.S. Treasury Nts., 3.875%:
3/31/95, with a value of $3,750,000 $ 3,709,000 $3,709,000
4/30/95, with a value of $6,385,000 6,291,000 6,291,000
Total Repurchase Agreements (Cost $10,000,000) 10,000,000
Government Obligations--2.2%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas:
Series I, 4.25%, 4/1/01(3) (4) 8,648,500 6,886,105
Series I, 3.1875%, 4/1/01(3) (4) 6,715,800(1) 5,835,909
Supplier, 4.25%, 4/1/07(3) (4) 1,235,500(1) 826,131
Par Bonds, 4%, 3/31/23(5) 5,000,000 3,437,500
Past Due Interest Bonds, 4.25%, 3/31/05(3) 3,000,000 2,636,250
Brazil (Federal Republic of) Interest Due and Unpaid Bonds, 8.75%, 1/1/01(3) 10,000,000 8,325,000
Venezuela (Republic of) Front-Loaded Coupon Reduction Bonds, Series A,
6%, 3/31/07(3) 5,000,000 3,825,000
Total Government Obligations (Cost $25,716,901) 31,771,895
Corporate Bonds and Notes--8.8%
Air Express International Corp., 6% Cv. Sub. Debs., 1/15/03 4,000,000 3,760,000
Baker (J.), Inc., 7% Cv. Sub. Nts., 6/1/02 3,000,000 3,945,000
Banco Nacional de Comercio Exterior SNC International Finance
BV, 8% Gtd. Matador Bonds, 8/5/03 6,000,000 6,180,000
Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99(6) 5,250,000 6,536,250
Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 3,000,000 3,952,500
Calfed, Inc., 10% Sub. Debs., 1/3/03 169,100 169,100
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(6) 6,500,000 5,630,625
CII Financial, Inc., 7.50% Cv. Sub. Debs., 9/15/01 1,085,000 843,587
Citibank, 17% CD, 8/10/94 1,228,200,000(1) 2,866,277
Comcast Corp., 1.125% Cv. Sub. Debs., 4/15/07 10,000,000 5,487,500
Conner Peripherals, Inc., 6.75% Cv. Sub. Debs., 3/1/01 3,000,000 2,617,500
Cross Timbers Oil Co., 5.25% Cv. Sub. Nts., 11/1/03 2,000,000 1,837,500
Delta Airlines, Inc., 3.23% Cv. Sub. Nts., 6/15/03 6,000,000 4,957,500
Employee Benefit Plans, Inc., 6.75% Cv. Sub. Debs., 7/31/06 3,000,000 2,163,750
Genesis Health Ventures, Inc., 6% Cv. Sr. Sub. Debs., 11/30/03 1,500,000 1,800,000
Greyhound Lines, Inc., 8.50% Cv. Sub. Debs., 3/31/07 3,000,000 3,495,000
Hillhaven Corp., 7.75% Cv. Sub. Debs., 11/1/02 2,000,000 2,635,000
Integrated Health Services, Inc., 5.75% Cv. Sub. Debs., 1/1/01 4,000,000 4,270,000
Interpool, Inc., 5.25% Cv. Sub. Exch. Nts., 12/15/18 5,000,000 5,062,500
IVAX Corp., 6.50% Cv. Sub. Nts., 11/15/01(6) 4,000,000 4,320,000
Kelley Oil & Gas Partners Ltd., 7.875% Cv. Sub. Nts., 12/15/99 2,500,000 2,003,125
Laidlaw, Inc., 6% Cv. Sub. Debs., 1/15/99(6) 1,000,000 1,030,000
L.A. Gear, Inc., 7.75% Cv. Sub. Debs., 11/30/02 4,500,000 4,612,500
<PAGE>
Face Market Value
Amount See Note 1
Statement of Investments (Continued)
Corporate Bonds and Notes (continued)
Maxtor Corp., 5.75% Cv. Sub. Debs., 3/1/12 $ 2,000,000 $ 1,215,000
Medaphis Corp., 6.50% Cv. Sub. Nts., 1/1/00(6) 2,000,000 2,450,000
Noble Affiliates, Inc., 4.25% Cv. Sub. Nts., 11/1/03 2,500,000 2,418,750
Novacare, Inc., 5.50% Cv. Sub. Debs., 1/15/00 3,000,000 2,782,500
Pacific Physician Services, 5.50% Cv. Sub. Debs., 12/15/03 4,000,000 4,375,000
Pharmaceutical Marketing Services, Inc., 6.25% Cv. Sub. Debs., 2/1/03(6) 2,750,000 2,791,250
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(6) (7) 4,000,000 4,340,000
Pioneer Financial Services, Inc., 8% Cv. Sub. Debs., 7/15/00 3,500,000 4,217,500
Roadmaster Industries, Inc., 8% Cv. Sub. Debs., 8/15/03 3,500,000 4,147,500
Seagate Technology, 6.75% Cv. Sub. Debs., 5/1/12 6,000,000 5,460,000
Shangri-La Asia Ltd., 2.875% Cv. Sub. Debs., 6/16/00(6) 4,300,000 4,047,375
Titan Wheel International, Inc., 4.75% Cv. Sub. Nts., 12/1/00 4,000,000 4,260,000
United Gaming, Inc. 7.50% Cv. Sub. Debs., 9/15/03(6) 3,000,000 2,985,000
Willcox & Gibbs, Inc., 7% Cv. Sub. Debs., 8/1/14 2,000,000 1,960,000
Total Corporate Bonds and Notes (Cost $118,461,848) 127,625,089
Units
Rights and Warrants--0.4%
Ciba-Geigy AG Wts., Exp. 6/95 1,500 13,889
Societa Telefonica SPA Wts., Exp. 9/94 650,000 5,486,272
Total Rights and Warrants (Cost $5,258,506) 5,500,161
Shares
Preferred Stocks--7.3%
Agco Corp., Cv. 140,000 6,545,000
AMR Corp., $3.00 Cum. Cv. Depositary Shares, Series A(2) (6) 150,000 7,875,000
Boise Cascade Corp., $1.58 Cum. Cv., Series G 390,000 9,262,500
Burlington Northern, Inc., $3.125 Cum. Cv., Series A 55,000 3,753,750
Catellus Development Corp., $7.25 Cv.(6) 220,000 10,862,500
Chemical Banking Corp., $5.00 Cv.(6) 100,000 8,450,000
Chiles Offshore Corp., $1.50 Cv. 125,000 2,843,750
Chrysler Financial Corp., $4.625 Cv. Depositary Shares, Series A(6) 50,000 7,450,000
Evergreen Media Corp., $3.00 Cv. Exch.(2) 25,000 1,250,000
Freeport-McMoRan Copper & Gold, Inc., Cv. Exch. Depositary Shares 320,000 8,040,000
Gensia Pharmaceuticals, Inc., $3.75 Cv. Exch.(6) 100,000 5,350,000
Hecla Mining Co., $3.50 Cv., Series B 110,000 5,788,750
Lynx Therapeutics, Inc., Series A(2) (6) 91,200 91,200
Noble Drilling Corp., $2.25 Cv. Exch., Series A 130,000 6,467,500
Olympic Financial Ltd., $2.00 Cum. Cv. Exch. 100,000 3,025,000
Philippine Long Distance Telephone Co., Cv. Global Depositary Shares,
Series II(6) 50,000 2,250,000
RJR Nabisco Holdings Corp., $8.35 Cum. Cv., Series A 650,000 4,550,000
Transco Energy Co., $3.00 Cum. Cv., Series E(6) 90,000 4,365,000
Unisys Corp., $3.75 Cv., Series A 145,000 7,014,375
Total Preferred Stocks (Cost $88,206,477) 105,234,325
<PAGE>
Market Value
Shares See Note 1
Common Stocks--79.7%
Basic Materials--3.1%
Chemicals--2.5%
Geon Co. (The) 435,000 $10,276,875
Hercules, Inc. 110,000 12,430,000
Lyondell Petrochemical Co. 400,000 8,500,000
Union Carbide Corp. 200,000 4,475,000
35,681,875
Metal: Miscellaneous--0.3%
Material Sciences Corp.(2) 200,000 4,575,000
Steel--0.3%
Oregon Steel Mills, Inc. 200,000 5,025,000
Consumer Cyclicals--17.5%
Airlines--2.3%
Atlantic Southeast Airlines, Inc. 610,000 20,892,500
Continental Airlines, Inc., Cl. B(2) 310,000 6,355,000
Mesa Airlines, Inc. 320,000 5,680,000
32,927,500
Automobiles--2.0%
General Motors Corp. 200,000 10,975,000
Harley-Davidson, Inc. 250,000 11,031,250
Volvo AB, Series B Free 110,000 7,113,166
29,119,416
Auto Parts:
After Market--0.5%
APS Holding Corp., Cl. A(2) 200,000 4,000,000
Cummins Engine Co., Inc. 55,000 2,956,250
6,956,250
Broadcast Media--1.5%
IDB Communications Group, Inc.(2) 185,000 10,175,000
Tele-Communications, Inc., Cl. A(2) 300,000 9,075,000
Turner Broadcasting System, Inc. 90,000 2,430,000
21,680,000
Entertainment--2.1%
Carnival Cruise Lines, Inc., Cl. A 270,000 12,791,250
Iwerks Entertainment, Inc.(2) (7) 465,000 12,438,750
New Line Cinema Corp.(2) 185,000 4,786,875
30,016,875
Hotels/Motels--0.7%
Promus Cos., Inc. (The) 225,000 10,293,750
Household Furnishings
and Appliances--1.1%
Baldwin Piano & Organ Co.(2) (7) 256,000 3,840,000
Maytag Corp. 200,000 3,600,000
Shaw Industries, Inc. 340,000 8,627,500
16,067,500
Leisure Time--0.8%
Acclaim Entertainment, Inc.(2) 200,000 4,250,000
Bally Gaming International, Inc.(2) 400,000 6,900,000
11,150,000
Manufactured Housing--0.3%
Fleetwood Enterprises, Inc. 190,000 4,512,500
<PAGE>
Market Value
Shares See Note 1
Statement of Investments (Continued)
Publishing--1.2%
American Greetings Corp., Cl. A 430,000 $14,620,000
Steck-Vaughn Publishing Corp.(2) 290,000 2,718,750
17,338,750
Restaurants--0.3%
Buffets, Inc.(2) 150,000 3,862,500
Retail: Specialty--2.1%
Lowe's Cos., Inc. 125,000 7,406,250
Musicland Stores Corp.(2) 540,000 11,205,000
Regis Corp.(2) (7) 650,000 6,825,000
Spiegel, Inc., Cl. A 235,000 5,287,500
30,723,750
Retail Stores: General
Merchandise Chains--1.7%
Fingerhut Cos., Inc. 550,000 15,468,750
Meyer (Fred), Inc.(2) 250,000 9,000,000
24,468,750
Shoes--0.2%
Baker (J.), Inc. 185,000 3,237,500
Textiles: Apparel
Manufacturers--0.2%
Chic by H.I.S., Inc.(2) 275,000 3,437,500
Toys--0.5%
Mattel, Inc. 250,000 6,906,250
Consumer Non-Cyclicals--10.6%
Drugs--0.7%
Astra AB Free, Series A 350,000 7,978,167
Nature's Bounty, Inc.(2) 115,000 2,386,250
10,364,417
Food: Grain and
Agriculture--0.2%
Ralston-Continental Baking Group 345,000 2,889,375
Food Processing--0.6%
McCormick & Co., Inc., Non-Vtg. 350,000 8,618,750
Healthcare: Diversified--1.0%
Bristol-Myers Squibb Co. 250,000 14,531,250
Healthcare: Miscellaneous--4.5%
Amgen, Inc.(2) 175,000 8,662,500
Amylin Pharmaceuticals, Inc.(2) 125,000 1,625,000
Chiron Corp.(2) 150,000 12,600,000
COR Therapeutics, Inc.(2) 425,000 6,428,125
Dentsply International, Inc.(2) 205,000 9,020,000
Genentech, Inc.(2) 200,000 10,100,000
Healthsource, Inc.(2) 215,000 11,878,750
Matrix Pharmaceutical, Inc.(2) 124,000 1,302,000
PCI Services, Inc.(2) (7) 330,000 3,712,500
65,328,875
Hospital Management--1.7%
Community Psychiatric Centers 328,500 4,599,000
Homecare Management, Inc.(2) 175,000 2,384,375
Living Centers of America, Inc.(2) 175,000 4,790,625
Sun Healthcare Group, Inc.(2) 200,000 3,350,000
Wellpoint Health Networks, Inc., Cl. A(2) 279,600 8,667,600
23,791,600
<PAGE>
Market Value
Shares See Note 1
Medical Products--1.5%
Lynx Therapeutics, Inc.(2) (6) 62,700 $ 12,540
Medtronic, Inc. 195,000 16,014,375
Sybron Corp. of Delaware(2) 175,000 5,600,000
21,626,915
Retail Stores:
Food Chains--0.4%
Whole Foods Market, Inc. 240,000 5,400,000
Energy--3.5%
Oil: Integrated
Domestic--0.8%
Seagull Energy Corp.(2) 175,000 4,440,625
Trident NGL Holding, Inc.(2) 275,000 3,231,250
Vintage Petroleum, Inc. 215,000 3,896,875
11,568,750
Oil: Integrated
International--1.4%
Repsol SA, ADR 200,000 6,175,000
Societe Nationale Elf Acquitaine 130,000 9,174,536
YPF Sociedad Anonima, Sponsored ADR 200,000 5,200,000
20,549,536
Oil and Gas Drilling--0.4%
Cross Timbers Oil Co. 200,000 2,850,000
Noble Drilling Corp.(2) 250,000 2,187,500
5,037,500
Oil Well Services
and Equipment--0.9%
Hombeck Offshore Services, Inc.(2) 250,000 3,625,000
McDermott International, Inc. 290,300 7,692,950
Weatherford International, Inc.(2) 200,000 2,125,000
13,442,950
Financial--10.4%
Financial Services:
Miscellaneous--1.8%
Advanta Corp., Cl. B 100,000 2,900,000
First Financial Caribbean Corp. 150,000 2,512,500
H & R Block, Inc. 150,000 6,112,500
Itel Corp.(2) 135,000 3,780,000
Primerica Corp. 280,000 10,885,000
26,190,000
Insurance: Life--0.5%
Bankers Life Holding Corp. 350,000 7,525,000
Insurance: Multi-line--1.1%
CCP Insurance, Inc. 250,000 6,968,750
Equitable Cos., Inc. 300,000 8,100,000
15,068,750
Major Banks: Other--2.7%
American Federal Bank, FSB 150,000 1,575,000
Banco Santander SA 210,000 9,756,163
C.S. Holdings 12,500 6,203,583
Commonwealth Bank of Australia 796,000 5,159,583
Independence Bancorp, Inc. 240,000 8,940,000
Westpac Banking Corp., Sponsored ADR 475,000 7,540,625
39,174,954
<PAGE>
Market Value
Shares See Note 1
Statement of Investments (Continued)
Major Banks: Regional--2.9%
CoreStates Financial Corp. 125,000 $ 3,265,625
First Interstate Bancorp 150,000 9,618,750
Midlantic Corp.(2) 275,000 7,012,500
Signet Banking Corp.(2) 275,000 9,556,250
Summit Bancorporation (The) 275,000 5,843,750
U.S. Bancorp 250,000 6,250,000
41,546,875
Savings and
Loans/Holding Cos.--1.4%
Coast Savings Financial, Inc.(2) 200,000 2,850,000
Onbancorp, Inc. 300,000 10,537,500
TCF Financial Corp. 190,000 6,460,000
19,847,500
Industrial--7.7%
Building Materials Group--0.4%
Owens-Corning Fiberglas Corp.(2) 115,000 5,103,125
Commercial Services--0.4%
Manitowoc Co., Inc. 190,000 6,127,500
Conglomerates--2.5%
Litton Industries, Inc.(2) 160,000 10,300,000
Philips NV, New York Shares(2) 350,000 7,218,750
Teledyne, Inc. 200,000 5,200,000
Tenneco, Inc. 250,000 13,156,250
35,875,000
Electrical Equipment--0.4%
Amphenol Corp., Cl. A(2) 300,000 4,950,000
Tencor Instruments(2) 100,000 1,250,000
6,200,000
Manufacturing:
Diversified Industrials--2.4%
AlliedSignal, Inc. 80,000 6,320,000
Pall Corp. 250,000 4,593,750
Trinity Industries, Inc. 300,000 12,937,500
Tyco Laboratories, Inc. 216,000 11,151,000
35,002,250
Railroads--0.4%
Southern Pacific Rail Corp.(2) 300,000 5,925,000
Transportation:
Miscellaneous--0.2%
Stolt Comex Seaway SA(2) 175,000 2,100,000
Truckers--1.0%
Roadway Services, Inc. 75,000 4,500,000
TNT Freightways Corp. 350,000 9,450,000
13,950,000
Technology--19.0%
Aerospace/Defense--0.7%
Martin Marietta Corp. 220,000 9,790,000
Communication:
Equipment/Manufacturers--0.4%
Newbridge Networks Corp.(2) 110,000 6,022,500
Computer Software
and Services--3.8%
Adobe Systems, Inc. 325,000 7,231,250
Bolt Beranek and Newman, Inc.(2) 200,000 2,400,000
Cornerstone Imaging, Inc.(2) 47,300 697,675
Exabyte Corp.(2) 200,000 3,525,000
<PAGE>
Market Value
Shares See Note 1
Computer Software and Services (continued)
INTERLINQ Software Corp.(2) (7) 300,000 $ 2,062,500
Network General Corp.(2) 200,000 3,575,000
Platinum Technology, Inc.(2) 400,000 4,300,000
SHL Systemhouse, Inc.(2) 1,851,500 13,423,375
Sierra On-Line, Inc.(2) 195,000 3,583,125
Sligos SA 47,085 4,401,887
Sybase, Inc.(2) 165,000 6,930,000
Symantec Corp. 150,000 2,737,500
54,867,312
Computer Systems--3.1%
Apple Computer, Inc. 210,000 6,142,500
Auspex Systems, Inc.(2) 400,000 3,800,000
Cisco Systems, Inc.(2) 200,000 12,925,000
Madge NV 182,500 2,737,500
Mentor Graphics Corp. 250,000 3,437,500
Seagate Technology(2) 250,000 5,937,500
Sensormatic Electronics Corp. 285,000 9,939,375
44,919,375
Electronics:
Instrumentation--1.5%
Belden, Inc.(2) 420,000 7,822,500
Thermo Electron Corp.(2) 307,500 12,915,000
20,737,500
Electronics:
Semiconductors--2.3%
Applied Materials, Inc.(2) 350,000 13,562,500
Atmel Corp.(2) 140,000 4,847,500
Dallas Semiconductor Corp.(2) 145,000 2,247,500
Intel Corp. 200,000 12,400,000
33,057,500
Office Equipment
and Supplies--0.6%
Moore Corp. Ltd. 440,000 8,415,000
Telecommunications--6.6%
A+ Communications, Inc.(2) 150,000 1,950,000
Atlantic Tele-Network, Inc. 200,000 2,850,000
Cellular, Inc.(2) 100,000 1,750,000
Communications Central, Inc.(2) 75,000 993,750
LCI International, Inc.(2) 320,000 11,840,000
LDDS Communications, Inc., Cl. A(2) 75,000 3,618,750
McCaw Cellular Communications, Inc.(2) 200,000 10,100,000
Millicom, Inc.(2) 514,968 12,101,748
NEXTEL Communications, Inc., Cl. A(2) 255,000 9,498,750
Octel Communications Corp.(2) 165,000 4,578,750
PacTel Corp.(2) 240,000 5,970,000
Paging Network, Inc.(2) 255,000 7,777,500
Societa Italiana per L'Eserrcizio delle Telecomunicazioni SPA 3,500,000 7,351,634
Telecommunication de Argentina, Cl. B 565,000 3,555,168
Vodafone Group PLC 130,000 11,602,500
95,538,550
<PAGE>
Market Value
Shares See Note 1
Statement of Investments (Continued)
Utilities--7.9%
Electric Cos.--5.4%
Allegheny Power System, Inc. 300,000 $ 7,950,000
Entergy Corp. 325,000 11,700,000
FPL Group, Inc. 125,000 4,890,625
Houston Industries, Inc. 300,000 14,287,500
Oklahoma Gas & Electric Co. 225,000 8,325,000
Public Service Enterprise Group, Inc. 425,000 13,600,000
Texas Utilities Co. 400,000 17,300,000
78,053,125
Natural Gas--1.5%
Equitable Resources, Inc. 200,000 7,325,000
Panhandle Eastern Corp. 250,000 5,906,250
Williams Cos., Inc. (The) 350,000 8,531,250
21,762,500
Telephone (New)--1.0%
GTE Corp. 200,000 7,000,000
Pacific Telesis Group 150,000 8,100,000
15,100,000
Total Common Stocks (Cost $967,317,517) 1,149,029,900
Total Investments, at Value (Cost $1,214,961,249) 99.1% 1,429,161,370
Other Assets Net of Liabilities .9 12,949,579
Net Assets 100.0% $1,442,110,949
<FN>
1. Face amount is reported in foreign currency.
2. Non-income producing security.
3. Represents the current interest rate for a variable rate security.
4. Interest or dividend is paid in kind.
5. Represents the current interest rate for an increasing rate security.
6. Restricted security--See Note 6 of Notes to Financial Statements.
7. Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer and is or was
an affiliate, as defined in the Investment Company Act of 1940, at or during the year ended December 31, 1993.
The aggregate fair value of all securities of affiliated companies as of December 31, 1993 amounted to $29,506,250.
Transactions during the period in which the issuer was an affiliate are as follows:
</TABLE>
<TABLE>
<CAPTION>
Balance Balance
December 31, 1992 Gross Additions Gross Reductions December 31, 1993
Share/Face Cost Share/Face Cost Share/Face Cost Share/Face Cost
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Baldwin Piano & Organ Co. -- $ -- 256,000 $ 4,418,500 -- $ -- 256,000 $
4,418,500
INTERLINQ Software Corp. -- -- 300,000 2,332,500 -- -- 300,000
2,332,500
Iwerks Entertainment, Inc. -- -- 465,000 14,569,045 -- -- 465,000 14,569,045
PCI Services, Inc.(8) 285,000 3,001,437 60,000 551,250 15,000 174,562 330,000
3,378,125
Physicians Clinical
Laboratory, Inc., 7.50%
Cv. Sub. Debs., 8/15/00 -- -- 4,000,000 4,000,000 -- -- 4,000,000 4,000,000
Regis Corp. 460,000 5,221,863 190,000 1,742,500 -- -- 650,000 6,964,363
$8,223,300 $27,613,795 $174,562 $35,662,533
</TABLE>
8. Not an affiliate as of December 31, 1993.
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities
December 31, 1993
<TABLE>
<S> <C>
Assets
Investments, at value (cost $1,214,961,249)--see accompanying statement $1,429,161,370
Cash 30,167
Receivables:
Investments sold 24,806,097
Shares of capital stock sold 15,272,714
Dividends and interest 4,123,395
Other 118,350
Total assets 1,473,512,093
Liabilities
Payables and other liabilities:
Investments purchased 18,865,867
Shares of capital stock redeemed 7,904,245
Dividends and distributions 3,597,615
Distribution assistance--Note 5 546,280
Other 487,137
Total liabilities 31,401,144
Net Assets $1,442,110,949
Composition of Net Assets
Par value of shares of capital stock $ 16,597,128
Additional paid-in capital 1,218,925,789
Distributions in excess of net investment income (750,275)
Distributions in excess of net realized gain from investment,
written option and foreign currency transactions (6,864,692)
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies--Note 3 214,202,999
Net assets $1,442,110,949
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $1,223,394,721 and
140,710,761 shares of capital stock outstanding) $8.69
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $9.22
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$218,716,228 and 25,260,515 shares of capital stock outstanding) $8.66
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Operations
For the Year Ended December 31, 1993
<TABLE>
<S> <C>
Investment Income
Dividends (net of withholding taxes of $27,561) $ 21,865,430
Interest 11,060,805
Total income 32,926,235
Expenses
Management fees--Note 5 6,012,518
Distribution assistance:
Class A--Note 5 1,459,739
Class B--Note 5 602,794
Transfer and shareholder servicing agent fees--Note 5 1,286,727
Shareholder reports 495,556
Registration and filing fees:
Class A 102,600
Class B 72,087
Custodian fees and expenses 133,044
Legal and auditing fees 62,484
Directors' fees and expenses 40,205
Other 85,861
Total expenses 10,353,615
Net Investment Income 22,572,620
Realized and Unrealized Gain (Loss) on Investments,
Options Written And Foreign Currency Transactions
Net realized gain (loss) from:
Investments 82,937,211
Closing of option contracts written--Note 4 (156,395)
Foreign currency transactions (314,792)
Net change in unrealized appreciation or depreciation on:
Investments 96,121,166
Translation of assets and liabilities denominated in foreign currencies (3,006,241)
Net realized and unrealized gain on investments, options written and foreign
currency transactions 175,580,949
Net Increase in Net Assets Resulting From Operations $198,153,569
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992
<S> <C> <C>
Operations
Net investment income $ 22,572,620 $ 17,769,530
Net realized gain on investments, options written
and foreign currency transactions 82,466,024 39,664,447
Net change in unrealized appreciation or depreciation
on investments, options written and translation of assets
and liabilities denominated in foreign currencies 93,114,925 30,349,025
Net increase in net assets resulting from operations 198,153,569 87,783,002
Equalization
Net change 3,854,582 (1,086,852)
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A ($.20 and $.201 per share, respectively) (23,576,552) (18,046,891)
Class B ($.1091 per share) (1,142,362) --
Distributions from net realized gain on investments,
options written and foreign currency transactions:
Class A ($.5834 and $.373 per share, respectively) (76,215,894) (35,843,007)
Class B ($.5834 per share) (13,016,692) --
Capital Stock Transactions
Net increase in net assets resulting from Class A
capital stock transactions--Note 2 335,283,270 206,802,941
Net increase in net assets resulting from Class B
capital stock transactions--Note 2 223,296,915 --
Net Assets
Total increase 646,636,836 239,609,193
Beginning of year 795,474,113 555,864,920
End of year (including of undistributed
net investment income of ($3,054,070) and $1,345,782, respectively) $1,442,110,949 $795,474,113
</TABLE>
See accompanying Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
Year Period
Ended Ended
Dec. 31, Dec. 31,
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1993(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $7.84 $7.49 $6.13 $6.68 $6.35 $5.95 $6.76 $6.81 $5.40 $5.74 $8.23
Income (loss) from
investment
operations:
Net investment income .18 .17 .24 .24 .27 .26 .25 .35 .25 .26 .09
Net realized and
unrealized gain
(loss) on
investments,
options written and
foreign currency
transactions 1.45 .75 1.91 (.49) .93 .53 .63 1.00 1.58 (.39) 1.03
Total income (loss)
from investment
operations 1.63 .92 2.15 (.25) 1.20 .79 .88 1.35 1.83 (.13) 1.12
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.20) (.20) (.23) (.24) (.28) (.27) (.32) (.37) (.21) (.21) (.11)
Distributions from
net realized gain
on investments,
options written and
foreign currency
transactions (.58) (.37) (.56) (.06) (.59) (.12) (1.37) (1.03) (.21) -- (.58)
Total dividends and
distributions to
shareholders (.78) (.57) (.79) (.30) (.87) (.39) (1.69) (1.40) (.42) (.21) (.69)
Net asset value,
end of period $8.69 $7.84 $7.49 $6.13 $6.68 $6.35 $5.95 $6.76 $6.81 $5.40 $8.66
Total Return, at
Net Asset Value(2) 21.24% 12.83% 36.26% (3.86)% 19.25% 13.35% 12.35% 19.70% 34.36%
(5.74)% 13.91%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands) $1,223,395 $795,474 $555,865 $396,240 $389,413 $314,039 $274,068 $234,674 $229,783
$197,758 $218,716
Average net assets
(in thousands) $992,381 $662,917 $475,741 $394,903 $356,994 $298,509 $277,877 $246,530 $213,803
$199,287 $90,952
Number of shares
outstanding at end
of period (in
thousands) 140,711 101,433 74,245 64,644 58,333 49,464 46,080 34,703 33,720 36,627
25,261
Ratios to average
net assets:
Net investment
income 2.21% 2.68% 3.26% 3.87% 3.96% 4.22% 3.42% 4.37% 3.81% 4.84%
1.09%(3)
Expenses .93% .96% .95% .98% .98% .94% .88% .85% .89% .95%
1.87%(3)
Portfolio turnover
rate(4) 143.9% 143.5% 161.5% 114.1% 151.6% 127.3% 173.4% 88.3% 143.9%
202.6% 143.9%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, 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.
3. Annualized.
4. 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 year ended December 31, 1993 were $1,939,566,810 and
$1,478,337,981, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Total Return Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge. Both classes of
shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution plan, expenses directly
attributable to a particular class and exclusive voting rights with respect
to matters affecting a single class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following
is a summary of significant accounting policies consistently followed by the
Fund.
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the
day or, in the absence of sales, at values based on the closing bid or asked
price or the last sale price on the prior trading day. Long-term debt
securities are valued by a portfolio pricing service approved by the Board of
Directors. Long-term debt securities which cannot be valued by the approved
portfolio pricing service are valued by averaging the mean between the bid
and asked prices obtained from two active market makers in such securities.
Short-term 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. Securities for which market quotes are
not readily available are valued under procedures established by the Board of
Directors to determine fair value in good faith. A call option is valued
based upon the last sales 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 on the prior trading date if it is within the spread
between the closing bid and asked prices. If the last sale price is outside
the spread, the closing bid or asked price closest to the last reported sale
price is used.
Foreign Currency Translation. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of exchange.
Amounts related to the purchase and sale of securities and investment income
are translated at the rate of exchange prevailing on the respective dates of
such transactions.
The Fund generally enters into forward currency exchange contracts as a
hedge, upon the purchase or sale of a security denominated in a foreign
currency. Risks may arise from the potential inability of the counterparty to
meet the terms of the contract and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
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 results 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. 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.
Call Options Written. The Fund may write covered call options. When an option
is written, the Fund receives a premium and becomes obligated to sell the
underlying security at a fixed price, upon exercise of the option. In writing
an option, the Fund bears the market risk of an unfavorable change in the
price of the security underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling a security at a price
different from the current market value. All securities covering call options
written are held in escrow by the custodian bank.
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Federal Income 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 tax provision is required.
<PAGE>
Notes to Financial Statements (Continued)
Equalization. Prior to September 24, 1993, the Fund followed the accounting
practice of equalization, by which a portion of the proceeds from sales and
costs of redemption of Fund shares equivalent on a per share basis to the
amount of undistributed net investment income were credited or charged to
undistributed income. The cumula tive effect of the change in accounting
practice resulted in a reclassification of $3,804,345 from undistributed net
investment income to paid-in capital.
Distributions to Shareholders. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Other. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life
of the respective securities, in accordance with federal income tax
requirements. Realized gains and losses on investments and options written
and unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes.
2. Shares of Capital Stock
The Fund has authorized 500,000,000 and 200,000,000 shares of $.10 par value
Class A and Class B capital stock, respectively. Transactions in shares of
capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1993(1) Year Ended December 31, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Sold 40,537,799 $ 349,550,087 29,867,549 $224,008,089
Dividends and distributions reinvested 10,935,488 90,416,322 6,634,600 51,706,015
Redeemed (12,195,290) (104,683,139) (9,313,962) (68,911,163)
Net increase 39,277,997 $ 335,283,270 27,188,187 $206,802,941
Class B:
Sold 24,707,937 $ 219,055,169 -- $ --
Dividends and distributions reinvested 1,561,693 13,222,296 -- --
Redeemed (1,009,115) (8,980,550) -- --
Net increase 25,260,515 $ 223,296,915 -- $ --
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period
from May 1, 1993 (inception of offering) to December 31, 1993 for Class B shares.
</TABLE>
3. Unrealized Gains and Losses on Investments
At December 31, 1993, net unrealized appreciation on investments of
$217,209,204 was composed of gross appreciation of $234,591,257, and gross
depreciation of $17,382,053.
4. Call Option Activity
Call option activity for the year ended December 31, 1993 was as follows:
<TABLE>
<CAPTION>
Number of Amount of
Options Premiums
<S> <C> <C>
Options outstanding at December 31, 1992 -- $ --
Options written 2,000 432,420
Options cancelled in closing purchase transactions (2,000) (432,420)
Options outstanding at December 31, 1993 -- $ --
</TABLE>
The cost of cancelling options in closing purchase transactions was $588,815,
resulting in a net short-term capital loss of $156,395.
5. Management Fees and Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75% on
the first $100 million of net assets with a reduction of .05% on each $100
million thereafter, to .50% on net assets in excess of $500 million. The
Manager has agreed to reimburse the Fund if aggregate expenses (with specified
exceptions) exceed the most stringent applicable regulatory limit on Fund
expenses.
For the year ended December 31, 1993, commissions (sales charges paid by
investors) on sales of Class A shares totaled $9,700,404, of which $2,958,311
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of
the Manager, as general distributor, and by an affiliated broker/dealer.
During the year ended December 31, 1993, OFDI received contingent deferred
sales charges of $87,358 upon redemption of Class B shares.
<PAGE>
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under separate approved plans of distribution, each class may expend up to
.25% of its net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund (sold subsequent to March 31, 1988 for Class
A), including amounts paid to brokers, dealers, banks and other financial
institutions. In addition, Class B shares are subject to an asset-based sales
charge of .75% of net assets annually, to reimburse OFDI for sales
commissions paid from its own resources at the time of sale and associated
financing costs. In the event of termination or discontinuance of the Class B
plan of distribution, the Fund would be contractually obligated to pay OFDI
for any expenses not previously reimbursed or recovered through contingent
deferred sales charges. During the year ended December 31, 1993, OFDI paid
$78,379 to an affiliated broker/dealer as reimbursement for Class A
distribution-related expenses and retained $602,794 as reimbursement for
Class B distribution-related expenses and sales commissions.
6. Restricted Securities
The Fund owns securities purchased in private placement transactions, without
registration under the Securities Act of 1933 (the Act). The securities are
valued under methods approved by the Board of Directors as reflecting fair
value. The Fund intends to invest no more than 10% of its net assets
(determined at the time of purchase) in restricted and illiquid securities,
excluding securities eligible for resale pursuant to Rule 144A of the Act
that are determined to be liquid by the Board of Directors or by the Manager
under Board-approved guidelines. Restricted and illiquid securities amount to
$103,740, or .01% of the Fund's net assets, at December 31, 1993.
<TABLE>
<CAPTION>
Valuation Per Unit
Security Acquisition Date Cost Per Unit as of December 31, 1993
<S> <C> <C> <C>
AMR Corp., $3.00 Cum. Cv. Depositary Shares,
Series A(1) 6/26/93--10/2/93 $ 51.81 $ 52.50
Banco Nacional de Mexico SA, 7%
Exch. Sub. Debs., 12/15/99(1) 12/1/92--3/2/93 $ 99.90 $124.50
Catellus Development Corp., $7.25 Cv.(1) 11/1/93--11/9/93 $ 49.97 $ 49.38
Chemical Banking Corp., $5.00 Cv.(1) 6/25/92--8/19/92 $ 78.93 $ 84.50
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(1) 1/9/93 $ 84.54 $ 86.63
Chrysler Financial Corp., $4.625 Cv.
Depositary Shares, Series A(1) 2/12/92 $ 50.00 $149.00
Gensia Pharmaceuticals, Inc., $3.75 Cv. Exch.(1) 5/11/93--5/25/93 $ 46.94 $ 53.50
IVAX Corp., 6.50% Cv. Sub. Nts., 11/15/01(1) 9/22/92--10/16/92 $ 98.87 $108.00
Laidlaw, Inc., 6% Cv. Sub. Debs., 1/15/99(1) 12/31/93 $103.00 $103.00
Lynx Therapeutics, Inc. 10/19/92 $ .20 $ .20
Lynx Therapeutics, Inc., Series A 10/19/92 $ 1.00 $ 1.00
Medaphis Corp., 6.50% Cv. Sub. Nts., 1/1/00(1) 3/3/93 $ 9.50 $122.50
Pharmaceutical Marketing Services, Inc.,
6.25% Cv. Sub. Debs., 2/1/03(1) 1/27/93 $100.00 $101.50
Philippine Long Distance Telephone Co.,
Cv. Global Depositary Shares, Series II(1) 10/9/92--12/17/92 $ 24.92 $ 45.00
Physicians Clinical Laboratory, Inc.,
7.50% Cv. Sub. Debs., 8/15/00(1) 8/18/93 $100.00 $108.50
Shangri-La Asia Ltd., 2.875% Cv. Sub. Debs., 6/16/00(1) 12/13/93 $ 86.00 $ 94.13
Transco Energy Co., $3.00 Cum. Cv., Series E(1) 10/29/93 $ 50.00 $ 48.50
United Gaming, Inc., 7.50% Cv. Sub. Debs., 9/15/03(1) 9/15/93 $100.00 $ 99.50
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER TOTAL RETURN FUND, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights - See Parts A and B: Filed herewith.
(2) Independent Auditors' Report - See Part B: Filed
herewith.
(3) Statement of Investments - See Part B: Filed herewith.
(4) Statement of Assets and Liabilities - See Part B: Filed
herewith.
(5) Statement of Operations - See Part B: Filed herewith.
(6) Statements of Changes in Net Assets - See Part B: Filed
herewith.
(7) Notes to Financial Statements - See Part B: Filed
herewith.
(8) Independent Auditors' Consent: Filed herewith.
(b) Exhibits
(1) (i)
Articles of Incorporation dated 12/5/79: Filed with
Registrant's Post-Effective Amendment No. 48, 8/19/80,
and incorporated herein by reference.
(ii)
Articles of Incorporation, amended as of 8/27/81: Filed
with Registrant's Post-Effective Amendment No. 50,
4/23/82, and incorporated herein by reference.
(iii)
Articles of Amendment dated 4/28/87 to Articles of
Incorporation, changing Registrant's name from "Hamilton
Funds, Inc." to Oppenheimer Total Return Fund, Inc.":
Filed with Registrant's Post-Effective Amendment No. 62,
4/27/87, and incorporated herein by reference.
(iv)
Articles of Amendment dated 3/23/93 to Articles of
Incorporation: Filed with Registrant's Post-Effective
Amendment No. 72, 4/28/93, and incorporated herein by
reference.
(v)Articles Supplementary dated 4/14/93 to Articles of
Incorporation: Filed with Registrant's Post-Effective Amendment No. 72,
4/28/93, and incorporated herein by reference.
(vi) Articles Supplementary dated 3/28/94 to Articles of
Incorporation: Filed herwith.
(2) By-Laws, as amended through 6/26/90: Filed with
Registrant's Post-Effective Amendment No. 70, 4/30/92,
and incorporated herein by reference.
(3) Not applicable.
(4) (i)
Specimen Share Certificate: Filed with Registrant's Post-Effective
Amendment No. 62, 4/27/87, and incorporated herein by reference.
(ii)Specimen Class A Share Certificate: Filed herewith.
(iii)
Specimen Class B Share Certificate: Filed herewith.
(iv) Specimen Class Y Share Certificate: Filed herewith.
(5) Investment Advisory Agreement between Registrant and
Oppenheimer Management Corporation dated 10/22/90: Filed
with Post-Effective Amendment No. 68, 2/28/91, and
incorporated herein by reference.
(6) (i)
General Distributor's Agreement between Registrant and
Oppenheimer Fund Management, Inc. dated 10/13/92: Filed
with Registrant's Post-Effective Amendment No. 71,
2/26/93, and incorporated herein by reference.
(ii)
Form of Oppenheimer Fund Management, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 12 to
the Registration Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(iii)
Form of Oppenheimer Fund Management, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 12 to
the Registration Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92 and
incorporated herein by reference.
(iv)
Form of Oppenheimer Fund Management, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 12 to
the Registration Statement of Oppenheimer Government
Securities Fund (File No. 33-02769), 12/2/92, and
incorporated herein by reference.
(v)
Broker Agreement between Oppenheimer Fund Management,
Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed
with Post-Effective Amendment No. 25 to the Registration
Statement of Oppenheimer Special Fund (File No. 2-
45272), 11/1/86, and incorporated herein by reference.
(7) Not applicable.
(8) Custody Agreement with The Bank of New York dated
10/6/92: Filed with Registrant's Post-Effective
Amendment No. 71, 2/26/93, and incorporated herein by
reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 1/30/81: Filed with
Registrant's Post-Effective Amendment No. 57, 4/25/85,
and incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (i)
Form of Individual Retirement Account Trust Agreement:
Filed with Post-Effective Amendment No. 21 to the
Registration Statement of Oppenheimer U.S. Government
Trust (File No. 2-76645), 8/25/93, and incorporated
herein by reference.
(ii)
Form of Tax Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt
organizations: Filed with Post-Effective Amendment No.
22 to the Registration Statement of Oppenheimer
Directors Fund (File No. 2-62240), 2/1/90, and
incorporated herein by reference.
(iii)
Form of Simplified Employee Pension IRA: Filed with Post-Effective
Amendment No. 36 to the Registration Statement of Oppenheimer
Equity Income Fund (File No. 2-33043), 10/23/91, and incorporated
herein by reference.
(iv)
Form of prototype Standardized and Non-Standardized
Profit-Sharing Plan and Money Purchase Pension Plan for
self-employed persons and corporations: Filed with Post-
Effective Amendment No. 3 to the Registration Statement
of Oppenheimer Global Growth & Income Fund (Reg. No. 33-
33799), 1/31/92, and incorporated herein by reference.
(v)
Form of SAR-SEP Simplified Employee Pension IRA: Filed
with Post-Effective Amendment No. 19 to the Registration
Statement of Oppenheimer Integrity Funds (File No. 2-
76547), 3/1/94, and incorporated herein by reference.
(15) (i)
Service Plan and Agreement for Class A Shares dated
6/22/93, pursuant to Rule 12b-1 of the Investment
Company Act of 1940: Filed with Registrant's Post-
Effective Amendment No. 73, 1/28/94, and incorporated
herein by reference.
(ii)
Distribution and Service Plan and Agreement for Class B
Shares dated 6/22/93, pursuant to Rule 12b-1 of the
Investment Company Act of 1940: Filed with Registrant's
Post-Effective Amendment No. 73, 1/28/94, and
incorporated herein by reference.
(16) Performance Calculations: Filed herewith.
-- Powers of Attorney and Certified Board Resolutions: Filed
with Registrant's Post-Effective Amendment No. 73, 1/28/94,
and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of
Record Holders as
Title of Class of March 18, 1994
Class A Common Stock, Par Value $.01 89,253
Class B Common Stock, Par Value $.01 26,436
Class Y Common Stock, Par Value $.01 None
Item 27. Indemnification
Reference is made to Section 7(c) of Article SEVENTH of
Registrant's Articles of Incorporation filed as Exhibit 24(b)(1)
to this Registration Statement, and to Section 2-418 of the
Maryland General Corporation Law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser
of the Registrant; it and certain subsidiaries act in the
same capacity to other registered investment companies as
described in Parts A and B of this Registration Statement.
(b) For information as to the business, profession, vocation or
employment of a substantial nature of each of the officers
and directors of Oppenheimer Management Corporation,
reference is made to Part B of this Registration Statement
and to the registration on Form ADV of Oppenheimer
Management Corporation filed under the Investment Advisers
Act of 1940, which is incorporated herein by reference.
Item 29. Principal Underwriters
(a) Oppenheimer Funds Distributor, Inc. is the general
distributor of the Registrant's shares. It is also the
general distributor of certain of the other registered open-
end investment companies for which Oppenheimer Management
Corporation is the investment adviser, as described in Parts
A and B of this Registration Statement.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor, Inc., filed under the
Securities Exchange Act of 1934, is incorporated herein by
reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the Investment Company
Act of 1940 and rules promulgated thereunder are in the possession
of Oppenheimer Management Corporation, at its offices at 3410 South
Galena Street, Denver, Colorado 80231.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for 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 Denver and State
of Colorado on the 28th day of March, 1994.
OPPENHEIMER TOTAL RETURN FUND, INC.
/s/ James C. Swain *
by: --------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signatures: Title Date
- ----------- ----------------- --------------
/s/ James C. Swain* Chairman of the Board March 28, 1994
- ---------------------- of Directors and
James C. Swain Principal Executive
Officer
/s/ Jon S. Fossel* President and Director March 28, 1994
- ----------------------
Jon S. Fossel
/s/ George Bowen* Treasurer and March 28, 1994
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Director March 28, 1994
- ----------------------
Robert G. Avis
/s/ William A. Baker* Director March 28, 1994
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Director March 28, 1994
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Director March 28, 1994
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director March 28, 1994
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director March 28, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Director March 28, 1994
- ---------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
POWERS/420SIG.B
<PAGE>
OPPENHEIMER TOTAL RETURN FUND, INC.
EXHIBIT INDEX
Form N-1A
Item No. Description
24(a)(8) Independent Auditor's Consent
24(b)(1)(vi) Articles Supplementary dated 3/28/94
to Articles of Incorporation
24(b)(4)(ii) Specimen Class A Share Certificate
24(b)(4)(iii) Specimen Class B Share Certificate
24(b)(4)(iv) Specimen Class Y Share Certificate
24(b)(16) Performance Computation Schedule
Oppenheimer Total Return Fund, Inc.
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, which are
as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(EX) Date Income Capital Gains Price
Class A Shares
04/01/84 0.0525 0.0000 5.400
06/25/84 0.0525 0.0000 5.080
09/24/84 0.0525 0.0000 5.300
12/24/84 0.0525 0.0000 5.340
04/01/85 0.0525 0.0000 5.840
07/01/85 0.0525 0.0000 6.280
10/03/85 0.0525 0.0000 6.210
12/30/85 0.0550 0.2050 6.770
03/31/86 0.0550 0.0000 7.880
06/30/86 0.0700 0.0000 8.060
09/29/86 0.0700 0.0000 7.700
12/29/86 0.1700 1.0300 6.800
03/30/87 0.0700 0.0000 7.930
06/26/87 0.0700 0.0950 8.010
09/25/87 0.0700 0.0000 8.520
12/24/87 0.1050 1.2750 6.010
03/25/88 0.0600 0.0000 6.220
06/24/88 0.0600 0.0100 6.570
09/23/88 0.0600 0.0000 6.360
12/23/88 0.0850 0.1100 6.270
03/23/89 0.0600 0.0000 6.520
06/23/89 0.0600 0.0000 6.990
09/22/89 0.0600 0.0000 7.300
12/22/89 0.0950 0.5900 6.550
03/23/90 0.0600 0.0000 6.600
06/22/90 0.0600 0.0450 6.710
09/21/90 0.0600 0.0000 6.100
12/21/90 0.0600 0.0150 6.110
03/22/91 0.0600 0.0000 6.900
06/21/91 0.0600 0.0000 7.000
09/20/91 0.0600 0.0000 7.600
12/20/91 0.0500 0.5550 6.910
03/27/92 0.0600 0.0000 7.580
06/26/92 0.0500 0.0150 6.960
09/25/92 0.0500 0.0000 7.260
12/21/92 0.0410 0.3580 7.630
03/26/93 0.0500 0.0000 8.180
06/25/93 0.0500 0.0150 8.450
09/24/93 0.0500 0.0000 9.000
12/23/93 0.0500 0.5684 8.480
Class B Shares
06/25/93 0.0460 0.0150 8.420
09/24/93 0.0400 0.0000 8.960
12/23/93 0.0231 0.5684 8.450
F:\rr\dnvshare\sai\totalret.sch
Oppenheimer Total Return Fund, Inc.
March 28, 1994
Page 2
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$1,142.71 1 $2,013.98 .2
(---------) - 1 = 14.27% (---------) - 1 = 15.03%
$1,000 $1,000
Ten Year
$3,888.10 .1
(----------) - 1 = 14.54%
$1,000
Examples at NAV:
One Year Five Year
$1,212.42 1 $2,136.85 .2
(---------) - 1 = 21.24% (---------) - 1 = 16.40%
$1,000 $1,000
Ten Year
$4,125.31 .1
(-------) - 1 = 15.22%
$1,000
Class B Shares
Example, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception (05/01/93)
$1,089.12 1.5000
(---------) - 1 = 13.66%
$1,000
Example at NAV:
Inception (05/01/93)
$1,139.12 1.5000
(---------) - 1 = 21.58%
$1,000
Oppenheimer Total Return Fund, Inc.
March 28, 1994
Page 3
2. TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating total return is as follows:
ERV - P
------- = Total Return
P
Examples:
Class A Shares
Ten Year (at Maximum Sales Charge) Ten Year (at NAV)
$3,888.10 - $1,000 $4,125.31 - $1,000
-------------------- = 288.81% -------------------- = 312.53%
$1,000 $1,000
One Year (at Maximum Sales Charge) One Year (at NAV)
$1,142.71 - $1,000 $1,212.42 - $1,000
-------------------- = 14.27% -------------------- = 21.24%
$1,000 $1,000
Class B Shares
Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge)
$1,089.12 - $1,000
-------------------- = 8.91%
$1,000
Inception (05/01/93)(at NAV)
$1,139.12 - $1,000
-------------------- = 13.91%
$1,000
Exhibit 24(b)(4)(ii)
OPPENHEIMER TOTAL RETURN FUND, INC.
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER TOTAL RETURN 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 CUSIP number
683808 109
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS A SHARES OF
CAPITAL STOCK OF THE PAR VALUE OF $.10 EACH OF
---OPPENHEIMER TOTAL RETURN FUND, INC.---
(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 (at right
of seal) of seal)
(signature) (signature)
----------------------- ---------------------
SECRETARY PRESIDENT
Exhibit 24(b)(4)(ii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER TOTAL RETURN FUND, INC.
SEAL
1979
MARYLAND
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER
MANAGEMENT CORPORATION)
Denver (Colo.) Transfer Agent
By ----------------------------
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT : --------------- Custodian -------------
(Cust) (Minor)
UNDER UGMA/UTMA -------------------
(State)
Additional abbreviations may also be used though not in the 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>
Exhibit 24(b)(4)(ii)
Page 3
- -------------------------------------------------------------------(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
Corporation 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
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the 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 Corportion.
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.
(at left) PLEASE NOTE: This document (at right) [LOGO]
contains a watermark when viewed at
an angle. It is invalid without this
watermark.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\420A.CER
Exhibit 24(b)(4)(iii)
OPPENHEIMER TOTAL RETURN FUND, INC.
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER TOTAL RETURN 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 CUSIP number
683808 208
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS B SHARES OF
CAPITAL STOCK OF THE PAR VALUE OF $.10 EACH OF
---OPPENHEIMER TOTAL RETURN FUND, INC.---
(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 (at right
of seal) of seal)
(signature) (signature)
----------------------- ---------------------
SECRETARY PRESIDENT
Exhibit 24(b)(4)(iii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER TOTAL RETURN FUND, INC.
SEAL
1979
MARYLAND
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER
MANAGEMENT CORPORATION)
Denver (Colo.) Transfer Agent
By ----------------------------
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT : --------------- Custodian -------------
(Cust) (Minor)
UNDER UGMA/UTMA -------------------
(State)
Additional abbreviations may also be used though not in the 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>
Exhibit 24(b)(4)(iii)
Page 3
- -------------------------------------------------------------------(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
Corporation 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
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the 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 Corportion.
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.
(at left) PLEASE NOTE: This document (at right) [LOGO]
contains a watermark when viewed at
an angle. It is invalid without this
watermark.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\420B.CER
Exhibit 24(b)(4)(iv)
OPPENHEIMER TOTAL RETURN FUND, INC.
Class Y Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER [of shares]
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER TOTAL RETURN 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 CUSIP number
------ ---
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS Y SHARES OF
CAPITAL STOCK OF THE PAR VALUE OF $.10 EACH OF
---OPPENHEIMER TOTAL RETURN FUND, INC.---
(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 (at right
of seal) of seal)
(signature) (signature)
----------------------- ---------------------
SECRETARY PRESIDENT
Exhibit 24(b)(4)(iv)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER TOTAL RETURN FUND, INC.
SEAL
1979
MARYLAND
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER
MANAGEMENT CORPORATION)
Denver (Colo.) Transfer Agent
By ----------------------------
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT : --------------- Custodian -------------
(Cust) (Minor)
UNDER UGMA/UTMA -------------------
(State)
Additional abbreviations may also be used though not in the 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>
Exhibit 24(b)(4)(iv)
Page 3
- -------------------------------------------------------------------(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
Corporation 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
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the 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 Corportion.
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.
(at left) PLEASE NOTE: This document (at right) [LOGO]
contains a watermark when viewed at
an angle. It is invalid without this
watermark.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\420Y.CER
OPPENHEIMER TOTAL RETURN FUND, INC.
ARTICLES SUPPLEMENTARY
OPPENHEIMER TOTAL RETURN FUND, INC., a open-end investment company
registered under the Investment Company Act of 1940, organized as a
Maryland corporation having its principal office in Maryland in the City
of Baltimore (hereinafter called the "Corporation"), hereby certifies
that:
FIRST: Pursuant to authority contained in the charter of the
Corporation, as amended, and under Sections 2-208 and 2-208.1 of the
Maryland Corporation Code, fifty million (50,000,000) shares of authorized
but unissued Class A shares have been duly reclassified by the Board of
Directors as authorized but unissued Class Y shares, par value ten (10)
cents per share. Upon such reclassification, the Corporation will have
four hundred fifty million (450,000,00) Class A shares, two hundred
million (200,000,000) Class B shares and fifty million (50,000,000) Class
Y shares authorized, each with a par value of ten (10) cents per share and
with an aggregate par value of $70,000,000. These Articles Supplementary
do not increase the number of authorized shares of the Corporation, which
remains at seven hundred million (700,000,000) shares, par value ten (10)
cents per share.
SECOND: Acting pursuant to paragraph (8) of Article IX of the
Articles of Incorporation as amended, the Board of Directors has set the
following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of Class Y stock, together with those set forth
in other provisions of the Articles of Incorporation relating to stock of
the Corporation generally.
(1) As more fully set forth hereinafter, the liabilities and
the expenses of the Class Y shares shall be determined separately
from those of the Class A and Class B shares and from those of any
other class of the Corporation's stock and, accordingly, the net
asset value, the dividends and distributions payable to holders, and
the amounts distributable in the event of liquidation of the
Corporation to holders of shares of the Corporation's stock may vary
from class to class. Article VIII of the Articles of Incorporation,
as amended, shall be construed in such manner as to reflect the
provisions of the immediately prior sentence and of these Articles
Supplementary generally. Except for these differences and certain
other differences hereinafter set forth, the Class Y shares shall
have the same preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of, and rights to require redemption as the
Class A and Class B shares and any other class of the Corporation's
stock that represents an interest in the same portfolio of
investments as the Class Y shares.
(2) The Class Y shares shall represent interests in the same
portfolio of investments as the Class A and Class B shares.
(3) The dividends and distributions of investment income and
capital gains to holders of the Class Y shares shall be in such
amounts as may be declared from time to time by the Board of
Directors, and such dividends and distributions may vary from the
dividends and distributions of investment income and capital gains
to holders of the Class A and Class B shares and any other class of
the Corporation's stock to reflect differing allocations of the
liabilities and expenses of the Corporation among the classes of
shares and any resultant differences among the net asset values per
share of the classes of shares, to such extent and for such purposes
as the Board of Directors may deem appropriate. The allocation of
investment income, capital gains, expenses and liabilities of the
Corporation among the Class A shares, the Class B shares, the Class
Y shares and any other class of the Corporation's stock that
represents an interest in the same portfolio of investments as the
Class Y shares shall be determined by the Board of Directors in a
manner that is consistent with the order dated 11/23/93 (Investment
Company Act of 1940 Release No. 19821) issued by the Securities and
Exchange Commission in connection with the application for exemption
filed by Oppenheimer Management Corp., et al., and any existing or
future amendment to such order or any rule or interpretation under
the Investment Company Act of 1940 or its successor that modifies or
supersedes such order.
(4) Except as may otherwise be required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of the Class Y shares
shall have exclusive voting rights with respect to any matter
submitted to a vote of stockholders that affects only holders of the
Class Y shares and no voting rights with respect to any matter
submitted to a vote of stockholders that does not affect holders of
the Class Y shares.
THIRD: The Class A shares aforesaid have been duly reclassified by
the Corporation's Board of Directors pursuant to authority and power
contained in the Corporation's Articles of Incorporation, as amended.
IN WITNESS WHEREOF, Oppenheimer Total Return Fund, Inc. has caused
these Articles Supplementary to be executed by its Vice President and
witnessed by its Assistant Secretary on this 28th day of March, 1994. The
Vice President of the Corporation who signed these Articles Supplementary
acknowledges them to be the act of the Corporation and states under the
penalties of perjury that, to the best of his knowledge, information and
belief, the matters and facts set forth herein relating to authorization
and approval hereof are true in all material respects.
OPPENHEIMER TOTAL RETURN FUND, INC.
By: /s/ Andre J. Donohue (SEAL)
-----------------------------
Andrew J. Donohue, Vice President
WITNESS:
/s/ Robert G. Zack
- -----------------------------------
Robert G. Zack, Assistant Secretary
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Total Return Fund, Inc.:
We hereby consent to the use in Post-Effective Amendment No. 74 to the
Registration Statement No. 2-11052 of our report dated January 21, 1994
appearing in the Statement of Additional Information, which is a part
of such Registration Statement, and to the reference to us under the caption
"Financial Highlights" appearing in the Prospectus, which is also a part of
such Registration Statement.
DELOITTE & TOUCHE
Denver, Colorado
March 25, 1994
