OPPENHEIMER TOTAL RETURN FUND, INC.
Prospectus dated April 28, 1995
Oppenheimer Total Return Fund, Inc. (the "Fund") is a mutual fund
with the investment objective of seeking high total return. The Fund
intends to seek its investment 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 to try to reduce risks of market
fluctuations that affect the value of the securities the Fund holds. The
securities the Fund invests in are described more completely in
"Investment Objective and Policies."
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the April 28, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus.
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 the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contents
ABOUT THE FUND
Expenses
Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class Y Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended December 31, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ____, for an explanation of how and when these charges
apply.
Class A Class B Class Y
Shares Shares Shares
Maximum Sales Charge on 5.75% None None
Purchases (as a % of offering
price)
Sales Charge On Reinvested None None None
Dividends
Deferred Sales Charge None(1) 5% in the first None
(as a % of the lower of the year, declining
original purchase price or to 1% in the
redemption proceeds) sixth year and
eliminated thereafter
Exchange Fee None(2) None(2) None(2)
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares,"
below.
(2)There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by ACH wire through
AccountLink (see "How to Sell Shares").
- Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the
Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are service fees. For Class B shares the 12b-1
Distribution Plan Fees are service fees and asset-based sales charges.
The service fee for Class A and Class B shares is a maximum of 0.25% of
average annual net assets of the class and the asset-based sales charge
for Class B shares is 0.75%. These plans are described in greater detail
in "How to Buy Shares." The Total Fund Operating Expenses as to Class Y
shares are based on expenses for the period from June 1, 1994 through
December 31, 1994.
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart, depending on a number of factors,
including the actual value of the Fund's assets represented by each class
of shares.
Class A Class B Class Y
Shares Shares Shares
Management Fees .55% .55% .55%
12b-1 Distribution
Plan Fees .18% 1.00% None
Other Expenses .28% .32% .41%
Total Fund Operating
Expenses 1.01% 1.87% .96%
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $67 $88 $110 $174
Class B Shares $69 $89 $121 $176
Class Y Shares $10 $31 $ 53 $118
<PAGE>
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $67 $88 $110 $174
Class B Shares $19 $59 $101 $176
Class Y Shares $10 $31 $ 53 $118
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Class B Shares" for more information.
These examples show the effect of the current level of expenses on an
investment attaining a hypothetical return, but are not meant to state or
predict actual or expected expenses or investment returns of the Fund, all
of which will vary.
Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek high total return.
- What Does the Fund Invest In? To achieve its objective, the Fund
primarily invests 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 may also write covered
calls and use certain types of securities called "derivative investments"
and hedging instruments to try to manage investment risks. These
investments are more fully explained in "Investment Objective and
Policies" starting on page __.
- Who Manages the Fund? The Fund's investment adviser (the "Manager")
is Oppenheimer Management Corporation, which (including a subsidiary)
advises investment company portfolios currently having over $30 billion
in assets. The Fund's portfolio managers are John Wallace, Bruce Bartlett
and Diane Sobin, who are primarily responsible for the selection of the
Fund's securities. The Manager is paid an advisory fee by the Fund, based
on its assets. The Fund's Board of Directors, elected by shareholders,
oversees the investment adviser and the portfolio manager. Please refer
to "How the Fund is Managed," starting on page ___ for more information
about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in stocks and bonds are subject to changes in their
value from a number of factors such as changes in general bond and stock
market movements. The change in value of particular stocks or bonds may
result from an event affecting the issuer, or changes in interest rates
that can affect stock and bond prices. These changes affect the value of
the Fund's investments and its share prices for each class of its shares.
The Fund is more aggressive than most growth & income funds but less
aggressive than aggressive growth funds. In addition, there are certain
risks associated with the foreign securities the Fund may purchase and the
hedging strategies the Manager may utilize. While the Manager tries to
reduce risks by diversifying investments, by carefully researching
securities before they are purchased for the portfolio, and in some cases
by using hedging techniques, there is no guarantee of success in achieving
the Fund's objectives and your shares may be worth more or less than their
original cost when you redeem them. Please refer to "Investment
Objectives and Policies" starting on page ___ for a more complete
discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor two classes of shares. Class A shares are offered
with a front-end sales charge, starting at 5.75%, and reduced for larger
purchases. Class B shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge (starting at 5%
and declining as shares are held longer) if redeemed within 6 years of
purchase. There is also an annual asset-based sales charge on Class B
shares. Please review "How To Buy Shares" starting on page ___ for more
details, including a discussion about factors you and your financial
advisor should consider in determining which class may be appropriate for
you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance by
quoting its dividend yield, average annual total return and cumulative
total return, which measure historical performance. Those yields and
returns can be compared to the yields and returns (over similar periods)
of other funds. Of course, other funds may have different objectives,
investments, and levels of risk. The Fund's performance can also be
compared to broad market indices, which we have done on page ___. Please
remember that past performance does not guarantee future results.
<PAGE>
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended December 31, 1994 is included in the Statement of Additional
Information. Class Y shares were only offered during a portion of that
period.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $8.69 $7.84 $7.49 $6.13 $6.68 $6.35 $5.95
Income (loss) from
investment operations:
Net investment income .23 .18 .17 .24 .24 .27 .26
Net realized and
unrealized gain (loss)
on investments, options
written and foreign
currency transactions (.91) 1.45 .75 1.91 (.49) .93 .53
Total income (loss)
from investment operations (.68) 1.63 .92 2.15 (.25) 1.20 .79
Dividends and distributions
to shareholders:
Dividends from net
investment income (.21) (.20) (.20) (.23) (.24) (.28) (.27)
Distributions from net
realized gain on investments,
options written and foreign
currency transactions -- (.58) (.37) (.56) (.06) (.59) (.12)
Total dividends and
distributions to shareholders (.21) (.78) (.57) (.79) (.30) (.87) (.39)
Net asset value,
end of period $7.80 $8.69 $7.84 $7.49 $6.13 $6.68 $6.35
========== ========== ======== ========
======== ======== ========
TOTAL RETURN,
AT NET ASSET VALUE(3) (7.86)% 21.24% 12.83% 36.26% (3.86)% 19.25%
13.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $1,235,637 $1,223,395 $795,474 $555,865 $396,240 $389,413 $314,039
Average net assets
(in thousands) $1,261,729 $992,381 $662,917 $475,741 $394,903 $356,994 $298,509
Number of shares
outstanding at end of period
(in thousands) 158,417 140,711 101,433 74,245 64,644 58,333 49,464
Ratios to average net assets:
Net investment income 2.88% 2.21% 2.68% 3.26% 3.87% 3.96%
4.22%
Expenses 1.01% .93% .96% .95% .98% .98% .94%
Portfolio turnover rate(5) 117.2% 143.9% 143.5% 161.5% 114.1% 151.6%
127.3%
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek 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.
Investment Policies and Strategies. In general, the Fund will attempt to
invest its assets to gain both reasonable income and capital appreciation.
The Manager does not follow a specified formula for allocating the Fund's
assets between 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.
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.
The Fund may try to hedge against losses in the value of its portfolio
of securities by using hedging strategies and derivative investments
described below. The Fund's portfolio managers may employ special
investment techniques in selecting securities for the Fund. These are
also described below. Additional information may be found about them
under the same headings in the Statement of Additional Information.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
The Fund's Board of Directors may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are
those that cannot be changed without the approval of a "majority" of the
Fund's outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
- Stock Investment Risks. Because the Fund invests a substantial
portion of its assets in stocks, the value of the Fund's portfolio will
be affected by changes in the stock markets. At times, the stock markets
can be volatile and stock prices can change substantially. This market
risk will affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's portfolio securities change. Not
all stock prices change uniformly or at the same time, and other factors
can affect a particular stock's prices (for example, poor earnings reports
by an issuer, loss of major customers, major litigation against an issuer,
and changes in government regulations affecting an industry). Not all of
these factors can be predicted.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial amount
of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does
not concentrate its investments in any one industry or group of
industries. Because changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change,
there is no assurance that the Fund will achieve its investment
objectives, and when you redeem your shares, they may be worth more or
less than what you paid for them.
- Investments in Convertible Securities. When investing in convertible
securities, the Manager looks to the conversion feature and treats the
securities as "equity securities." The Fund can buy unrated securities,
and when doing so, the Manager will determine whether unrated securities
are of comparable quality to securities rated by rating organizations.
- Interest Rate Risks. In addition to credit risks, described below,
debt securities which the Fund may purchase are subject to changes in
their values due to changes in prevailing interest rates. When prevailing
interest rates fall, the value of already-issued debt securities generally
rise. When interest rates rise, the values of already-issued debt
securities generally decline. The magnitude of these fluctuations will
often be greater for longer-term debt securities than shorter-term debt
securities. Changes in the value of securities held by the Fund mean that
the Fund's share prices can go up or down when interest rates change
because of the effect of the change on the value of the Fund's portfolio
of debt securities.
- Special Risks of Lower-Rated Securities. The domestic and foreign
debt securities the Fund can invest in may include (without any
restriction as to the amount) high-yield, "lower-grade" debt securities
(including both high-yielding rated and unrated securities), because they
generally offer higher income potential than investment grade securities.
"Lower-grade" securities are those rated below "investment grade," which
means they have a rating below "BBB" by Standard & Poor's Corporation or
"Baa" by Moody's Investors Service, Inc. or similar ratings by other
rating organizations. "Lower-grade" debt securities the Fund may invest
in also include securities that are not rated by a nationally-recognized
rating organization like Standard & Poor's or Moody's, but which the
Manager judges to be comparable to lower-rated securities. The Fund may
invest in securities rated as low as "D" by Standard & Poor's or "C" by
Moody's.
High yield, lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special risks
that make them riskier investments than investment grade securities. They
may be subject to greater market fluctuations and risk of loss of income
and principal than lower yielding, investment grade securities. There may
be less of a market for them and therefore they may be harder to sell at
an acceptable price. There is a relatively greater possibility that the
issuer's earnings may be insufficient to make the payments of interest due
on the bonds. The issuer's low creditworthiness may increase the
potential for its insolvency. For foreign lower-grade debt securities,
these risks are in addition to the risks of investing in foreign
securities, described in "Foreign Securities," below.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may
be affected by declines in value of these securities. However,
convertible securities may be less subject to some of these risks than
other debt securities, to the extent they can be converted into stock,
which may be more liquid and less affected by these risks.
- Foreign Securities. To broaden its opportunities to seek its
investment objective, the Fund may purchase equity and debt securities
issued or guaranteed by foreign companies or debt securities issued by
foreign governments, including foreign government agencies, that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. The Fund may buy securities of companies or governments in any
country, developed or underdeveloped. The Fund may invest up to 100% of
its assets in foreign securities. The Fund will hold foreign currency
only to effect foreign securities transactions and not as an investment.
If the Fund's securities are held abroad, the countries in which they are
held and the sub-custodians holding them must, in most cases, be approved
by the Fund's Board of Directors.
Foreign securities have special risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign investments may be affected
by changes in foreign currency rates, exchange control regulations,
expropriation or nationalization of a company's assets, foreign taxes,
delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and economic
factors. More information about the risks and potential rewards of
investing in foreign securities is contained in the Statement of
Additional Information.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- Derivative Investments. The Fund can invest in a number of different
kinds of "derivative investments." They are used in some cases for
hedging purposes and in other cases to attempt to enhance income. In
general, a "derivative investment" is a specially designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future, index, currency or commodity. In the
broadest sense, exchange-traded options and futures contracts (discussed
in "Hedging," below) may be considered "derivative investments."
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or security
on which the derivative is based might not perform the way the Manager
expected it to perform. The performance of derivative investments may
also be influenced by interest rate changes in the U.S. and abroad. All
of this can mean that the Fund will realize less principal or income from
the investment than expected. Certain derivative investments held by the
Fund may trade in the over-the-counter market and may be illiquid. Please
refer to "Illiquid and Restricted Securities."
The Fund may invest in different types of derivatives, described below.
"Index-linked" or "commodity-linked" notes are debt securities of
companies that call for payment on the maturity of the note in different
terms than the typical note where the borrower agrees to pay a fixed sum
on the maturity of the note. The payment on maturity of an index-linked
note depends on the performance of one or more market indices, such as the
S & P 500 Index or a weighted index of commodity futures, such as crude
oil, gasoline and natural gas. The Fund may invest in debt exchangeable
for common stock of an issuer or "equity-linked" debt securities of an
issuer. At maturity, the principal amount of the debt security is
exchanged for common stock of the issuer or is payable in an amount based
on the issuer's common stock price at the time of maturity. In either
case there is a risk that the amount payable at maturity will be less than
the principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value
at maturity or an interest rate determined by reference to one or more
foreign currencies. The currency-indexed securities purchased by the Fund
may make payments based on a formula. The payment may be calculated as
a multiple of the movement of one currency against another currency, or
against an index. These investments may entail increased risk to
principal and increased price volatility.
- Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and
options on futures, on broadly-based stock indices and on foreign
currencies, or enter into interest rate swap agreements. These are all
referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are described
below and in greater detail in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the equities market as a temporary substitute
for purchasing particular equity securities. It may do so to try to
manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price
fluctuations.
Other hedging strategies, such as buying futures and call options, tend
to increase the Fund's exposure to the securities market. Forward
contacts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Fund for liquidity purposes or defensive reasons.
- Futures. The Fund may buy and sell futures contracts that relate to
(1) foreign currencies (these are Forward Contracts), and (2) broadly-
based stock indices (these are referred to as Stock Index Futures). These
types of Futures are described in "Hedging" in the Statement of Additional
Information. At present, the Fund does not intend to enter into Stock
index Futures and options on Futures for bona fide hedging purposes, if,
after any such purchase or sales, the sum of margin deposits on Futures
and premiums paid on Futures options exceed 5% of the value of the Fund's
total assets.
- Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls).
The Fund may buy calls only on securities, securities indices, or Stock
Index Futures, or to terminate its obligation on a call the Fund
previously wrote. The Fund may write (that is, sell) call options only
if they are "covered." That means the Fund must own the security subject
to the call while the call is outstanding (or own other securities
acceptable for applicable escrow requirements). When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment). The Fund may write calls to
generate additional income or for defensive purposes if, after any sale,
not more than 25% of the Fund's total assets are subject to calls. The
Fund may also purchase "relative performance call options." These are
call options that have a cash settlement based on the difference between
the returns on two market indices. These options are subject to the risk
that the value of the option may decline because of adverse movements in
the market indices.
The Fund may purchase puts. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put
on that investment. The Fund can buy only those puts that relate to (1)
securities (whether or not held by it), (2) Stock Index Futures (whether
or not it holds such Stock Index Futures in its portfolio), or (3)
broadly-based stock indices. The Fund may sell a put on securities,
securities indices, or, Futures, but only if the puts are covered by
segregated liquid assets. The Fund will not write puts if more than 50%
of the Fund's net assets would have to be segregated to cover put
obligations.
A call or put may be purchased only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the
Fund's total assets. The Fund may buy and sell put and call options that
are traded on U.S. or foreign securities or commodity exchanges or are
traded in the over-the-counter markets. In the case of foreign currency
options, they may be quoted and traded by major recognized dealers in
those options. Options traded in the over-the-counter market may be
"illiquid," and therefore may be subject to the Fund's restrictions on
illiquid investments, described in "Illiquid and Restricted Securities,"
below.
- Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to try to "lock in" the
U.S. dollar price of a security denominated in a foreign currency that the
Fund has purchased or sold, or to protect against possible losses from
changes in the relative value of the U.S. dollar and a foreign currency.
The Fund may also use "cross hedging," where the Fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated.
- Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive, or their obligation to pay,
interest on a security. For example, they may swap a right to receive
floating rate interest payments for fixed rate payments. The Fund enters
into swaps only on securities it owns. The Fund may not enter into swaps
with respect to more than 25% of its total assets. The Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions are
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
The use of Forward Contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a
foreign currency. The Fund limits its exposure in foreign currency
exchange contracts to the amount of its assets denominated in the foreign
currency, to avoid having to buy or sell foreign currency at
disadvantageous prices. Interest rate swaps are subject to the risk that
the other party will fail to meet its obligations (or that the underlying
issuer will fail to pay on time), as well as interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it
receives under them, as a result of interest rate changes. If a covered
call written by the Fund is exercised on an investment that has increased
in value, the Fund will be required to sell the investment at the call
price and will not be able to realize any profit if the investment has
increased in value above the call price. These risks are described in
greater detail in the Statement of Additional Information.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Directors, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly at
an acceptable price. A restricted security is one that has a contractual
restriction on its resale or which cannot be sold publicly until it is
registered under the Securities Act of 1933. The Fund will not invest
more than 10% of its net assets in illiquid or restricted securities (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). The Fund's percentage
limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers.
- Repurchase Agreements. The Fund may enter into repurchase agreements
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. In a
repurchase transaction, the Fund buys a security and simultaneously sells
it to the vendor for delivery at a future date. Repurchase agreements
must be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its
ability to do so. The Fund will not enter into a repurchase agreement
that will cause more than 15% of its 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 of seven days or less. See the Statement of Additional
Information for more details.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities (other than in repurchase
transactions) to brokers, dealers and other financial institutions. These
loans are limited to not more than 10% of the value of the Fund's total
assets and are subject to other conditions described in the Statement of
Additional Information. The Fund presently does not intend to lend its
portfolio securities, but if it does, the value of securities loaned is
not expected to exceed 5% of the value of the Fund's total assets.
Other Investment Restrictions. The Fund has other investment restrictions
which, together with its investment objective, are fundamental policies.
Under these fundamental policies, the Fund cannot do any of the following:
(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.
All of the percentage restrictions described above and elsewhere in this
Prospectus apply only at the time the Fund purchases a security, and the
Fund need not dispose of a security merely because the size of the Fund's
assets has changed or the security has increased in value relative to the
size of the Fund. There are other fundamental policies discussed in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1944. Since 1979, the
Fund has been a Maryland corporation. The Fund is a diversified open-end,
management investment company.
The Fund is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. The Directors
meet periodically throughout the year to oversee the Fund's activities,
review its performance, and review the actions of the Manager. "Directors
and Officers of the Fund" in the Statement of Additional Information names
the Directors and provides more information about them and the officers
of the Fund. Although the Fund is not required by law to hold annual
meetings, it may hold shareholder meetings from time to time on important
matters, and shareholders have the right to call a meeting to remove a
Director or to take other action described in the Fund's Articles of
Incorporation.
The Board of Directors has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class Y. Each class has its own dividends and distributions
and pays certain expenses which may be different for the different
classes. Each class may have a different net asset value. Each share has
one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote together on
matters that affect that class alone. Shares are freely transferrable.
Please refer to "How the Fund is Managed" in the Statement of Additional
Information for more information on the voting of shares.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Directors, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other OppenheimerFunds, with assets of more than $30 billion as
of March 31, 1995, and with more than 2.4 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The portfolio managers of the Fund are John
Wallace, Bruce Bartlett and Diane Sobin. Each of them is a Vice President
of the Manager and serves as a Vice President and Portfolio Manager of the
Fund. John Wallace has been the person principally responsible for the
day-to-day management of the Fund's portfolio since February, 1990.
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. Mr. Bartlett was previously
a Vice President and Senior Portfolio Manager with First of America
Investment Corporation. Ms. Sobin was previously a Vice President and
Senior Portfolio Manager with Dean Witter Intercapital, Inc. Prior to
that, she served as an international equity analyst with College
Retirement Equities Fund and was a financial planner with E.F. Hutton &
Company. For more information about the Fund's other officers and
Directors, see "Directors and Officers of the Fund" in the Statement of
Additional Information.
- Fees and Expenses. Under the investment advisory agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.75% of the first $100 million of aggregate
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. The Fund's management
fee for its last fiscal year was 0.55% of average annual net assets for
each of its Class A, Class B and Class Y shares, which may be higher than
the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Directors' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return," "average annual total return" and "dividend yield" to illustrate
its performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will usually
be different as a result of the different kinds of expenses each class
bears. This performance information may be useful to help you see how
well your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns and yield
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns are
calculated is contained in the Statement of Additional Information, which
also contains information about other ways to measure and compare the
Fund's performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect the
payment of the current maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. Total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be
reduced if sales charges were deducted.
- Dividend Yield. Dividend yield is calculated by dividing the
dividends of a class derived from net investment income during a stated
period by the maximum offering price on the last day of the period.
Yields and dividend yields for Class A shares reflect the deduction of the
maximum initial sales charge, but may also be shown based on the Fund's
net asset value per share. Yields for Class B shares do not reflect the
deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
followed by graphical comparisons of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's last
fiscal year, the Federal Reserve Board moved aggressively to raise short-
term interest rates to attempt to fight the possibility of inflation. The
increases had a depressing effect on small to mid-size growth stocks in
which the Fund invests; the market sentiment favored larger-company
stocks. Yet the Fund benefitted from the Manager's investments in
technology stocks, certain stocks providing strong dividend yields,
special situations, European auto makers and international
telecommunications and technology companies. In addition, the Manager's
investments in convertible securities provided the Fund with income and
capital appreciation potential while helping to lower the overall risk
profile of the Fund. Given the Manager's belief that short-term interest
rates will rise slightly and long-term rates will stabilize or even
decline, the Manager took a "barbell" approach to the Fund's U.S.
Government bond investments, investing both in 5-and 10-year bonds, and
long-term zero coupon bonds, which will benefit most from any rally in
long-term rates.
- Comparing the Fund's Performance to the Market. The charts below
show the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until December 31, 1994; in the case of Class
A shares, for the past ten-year period, in the case of Class B shares,
from the inception of the Class on May 1, 1993, and in the case of Class
Y shares, from the inception of the Class on June 1, 1994, with all
dividends and capital gains distributions reinvested in additional shares.
As a result, the performance for Class B and Class Y shares is shown for
relatively short periods of time, and investors should realize that such
time periods may not be as appropriate or useful as a comparison for a
longer period. The graph for Class A shares reflects the deduction of the
5.75% current maximum initial sales charge on Class A shares and the graph
for Class B shares reflects the 4% contingent deferred sales charge that
applies to redemptions of Class B shares held from May 1, 1993 until
December 31, 1994.
The Fund's performance is compared to the performance of the Standard
& Poor's ("S&P") 500 Index. The S&P 500 Index is a broad based index of
equity securities widely regarded as the general measure of the
performance of the U.S. equity securities market. Index performance
reflects the reinvestment of dividends but does not consider the effect
of capital gains or transaction costs, and none of the data below shows
the effect of taxes. Also, the Fund's performance reflects the effect of
Fund business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted
that the Fund's investments are not limited to securities in the Index.
Moreover, the index performance data does not reflect any assessment of
the risk of the investments included in the Index.
Comparison of Change in Value
of $10,000 Hypothetical Investments
In: Oppenheimer Total Return Fund, Inc. and
S&P 500
(Graphs)
Average Annual Total Returns Average Annual Total Returns
of the Fund at 12/31/94 (1) of the Fund at 12/31/94(2)
- ---------------------------- ------------------------
A Shares 1-Year 5-Year 10 Years B Shares
________ -13.16% 9.25% 14.28% 1-Year Life (2)
-13.12% .18%
Cumulative Total Return of
Class Y shares of the Fund
at 12/31/94 (3)
----------------------------
Life
-3.15%
_____________________
(1) The average annual total returns and the ending account value in the
graph reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 5.75% maximum initial
sales charge.
(2) Class B shares of the Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5% and 4%
contingent deferred sales charges, respectively, for the 1-year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 4% contingent deferred sales charge.
(3) Class Y shares of the Fund were first publicly offered on 6/1/94.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers two different classes of shares, Class
A and Class B, to individual investors. Only certain institutional
investors may purchase a third class of shares, Class Y shares. The
different classes of shares represent investments in the same portfolio
of securities but are subject to different expenses and will likely have
different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge but if you sell
any of those shares within 18 months after your purchase, you may pay a
contingent deferred sales charge, which will vary depending on the amount
you invested. Sales charges are described below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge, described below,
that varies depending on how long you own your shares.
- 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, Massachusetts Mutual
Life Insurance Company (an affiliate of the Manager and the Distributor)
acts as Class Y Sponsor for all 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
Statement of Additional Information for the purchase, redemption,
reinvestment, exchange or transfer of shares of the Fund, the selection
of classes of shares 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.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We assumed you
are an individual investor, and therefore ineligible to purchase Class Y
shares. We used the sales charge rates that apply to Class A and B shares
considering the effect of the annual asset-based sales charge on Class B
expenses (which, like all expenses, will affect your investment return).
For the sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are
different.
- How Long Do You Expect to Hold Your Investment? The Fund is designed
for long-term investment. While future financial needs cannot be
predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a substantial
amount over the long term, the reduced sales charges available for larger
purchases of Class A shares may offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher expenses on Class B shares, for which no
initial sales charge is paid. Additionally, dividends payable to Class
B shareholders will be reduced by the additional expenses borne solely by
Class B, such as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares may
be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the reduction of initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
For most investors who invest $500,000 or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Fund's distributor, Oppenheimer
Funds Distributor, Inc. (the "Distributor") normally will not accept
purchase orders of $500,000 or more of Class B shares from a single
investor.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time,
using the assumptions stated above. Therefore, these examples should not
be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B
shareholders, or other features (such as Automatic Withdrawal Plans) might
not be advisable (because of the effect of the contingent deferred sales
charge), you should carefully review how you plan to use your investment
account before deciding which class of shares to buy. Also, because not
all OppenheimerFunds currently offer Class B shares, and because exchanges
are permitted only to the same class of shares in other OppenheimerFunds,
you should consider how important the exchange privilege is likely to be
for you.
- How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class than another class. It is important that investors understand that
the purpose of the Class B contingent deferred sales charge and asset-
based sales charge is the same as the purpose of the front-end sales
charge on sales of Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling
shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend that you
discuss your investment first with a financial advisor, to be sure it is
appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that
applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day the New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order
by the close of the New York Stock Exchange on a regular business day, and
transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Class A Shares Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be the net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers
are as follows:
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
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%
The Distributor reserves the right to reallow the entire commissions to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more (shares of the Fund and other
OppenheimerFunds that offer only one class of shares that has no class
designation are considered "Class A shares" for this purpose). However,
the Distributor pays dealers of record commissions on such purchases in
an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50%
of the next $2.5 million, plus 0.25% of share purchases over $5 million.
That commission will be paid only on the amount of those purchases in
excess of $1 million that were not previously subject to a front-end sales
charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") may be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
contingent deferred sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A shares you purchase for your individual accounts, or
jointly, or on behalf of your children who are minors, under trust or
custodial accounts. A fiduciary can count all shares purchased for a
trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A shares
of the Fund and other OppenheimerFunds. You can also include Class A
shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the total amount of the
intended purchases. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) 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 their clients; (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a) issued
in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor, or (d) purchased and paid for with the proceeds of
shares redeemed in the prior 12 months from a mutual fund on which an
initial sales charge or contingent deferred sales charge was paid (other
than a fund managed by the Manager or any of its affiliates); this waiver
must be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge does not apply to purchases
of Class A shares at net asset value described above and is also waived
if shares are redeemed in the following cases: (1) for retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) to return excess contributions made to
Retirement Plans, (3) to make Automatic Withdrawal Plan payments that are
limited to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Articles of Incorporation or adopted
by the Board of Directors, and (5) if, at the time an order is placed for
Class A shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees to accept the dealer's portion
of the commission payable on the sale in installments of 1/18th of the
commission per month (and that no further commission is payable if the
shares were redeemed within 18 months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net asset
value of Class A shares of the Fund. The Distributor uses all of those
fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse
itself (if the Fund's Board of Directors authorizes such reimbursements,
which it has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net asset value of Class A shares held
in accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares of the Fund by up to 0.25%
of the class' average annual net assets. For more details, please refer
to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) to make distributions to participants or
beneficiaries from Retirement Plans, if the distributions are made (a)
under an Automatic Withdrawal Plan after the participant reaches age 59-
1/2, as long as the payments are no more than 10% of the account value
annually (measured in the first year, as of the date the redemption
request is received by the Transfer Agent, and in subsequent years as to
the most recent anniversary of that date), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary which occurred after the account was opened; (2)
redemptions from accounts other than Retirement Plans following the death
or disability of the shareholder (the disability must have occurred after
the account was established and you must provide evidence of a
determination of disability by the Social Security Administration), (3)
to make returns of excess contributions to Retirement Plans, and (4) to
make distributions from IRAs (including SEP-IRAs and SAR/SEP accounts)
before the participant is age 591/2, and distributions from 403(b)(7)
custodial plans or pension or profit sharing plans before the participant
is age 591/2 but only after the participant has separated from service,
if the distributions are made in substantially equal periodic payments
over the life (or life expectancy) of the participant or the joint lives
(or joint life and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must comply
with other requirements for such distributions under the Internal Revenue
Code and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares.
This conversion feature relieves Class B shareholders of the asset-based
sales charge that applies to Class B shares under the Class B Distribution
and Service Plan, described below. The conversion is based on the relative
net asset value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that were
acquired by the reinvestment of dividends and distributions on the
converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to reimburse
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net asset value of Class B shares, determined as of the close of
each regular business day. The asset-based sales charge allows investors
to buy Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for providing
personal services for accounts that hold Class B shares. Those services
are similar to those provided under the Class A Service Plan, described
above.
The Distributor pays 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 pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be more
than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $18,368,807 (equal to 4.3% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for expenses it incurred before the Plan was
terminated.
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.
The Fund's Board of Directors has determined that it is in the best
interest of the Fund's shareholders to adopt a new Distribution and
Service Plan for Class B shares to compensate the Distributor for its
services and costs in distributing Class B shares and servicing accounts.
Under the new plan, the Distributor would be compensated with a fixed fee
(0.25% of average annual net assets, which is the maximum rate under the
current Plan). The new plan is not expected to increase Fund expenses
materially under normal circumstances. Distribution costs in excess of
the fee will be borne by the Distributor. Details about the proposed plan
will be contained in a proxy statement to be sent to the Fund's
shareholders of record as of April 28, 1995, the record date of the
shareholder meeting to vote on the proposed plan. If shareholders do not
approve the adoption of the new Distribution and Service Plan, this
Prospectus will be amended accordingly.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use to
buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly
to your AccountLink bank account. Please refer to "How to Sell Shares,"
below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- - You wish to redeem more than $50,000 worth of shares and receive a check
- A redemption check is not payable to all shareholders listed on
the account statement
- A redemption check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail: Send courier or Express
Mail requests to:
Oppenheimer Shareholder Services Oppenheimer Shareholder Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan or under a share
certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink or By Wire. There are no
dollar limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH wire to your
bank is initiated on the business day after the redemption. You do not
receive dividends on the proceeds of the shares you redeemed while they
are waiting to be wired.
Shareholders may also have the Transfer Agent send redemption proceeds
of $2,500 or more by Federal Funds wire to a designated commercial bank
account. The bank must be a member of the Federal Reserve wire system.
To place a wire redemption request, call the Transfer Agent at 1-800-852-
8457. The wire will normally be transmitted on the next bank business day
after the shares are redeemed. There is a possibility that the wire may
be delayed up to seven days to enable the Fund to sell securities to pay
the redemption proceeds. No dividends are accrued or paid on the proceeds
of shares that have been redeemed and are awaiting transmittal by wire.
To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions. There
is a $10 fee for each wire.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open
7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A, Class B or Class C or Class Y shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares as
of the close of The New York Stock Exchange on each regular business day
by dividing the value of the Fund's net assets attributable to a class by
the number of shares of that class that are outstanding. The Fund's Board
of Directors has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained. These procedures are described more completely in the
Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Directors at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class Y shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer
Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. Effective June 7, 1995, for
accounts registered in the name of a broker-dealer, payment will be
forwarded within 3 business days. The Transfer Agent may delay forwarding
a check or processing a payment via AccountLink for recently purchased
shares, but only until the purchase payment has cleared. That delay may
be as much as 10 days from the date the shares were purchased. That delay
may be avoided if you purchase shares by certified check or arrange to
have your bank provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you
violate Internal Revenue Service regulations on tax reporting of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class Y shares from net investment income on a quarterly basis and pays
those dividends to shareholders in March, June, September and December on
a date set by the Fund's Board. Also, dividends paid on Class A and Class
Y shares generally are expected to be higher than for Class B shares
because expenses allocable to Class B shares will generally be higher.
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.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares
of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
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, 1994, and (iii) Class Y
shares of the Fund for the period from June 1, 1994 through December 31,
1994, 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 "Performance of the Fund-How Has the
Fund Performed."
Fiscal Oppenheimer Total Return S & P 500
Year Ended Fund, Inc. Class A Shares Index
12/31/84 $ 9,425 $10,627
12/31/85 $12,664 $13,999
12/31/86 $15,158 $16,613
12/31/87 $17,030 $17,485
12/31/88 $19,303 $20,380
12/31/89 $23,018 $26,826
12/31/90 $22,130 $25,992
12/31/91 $30,153 $33,894
12/31/92 $34,020 $36,473
12/31/93 $41,247 $40,142
12/31/94 $38,006 $40,668
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 $11,391 $10,807
12/31/94 $10,030 $10,949
Fiscal Oppenheimer Total Return S & P 500
Period Ended Fund, Inc. Class Y Shares Index
6/1/94 $10,000 $11,056
12/31/94 $ 9,686 $10,203
(1) Since June 1, 1994 (inception of the Class).
<PAGE>
Oppenheimer Total Return Fund, Inc.
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
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 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 LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, 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.
Prospectus
OPPENHEIMER
Total Return
Fund, Inc.
Effective April 28, 1995
(OppenheimerFunds Logo)
PR421.0495.N
<PAGE>
Prospectus and
New Account Application
OPPENHEIMER
Total Return
Fund, Inc.
Effective April 28, 1995
(OppenheimerFunds Logo)
PR420.0495.N
<PAGE>
Oppenheimer Total Return Fund, Inc.
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated April 28, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 28, 1995. It should be read
together with the Prospectus which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 3
Other Investment Restrictions 13
How the Fund is Managed 14
Organization and History 14
Directors and Officers of the Fund 14
The Manager and Its Affiliates 18
Brokerage Policies of the Fund 19
Performance of the Fund 21
Distribution and Service Plans 24
About Your Account
How To Buy Shares 27
How To Sell Shares 33
How To Exchange Shares 37
Dividends, Capital Gains and Taxes 39
Additional Information About the Fund 40
Financial Information About the Fund
Independent Auditors' Report 41
Financial Statements 42
Appendix A: Industry Classifications A-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about these policies. Certain capitalized terms
used in this Statement of Additional Information are defined in the
Prospectus.
- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments, that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Investing in foreign securities offers the Fund potential benefits not
available from investing solely in securities of domestic issuers, such
as the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which such
securities may be held and the sub-custodians holding them must be
approved by the Fund's Board of Directors under applicable rules of the
Securities and Exchange Commission. 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.
- Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the U.S.
These include: reduction of income by foreign taxes; fluctuation in value
of foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack
of uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less liquidity
in foreign markets than in the U.S.; less regulation of foreign issuers,
stock exchanges and brokers than in the U.S.; greater difficulties in
commencing lawsuits against foreign issuers; higher brokerage commission
rates than in the U.S.; increased risks of delays in settlement of
portfolio transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation or nationalization of
assets, confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and unfavorable differences between
the U.S. economy and foreign economies. In the past, U.S. Government
policies have discouraged certain investments abroad by U.S. investors,
through taxation or other restrictions, and it is possible that such
restrictions could be re-imposed.
Other Investment Techniques and Strategies.
- Hedging. As described in the Prospectus, the Fund may 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, or (iv) enter into interest rate swap agreements. When hedging
to permit the Fund to establish a position in the equity 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 (1) buy Stock Index Futures, or (ii) buy calls on
such Futures on Securities held until. Covered calls and puts may also
be written on debt securities to attempt to increase the Fund's income.
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 the Hedging Instruments the Fund may use is
provided below. In the future, the Fund may employ hedging instruments
and strategies that are not presently contemplated but which may be
developed, to the extent such investment methods are consistent with the
Fund's investment objective, legally permissible and adequately disclosed.
- 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 on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Fund has
retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written is more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. An option position may be closed out only on a market
that provides secondary trading for options of the same series, and there
is no assurance that a liquid secondary market will exist for a particular
option. If the Fund could not effect a closing purchase transaction due
to lack of a market, it would have to hold the callable investments until
the call lapsed or was exercised.
- 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.
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 forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments
by the Fund. The Fund will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from writing puts
are considered short-term gains for Federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
- Purchasing Calls and Puts. 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, it
pays a premium, but settlement is in cash rather than by delivery of the
underlying investment to the Fund. In purchasing a call, the Fund
benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of
the call price plus the transaction costs and the premium paid and the
call is exercised. If the call is not exercised or sold (whether or not
at a profit), it will become worthless at its expiration date and the Fund
will lose its premium payment and the right to purchase the underlying
investment.
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 protect itself during
the put period against a decline in the value of the underlying investment
below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration date, and the Fund will lose its premium
payment and the right to sell the underlying investment. The put may,
however, be sold prior to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index
or a put on a Stock Index Future not held by the Fund, permits the Fund
either to resell the put or buy the underlying investment and sell it at
the exercise price. The resale price of the put will vary inversely with
the price of the underlying investment. If the market price of the
underlying investment is above the exercise price and as a result the put
is not exercised, the put will become worthless on its expiration date.
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 delivery by the Fund of the underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts
and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question
(and thus on price movements in the stock market generally) rather than
on price movements in individual securities or futures contracts. When
the Fund buys a calls on an index or Future, it pays a premium. During
the call period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an amount of
cash to settle the call if the closing level of the index or Future upon
which the call is based is greater than the exercise price of the call.
That cash payment is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple
(the "multiplier"), which determines the total dollar value for each point
of difference. When the Fund buys a put on an index or Future, it pays
a premium and has the right during the put period to require a seller of
a corresponding put, upon the Fund's exercise of its put, to deliver to
the Fund an amount of cash to settle the put if the closing level of the
index or Future upon which the put is based is less than the exercise
price of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, put or 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.
- Stock Index Futures. The Fund may buy and sell "Stock Index
Futures," a type of Financial Future for which the index used as the basis
for trading is a broadly-based stock index (including stocks that are not
limited to issuers in a particular industry or group of industries). A
stock index assigns relative values to the common stocks included in the
index and fluctuates with the changes in the market value of those stocks.
Stock indices cannot be purchased or sold directly. The contracts
obligate the seller to deliver, and the purchaser to take, cash to settle
the futures transaction or to enter into an offsetting contract. No
physical delivery of the securities underlying the index is made on
settling the futures obligation. No monetary amount is paid or received
by the Fund on the purchase or sale of a Financial Future or Stock Index
Future.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with
the futures commission merchant (the "futures broker"). 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 certain specified conditions. As
the Future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker 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 by the Fund on the Future for tax purposes. Although Stock Index
Futures by their terms call for settlement by the delivery of cash, in
most cases the settlement obligation is fulfilled without such delivery
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 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 or other assets 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 or
other assets denominated in that currency provided the excess amount is
"covered" by liquid, high-grade debt securities, denominated in any
currency, at least equal at all times to the amount of such excess. As
an alternative, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of
the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense
of such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing
a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund may close out a Forward Contract requiring
it to purchase a specified currency by entering into a second contract
entitling it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss as a
result of entering into such an offsetting Forward Contract under either
circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first
contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. 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 transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. That formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is exercisable below the market price
of the underlying security (that is, the extent to which the option is
"in-the-money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be invested in
illiquid securities, stated in the Prospectus) the mark-to-market value
of any OTC option held by it. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the
outcome of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund
to sell related portfolio securities, thus increasing its turnover rate
in a manner beyond the Fund's control. The exercise by the Fund of puts
on securities or Futures 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 or sells a put,
a call, or an underlying investment in connection with the exercise of a
put or call. Such commissions may be higher than those which would apply
to direct purchases or sales of the underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
- Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use
of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of the Rule adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
Futures margin and related options premiums to no more than 5% of the
Fund's net assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser. The exchanges also impose
position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in violation
of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing calls or puts which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices or Stock Index Futures to attempt to
protect against decline in value of the Fund's equity securities that the
prices of the Futures or applicable index 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 natures of
those markets. First, all participants in the futures markets are subject
to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close out futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
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.
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 the equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Directors of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
- 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 or a
broker-dealer which has been designated a primary dealer in government
securities which must meet the credit requirements set up by the Fund's
Board of Directors from time to time) for delivery on an agreed-on future
date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to the resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
- 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 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 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. In a portfolio securities lending transaction, the Fund receives
from the borrower an amount equal to the dividends declared or interest
paid on loaned securities during the terms of this loan as well as the
interest on the collateral securities, less any finder's or administrative
fees the Fund pays in arranging the loan. The Fund may share the interest
it receives on the collateral securities with the borrower as long as it
realizes at least a minimum amount of interest required by the lending
guidelines established by its Board of Directors. The Fund will not lend
its portfolio securities to any officer, trustee, employee or affiliate
of the Fund or its Manager. 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 business days' notice or in time to
vote on any important matter.
Other Investment Restrictions
The Fund's significant investment restrictions are described in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective, cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at a 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.
For purposes of the Fund's policy not to concentrate described in
investment restriction number 4 of the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix A to this Statement of
Additional Information. The Fund's adoption of these industry
classifications is not a fundamental policy of the Fund, and these
classifications may be modified or eliminated by the Board of Directors.
<PAGE>
How the Fund Is Managed
Organization and History. As a Maryland corporation, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Directors or upon proper request of the
shareholders. Each share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the same
class and entitles the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund vote together in the
aggregate on certain matters at shareholders' meetings, such as the
election of Trustees and ratification of appointment of auditors for the
Trust. Shareholders of a particular class vote separately on proposals
which affect that class, and shareholders of a class which is not affected
by that matter are not entitled to vote on the proposal. For example,
only shareholders of a class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect that class.
Directors and Officers of the Fund. The Fund's Directors and officers 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 Daily Cash Accumulation Fund, Inc., Centennial
Money Market Trust, Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer Champion High Yield Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Variable Account Funds,
Oppenheimer Main Street Funds, Inc., Oppenheimer Integrity Funds,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Investment Grade
Bond Fund, Oppenheimer Strategic Short-Term Income Fund, Centennial
America Fund, L.P., Oppenheimer Tax-Exempt Bond Fund, Oppenheimer
Limited-Term Government Fund, and The New York Tax-Exempt Income Fund,
Inc. (collectively, the "Denver-based OppenheimerFunds"). Mr. Fossel is
President and Mr. Swain is Chairman of each of the Denver-based
OppenheimerFunds. As of March 29, 1995, the Directors and officers of the
Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership
of shares held of record by an employee benefit plan for employees of the
Manager (for which plan two of the officers listed below, Messrs. Fossel
and Donohue, are trustees), other than the shares beneficially owned under
that plan by the officers of the Fund listed above.
Robert G. Avis, Director*, Age: 63
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).
__________________
*A Director who is an "interested person" of the Fund as defined in the
Investment Company Act.
<PAGE>
William A. Baker, Director; Age: 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Director; Age: 64
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Director*: Age: 52
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; Age: 65
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; 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; Age: 73
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Director; Age: 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Director; Age: 79
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Director*; Age: 61
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a director of the Manager; President and a director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
__________________
*A Director who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Vice President; Age: 44
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; formerly a Partner in
Kraft & McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age: 58
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
John L. Wallace, Vice President and Portfolio Manager; Age: 41
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly a securities analyst and Assistant Portfolio Manager for the
Manager.
Bruce Bartlett, Portfolio Manager; Age:
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; a Portfolio Manager of other
OppenheimerFunds; formerly a Vice President and Senior Portfolio Manager
at First of America Investment Corporation.
Diane L. Sobin, Portfolio Manager; Age:
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; a Portfolio Manager of other
OppenheimerFunds; formerly a Vice president and Senior Portfolio Manager
at Dean Witter Intercapital, Inc.
Robert G. Zack, Assistant Secretary; Age: 46
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.
Robert J. Bishop, Assistant Treasurer; Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; formerly a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Directors. The officers of the Fund are
affiliated with the Manager; they and the Directors of the Fund who are
affiliated with the Manager (Messrs. Fossel and Swain, who are both
officers and Directors) receive no salary or fee from the Fund. The
Directors of the Fund (excluding Messrs. Fossel and Swain) received the
total amounts shown below (i) from the Fund, during its fiscal year ended
December 31, 1994, and (ii) from all 22 of the Denver-based
OppenheimerFunds (including the Fund) listed in the first paragraph of
this section, for services in the positions shown:
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund OppenheimerFunds1
Robert G. Avis $10,212 $53,000.00
Director
William A. Baker $14,122 $73,257.01
Audit and Review
Committee Chairman
and Director
Charles Conrad, Jr. $13,163 $68,293.67
Audit and Review
Committee Member
and Director
Raymond J. Kalinowski $10,212 $53,000.00
Director
C. Howard Kast $10,212 $53,000.00
Director
Robert M. Kirchner $13,163 $68,293.67
Audit and Review
Committee Member
and Director
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund OppenheimerFunds1
Ned M. Steel $10,212 $53,000.00
Director
______________________
1 For the 1994 calendar year.
- Major Shareholders. As of March 29, 1995, no person owned of
record or was known by the Fund to own beneficially 5% or more shares of
the Fund as a whole or any class of the Fund's outstanding shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Swain and Mr. Fossel)
serve as Directors of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Directors, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. For the Fund's fiscal years ended December
31, 1992, 1993, and 1994, the management fees paid by the Fund to the
Manager were $4,067,024, $6,012,518 and $8,860,284, respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that 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
advisory 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 advisory agreement, or against any liability imposed by
law.
- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class Y
shares but is not obligated to sell a specific number of shares. Expenses
normally attributable to sales (excluding payments under the Distribution
and Service Plans but including advertising and the cost of printing and
mailing prospectuses) other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal
year ended December 31, 1992, 1993 and 1994, the aggregate amounts of
sales charges on sales of the Fund's shares were $6,062,114, $9,787,762
and $8,832,144, respectively, of which the Distributor and an affiliated
broker retained $1,531,266, $3,438,923 and $2,726,018 in those respective
periods. During the Fund's fiscal year ended December 31, 1994, the
contingent deferred sales charges on the Fund's Class B shares totalled
$731,799, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to be aware of the current
rates of eligible brokers and to minimize the commissions paid to the
extent consistent with the interest and policies of the Fund as
established by its Board of Directors. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above.
Regardless, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed
for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Directors has permitted the Manager to
use concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Directors, including the "independent" Directors of the Fund (those
Directors of the Fund who are not "interested persons" as defined in the
Investment Company Act, and who have no direct or indirect financial
interest in the operation of the advisory agreement or the Distribution
Plans described below) annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such services so
that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services. The Board of
Directors has permitted the Manager to use concessions on fixed price
offerings to obtain research in the same manner as is permitted for agency
transactions.
During the Fund's fiscal years ended December 31, 1992, 1993 and
1994, total brokerage commissions paid by the Fund were $2,028,356,
$4,581,702 and $10,116,822, respectively. During the fiscal year ended
December 31, 1994, $1,589,304 was paid to brokers as commissions in return
for research services; the aggregate dollar amount of those transactions
was $730,594,644. The transactions giving rise to those commissions were
allocated in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from
time to time the "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset
value" and "cumulative total return at net asset value" of an investment
in a class of shares of the Fund may be advertised. An explanation of how
these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5, and 10-year periods (or the life of the class, if less) ending as
of the most recently-ended calendar quarter prior to the publication of
the advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices are
not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class Y shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a class
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ---------------------------------------------------- +
Max Offering Price of the Class (last day of period)
Number of days (accrual period) x 365 charge.
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.
- - Total Return Information.
- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return for
each year in a specified number of years. It is the rate of return based
on the change in value of a hypothetical initial investment of $1,000 ("P"
in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV") of that investment, according to the
following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering price) is
deducted from the initial investment ("P") (unless the return is shown at
net asset value, as described below). For Class B shares, payment of a
contingent deferred sales charge of 5.0% for the first year, 4.0% for the
second year, 3.0% for the third and fourth years, 2.0% for the fifth year
and 1.0% for the sixth year, and none thereafter, is applied, as described
in the Prospectus. Class Y Shares are not subject to a sales charge.
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to by additional shares,
at net asset value per share, and that the investment is redeemed at the
end of the period. The average annual total returns on an investment in
Class A shares for the one, five and ten-year periods ended December 31,
1994, and for the period were -13.16 % 9.25%; and 14.28%, respectively.
The average annual total returns on an investment in Class B shares for
the fiscal year ended December 31, 1994, and for the period May 1, 1993
(inception of the class) to December 31, 1994 were -13.12% and .18%,
respectively. The cumulative total return on Class A shares for the
period September 30, 1975 (the date shareholders of the Fund approved a
new management contract with a subsidiary of Oppenheimer Management
Corporation) through December 31, 1994 was 763.8%. The cumulative total
return on Class B shares for the period May 19, 1993 through December 31,
1994 was .30%. The cumulative total returns on Class Y shares for the
period June 1, 1994 (commencement of the offering of the Class of shares)
through December 31, 1994 was -3.14%.
- Total Returns At Net Asset Value. From time to time the Fund
may also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
Y shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The cumulative total return
at net asset value on the Fund's Class A shares for the fiscal year ended
December 31, 1994, was 816.50%. The average annual total return at net
asset value for the period September 30, 1975 to December 31, 1994, for
Class A shares was 12.2%. The average annual total returns at net asset
value for Class B shares for the fiscal year ended December 31, 1994 and
for the period May 1, 1993 (inception of that class) to December 31, 1994
were -8.64% and 2.42%, respectively. The cumulative total return for
Class Y shares from June 1, 1994 (commencement of offering) to December
31, 1994 was -3.15%.
Total return information may be useful to investors in reviewing
the performance of the Fund's Class A or Class B shares. However, when
comparing total return of an investment in Class A or Class B shares of
the Fund, a number of factors should be considered before using such
information as a basis for comparison with other 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.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent service.
Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based
on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other funds, (ii) all other "growth and
income" funds, and (iii) all other growth and income funds in a specific
size category. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gains distributions and income
dividends but do not take sales charges or taxes into consideration. The
Fund may also compare its performance from time to time with that of
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 include in its advertisements and
sales literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class Y shares by Morningstar,
Inc., an independent mutual fund monitoring service, that ranks mutual
funds, including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S.
Treasury bill returns after considering sales charges and expenses. Risk
reflects fund performance below 90-day U.S. Treasury bill monthly returns.
Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars
is the "highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). Morningstar ranks the
Class A and Class B shares of the Fund in relation to other equity funds
and includes the maximum sales charge as a factor in its ranking
computations. Rankings are subject to change.
The total return on an investment in the Fund's Class A, Class
B or Class Y shares may be compared with the performance for the same
period of one or more of the following indices: 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.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the OppenheimerFunds, other than
performance rankings of the OppenheimerFunds themselves. Those ratings
or rankings of shareholder/investor services by third parties may compare
the OppenheimerFunds' services to those of other mutual fund families
selected by the rating or ranking services and may be based upon the
opinions of the rating or ranking service itself, based on its research
or judgment, or based upon surveys of investors, brokers, shareholders or
others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. 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.
In addition, under the Plans, the Manager and the Distributor,
in their sole discretion, from time to time, may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund), to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform, at
no cost to the Fund. The Distributor and the Manager may, in their sole
discretion, increase or decrease the amount of payments they make from
their own resources to Recipients.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as its continuance is
specifically approved at least annually by the Fund's Board of 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 each payment was made and the identity of each Recipient
that received any payment. The report for the Class B Plan shall also
include the Distributor's distribution costs for that quarter, and such
costs for previous fiscal periods that have been carried forward, as
explained in the Prospectus and below. 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 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 fees at the maximum rate and set no minimum amount.
For the fiscal year ended December 31, 1994, payments under the
Plan for Class A shares totaled $2,274,087, all of which was paid by the
Distributor to Recipients including $144,910 that was paid to an affiliate
of the Distributor. Any unreimbursed expenses incurred by the Distributor
with respect to Class A shares for any fiscal year may not be recovered
in subsequent fiscal years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
The Plan for Class B shares 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. Service fee payments by the Distributor to
Recipients will be made (i) in advance for the first year Class B shares
are outstanding, following the purchase of shares, in an amount equal to
0.25% of the net asset value of the shares purchased by the Recipient or
its customers and (ii) thereafter, on a quarterly basis, computed as of
the close of business each day at an annual rate of .25% of the average
daily net asset value of Class B shares held in accounts of the Recipient
or its customers. 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 that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor. Payments made under the
Class B Plan during the fiscal year ended December 31, 1994 totalled
$3,604,784, of which $3,465,766 was retained by the Distributor and $7,941
was paid to a dealer affiliated with the Distributor.
Although the Class B Plan permits the Distributor to retain both
the asset-based sales charge 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 Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's
payments to the Distributor under the Class B Plan and recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a front-
end sales load and at the same time permit the Distributor to compensate
brokers and dealers in connection with the sale of Class B shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B Plan
and from contingent deferred sales charges, and such expenses will be
carried forward and paid in future years. The Fund will be charged only
for interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$500,000 or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead. A third class of shares, may be purchased only by
certain institutional investors at net asset value per share (the "Class
Y Shares").
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B 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.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter ruling
from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class 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 assets, and then equally to each outstanding share within a
given class. Such general expenses include (i) management fees, (ii)
legal, bookkeeping and audit fees, (iii) printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional Information
and other materials for current shareholders, (iv) fees to unaffiliated
Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a class are allocated
equally to each outstanding share within that class. Such expenses
include (i) Distribution Plan fees, (ii) incremental transfer and
shareholder servicing agent fees and expenses, (iii) registration fees and
(iv) shareholder meeting expenses, to the extent that such expenses
pertain to a specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A, Class B and Class Y shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day
that the Exchange is open, by dividing the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding.
The Exchange normally closes at 4:00 P.M., New York time, but may close
earlier on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. Trading may occur in debt securities and in foreign securities when
the Exchange is closed (including weekends and holidays). Because the
Fund's net asset value will not be calculated at those times, if
securities held in the Fund's portfolio are traded at such time, net asset
values per share of Class A, Class B and Class Y shares of the Fund may
be significantly affected on such days when shareholders may not purchase
or redeem shares.
The Fund's Board of Directors has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Directors or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued at
the mean between "bid" and "asked" prices determined by a pricing service
approved by the Board of Directors or by the Manager; (iv) long-term debt
securities having a remaining 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) debt instruments having a maturity of more than one year when issued,
and non-money market type instruments having a maturity of one year or
less when issued, which have a remaining maturity of 60 days or less are
valued at the mean between the "bid" and "asked" prices determined by a
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;
(vi) money market-type debt securities having a maturity of less than one
year when issued that having a remaining maturity of 60 days or less are
valued at cost, adjusted for amortization of premiums and accretion of
discounts; and (vii) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under
the Board's procedures.
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.
Puts, calls and Futures held by the Fund are valued at the last
sales price on the principal exchange on which they are traded, or on
NASDAQ, as applicable as determined by a pricing service approved by the
Board of Directors or by the Manager, 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 as provided by a
reliable bank, dealer or pricing service. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction. If
the Fund exercises a put it holds, the amount the Fund receives on its
sale of the underlying investment is reduced by the amount of premium paid
by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain circumstances described in
the Prospectus because the Distributor or dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt BondFund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
<PAGE>
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
<PAGE>
There is an initial sales charge on the purchase of Class A
shares of each of the OppenheimerFunds except Money Market Funds (under
certain circumstances described herein, redemption proceeds of Money
Market Fund shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) 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 Letter states the
investor's intention to make the aggregate amount of purchases (excluding
any purchases made by 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. This enables the investor
to count the shares to be purchased under the Letter of Intent to obtain
the reduced sales charge rate (as set forth in the Prospectus) that
applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at
the public offering price (including the sales charge) that applies to a
single lump-sum purchase of shares in the amount intended to be purchased
under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended purchase amount, the investor agrees to pay
the additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
up to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the intended
purchase amount specified in the Letter, the investor must remit to the
Distributor an amount equal to the difference between the dollar amount
of sales charges actually paid and the amount of sales charges which would
have been paid if the total amount purchased had been made at a single
time. Such sales charge adjustment will apply to any shares redeemed
prior to the completion of the Letter. If such difference in sales
charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary
to realize such difference in sales charges. Full and fractional shares
remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter) include
Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge, Class A shares acquired in exchange
for Class A shares of one of the other OppenheimerFunds that were acquired
subject to a Class A initial or contingent sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is requested,
as described in the section of the Prospectus entitled "How to Exchange
Shares," and the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How To Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Directors has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $500
or such lesser amount as the Board may fix. The Board of Directors will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, and the provisions of Maryland law, the requirements for any
notice to be given to the shareholders in question (not less than 30
days), or the Board may set requirements for granting permission to the
Shareholder to increase the investment, and set other terms and conditions
so that the shares would not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However, the
Board of Directors of the Fund may determine that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash. In that case the
Fund may pay the redemption proceeds in whole or in part by a distribution
"in kind" of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shareholders owning Class A or Class B shares must
specify whether they intend to transfer Class A or Class B. Shares are
not subject to the payment of a contingent deferred sales charge of either
class at the time of transfer to the name of another person or entity
(whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares
will remain subject to the contingent deferred sales charge, calculated
as if the transferee shareholder had acquired the transferred shares in
the same manner and at the same time as the transferring shareholder. If
less than all shares held in an account are transferred, and some but not
all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class
B contingent deferred sales charge will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request exchanges in or redemption
of their accounts. The employer or plan administrator must sign the
request. Distributions from pension and profit sharing plans are subject
to special requirements under the Internal Revenue Code and certain
documents (available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be made
within seven days (effective June 7, 1995, within three days for accounts
registered in the name of a broker-dealer) after the Distributor's receipt
of the required redemption documents, with signature(s) guaranteed as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B shareholders should not establish withdrawal
plans that would require the redemption of shares purchased subject to a
contingent deferred sales charge and held less than 6 years, because of
the imposition of the Class B contingent deferred sales charge on such
withdrawals (except where the Class B contingent deferred sales charge is
waived as described in the Prospectus under "Waivers of Class B Sales
Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions
of capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares held
in the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are to
be sent may be changed at any time by the Planholder by writing to the
Transfer Agent. The Planholder should allow at least two weeks' time in
mailing such notification for the requested change to be put in effect.
The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-
current Prospectus of the Fund) to redeem all, or any part of, the shares
held under the Plan. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any time
by the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed from the account will be held in
uncertificated form in the name of the Planholder, and the account will
continue as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
<PAGE>
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund),
but only certain funds offer Class B and/or Class Y shares. The following
other OppenheimerFunds currently offer Class B shares:
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Equity Income Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available
by exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
The following OppenheimerFunds currently offer Class Y shares:
Oppenheimer Growth Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or more
accounts. The Fund may accept requests for exchanges of up to 50 accounts
per day from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or would
include shares covered by a share certificate that is not tendered with
the request. In those cases, only the shares available for exchange
without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of a
prospectus of, the fund to which the exchange is to be made. For full or
partial exchanges of an account made by telephone, any special account
features such as Asset Builder Plans, Automatic Withdrawal Plans,
Checkwriting, if available, and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders
might not be able to request exchanges by telephone and would have to
submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have
different investment objectives, policies and risks, and a shareholder
should assure that the Fund selected is appropriate for his or her
investment and should be aware of the tax consequences of an exchange.
For federal income tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request
or any other investment transaction.
<PAGE>
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc., as promptly as possible after the return of such
checks to the Transfer Agent, in order to enable the investor to earn a
return on otherwise idle funds.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned from
January 1 through December 31 of that year and 98% of its capital gains
realized in the period from November 1 of the prior year through October
31 of the current year, or else the Fund must pay an excise tax on the
amounts not distributed. While it is presently anticipated that the Fund
will meet those requirements, the Fund's Board of Directors and the
Manager might determine in a particular year that it would be in the best
interest of shareholders for the Fund not to make such distributions at
the required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains available
for distribution to shareholders.
If the Fund qualifies as a "regulated investment company" under
the Internal Revenue Code, it will not be liable for Federal income taxes
on amounts paid by it as dividends and distributions. The Fund qualified
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. 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.
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 OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
and Class Y shareholders should be aware that as of the date of this
Statement of Additional Information, not all of the OppenheimerFunds offer
Class B and/or Class Y shares. To elect this option, a shareholder must
notify the Transfer Agent in writing and either have an existing account
in the fund selected for reinvestment or must obtain a prospectus for that
fund and an application from the Distributor to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other OppenheimerFunds may
be invested in shares of this Fund on the same basis.
<PAGE>
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager has represented to the
Fund that the banking relationships 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 Fund's cash
balances with the Custodian in excess of $100,000 are not protected by
Federal deposit insurance. Those uninsured balances at times may be
substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
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,
1994, the related statement of operations for the year
then ended, the statements of changes in net assets for
the years ended December 31, 1994 and 1993, and the
financial highlights for the period January 1, 1985 to
December 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included
confirmation of securities owned at December 31, 1994 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, 1994, the results of
its operations, the changes in its net assets, and the
financial highlights for the respective stated periods,
in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
STATEMENT OF INVESTMENTS December 31, 1994
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
--------- -----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--4.2%
Repurchase agreement with First Chicago Capital Markets, 6%, dated
12/30/94, to be repurchased at $69,903,571 on 1/3/95, collateralized by
U.S. Treasury Nts., 3.875%--8.875%, 5/31/95--8/31/05, with a value of
$66,433,201 and U.S. Treasury Bonds, 10.75%--14.25%, 2/15/02--8/15/05,
with a value of $4,880,216 (Cost $69,857,000) $ 69,857,000
$69,857,000
U.S. GOVERNMENT OBLIGATIONS--1.3%
TREASURY--1.3% U.S. Treasury Nts., 7.50%, 12/31/96 1,670,000
1,664,258
U.S. Treasury Nts., 7.75%, 11/30/99 10,000,000
9,965,619
U.S. Treasury Nts., 7.75%, 12/31/99 3,200,000
3,190,000
U.S. Treasury STRIPS, 0%, 5/15/18 40,000,000
6,341,640
---------
Total U.S. Government Obligations (Cost $20,623,560)
21,161,517
FOREIGN GOVERNMENT Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
OBLIGATIONS--3.0% Series I, 5.625%, 4/1/01(3) (5) 6,981,426
4,472,113
Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
Series I, 3.17%, 4/1/01(3) (5) ARA 8,921,972
3,791,167
Argentina (Republic of) Par Bonds, 4.25%, 3/31/23(6) 5,000,000
2,116,406
Argentina (Republic of) Past Due Interest Bonds, 6.50%, 3/31/05(3) 8,000,000
5,115,000
Banco Nacional de Comercio Exterior SNC International Finance
BV Gtd. Matador Bonds, 8%, 8/5/03 6,000,000
4,650,000
Brazil (Federal Republic of) Interest Due and Unpaid Bonds, 6.063%, 1/1/01(3) 9,800,000
8,186,063
Brazil (Federal Republic of) Par Bonds, 4%, 4/15/24(6) 13,000,000
5,239,000
Ecuador (Republic of) Bonds, 0%, 12/29/49(4) (7) 15,000,000
8,156,250
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00ESP 500,000,000 3,852,654
United Mexican States, 7.25% Notes, 12/31/19(3) 5,000,000
3,662,500
---------
Total Foreign Government Obligations (Cost $56,303,066)
49,241,153
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
FINANCIAL--0.0% Calfed, Inc., 10% Nts., 1/3/03 (Cost $169,100) 169,100
158,109
CONVERTIBLE CORPORATE BONDS AND NOTES--6.2%
BASIC MATERIALS--0.5%
METALS--0.3% Coeur d'Alene Mines Corp., 6.375% Cv. Sub. Debs., 1/31/04
6,500,000
5,335,000
PAPER AND FOREST Stone Container Corp., 6.75% Cv. Debs., 2/15/07
5,000,000
3,762,500
PRODUCTS--0.2%
</TABLE>
6 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
--------- ------------
<S> <C> <C> <C>
CONSUMER CYCLICALS--1.1%
MEDIA--0.7% Comcast Corp., 1.125% Cv. Sub. Disc. Debs., 4/15/07 $15,000,000
$6,056,250
Time Warner, Inc., 8.75% Cv. Sr. Nts., 1/10/15 6,000,000
5,655,000
----------
11,711,250
OTHER--0.2% Titan Wheel International, Inc., 4.75% Cv. Sub. Nts., 12/1/00 3,500,000
3,727,500
RETAIL--0.2% Food Lion, Inc., 5% Cv. Sub. Debs., 6/1/03(4) 4,000,000
3,540,000
CONSUMER NON-CYCLICALS--0.8%
HEALTHCARE--0.8% Healthsouth Rehabilitation Corp., 5% Cv. Sub. Debs., 4/1/01 3,000,000
3,330,000
Novacare, Inc., 5.50% Cv. Sub. Debs., 1/15/00 4,500,000
3,408,750
Pharmaceutical Marketing Services, Inc., 6.25% Cv. Sub. Debs., 2/1/03(4) 3,500,000
2,380,000
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(4) (9) 4,000,000
3,795,000
----------
12,913,750
ENERGY--0.5% Cross Timbers Oil Co., 5.25% Cv. Sub. Nts., 11/1/03 3,500,000
2,856,875
Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 3,000,000
3,135,000
Kelly Oil & Gas Partners Ltd., 7.875% Cv. Sub. Nts., 12/15/99 2,500,000
1,934,375
----------
7,926,250
FINANCIAL--0.7% Banco de Galicia y Buenos Aires SA,
7% Cv. Negotiable Obligation Bonds, 8/1/02 6,250,000
4,875,000
First Financial Management Corp., 5% Cv. Debs., 12/15/99 5,000,000
5,187,500
Employee Benefit Plans, Inc., 6.75% Cv. Sub. Debs., 7/31/06 3,000,000
2,017,500
----------
12,080,000
INDUSTRIAL--2.0%
TRANSPORTATION--2.0% Air Express International Corp., 6% Cv. Sub. Debs., 1/15/03
3,500,000
3,465,000
Interpool, Inc., 5.25% Cv. Exch. Sub. Nts., 12/15/18 3,500,000
2,677,500
AMR Corp., 6.125% Cv. Sub. Debs., 11/1/24 20,000,000
16,100,000
Delta Airlines, Inc., 3.23% Cv. Sub. Nts., 6/15/03 15,000,000
10,462,500
----------
32,705,000
</TABLE>
7 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
--------- ------------
<S> <C> <C> <C>
TECHNOLOGY--0.6% Seagate Technology, 6.75% Cv. Sub. Debs., 5/1/12
$6,000,000
$4,957,500
Thermo Electron Corp., 5% Cv. Debs., 4/15/01 5,000,000
5,306,250
-----------
10,263,750
-----------
Total Convertible Corporate Bonds and Notes (Cost $112,871,142)
103,965,000
Shares
COMMON STOCKS--79.1%
BASIC MATERIALS--4.1%
CHEMICALS--2.0% Eastman Chemical Co. 200,000
10,100,000
Great Lakes Chemical Corp. 275,000 15,675,000
Imperial Chemical Industries PLC, ADS 150,000
6,975,000
-----------
32,750,000
GOLD--0.9% Cyprus Amax Minerals Co. 410,000
10,711,250
Santa Fe Pacific Gold Corp.(2) 302,953 3,900,520
------- -----------
14,611,770
METAL: MISCELLANEOUS--0.5% Material Sciences Corp.(2) 530,000
8,413,750
STEEL--0.7% Birmingham Steel Corp. 300,000
6,000,000
Oregon Steel Mills, Inc. 400,000 6,250,000
-----------
12,250,000
CONSUMER CYCLICALS--13.9%
AIRLINES--0.7% Atlantic Southeast Airlines, Inc. 550,000
8,525,000
Continental Airlines, Inc., Cl. B(2) 375,000 3,468,750
-----------
11,993,750
AUTOMOBILES--2.0% Chrysler Corp. 200,000
9,800,000
Daimler-Benz AKT 245,000 12,066,250
Volvo AB, Series B Free 650,000 12,240,943
-----------
34,107,193
BROADCAST MEDIA--0.6% TeleCommunications, Inc., Cl. A(2) 500,000
10,875,000
ENTERTAINMENT--0.2% Iwerks Entertainment, Inc.(2) (9) 540,000
2,565,000
LEISURE TIME--3.1% Brunswick Corp. 500,000
9,437,500
Caesar's World, Inc.(2) 200,000 13,350,000
Eastman Kodak Co. 300,000 14,325,000
Harley-Davidson, Inc. 500,000 14,000,000
-----------
51,112,500
</TABLE>
8 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ ------------
<S> <C> <C> <C>
PUBLISHING--0.7% American Greetings Corp., Cl. A 425,000
$11,475,000
RETAIL STORES: Federated Department Stores, Inc. 525,000
10,106,250
DEPARTMENT STORES--0.6%
RETAIL STORES: GENERAL Meyer (Fred), Inc.(2) 550,000
16,912,500
MERCHANDISE CHAINS--1.0%
RETAIL: SPECIALTY--3.6% Alco Standard Corp. 275,000
17,256,250
Intelligent Electronics, Inc. 750,000 6,000,000
Regis Corp. of Minnesota(2) (9) 700,000 10,500,000
Rite Aid Corp. 1,022,000 23,889,250
Tandy Corp. 57,700 2,892,213
-----------
60,537,713
RETAIL: SPECIALTY APPAREL--0.4% Gap, Inc. (The)(8) 225,000
6,862,500
SHOES--1.0% Nike, Inc., Cl. B 225,000
16,790,625
CONSUMER NON-CYCLICALS--9.0%
DRUGS--1.3% Astra AB Free, Series A 350,000
9,039,465
Lilly (Eli) & Co. 200,000 13,125,000
-----------
22,164,465
FOOD PROCESSING--0.7% Archer-Daniels-Midland Co. 575,000
11,859,375
HEALTHCARE: DIVERSIFIED--0.7% Bristol-Myers Squibb Co. 200,000
11,575,000
HEALTHCARE: MISCELLANEOUS--1.6% COR Therapeutics, Inc.(2) 500,000
5,500,000
Healthsource, Inc.(2) 300,000 12,262,500
PCI Services, Inc.(2) 185,000 1,202,500
United Healthcare Corp. 175,000 7,896,875
-----------
26,861,875
HOSPITAL MANAGEMENT--0.7% Living Centers of America, Inc.(2) 175,000
5,840,625
Sun Healthcare Group, Inc.(2) 200,000 5,075,000
-----------
10,915,625
MEDICAL PRODUCTS--1.6% Angeion Corp.(2) (9) 500,000
1,500,000
Lynx Therapeutics, Inc.(2) (4) 153,900 30,780
Medtronic, Inc. 300,000 16,687,500
Sybron Corp. of Delaware(2) 226,500 7,814,250
-----------
26,032,530
</TABLE>
9 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ ------------
<S> <C> <C> <C>
RETAIL STORES: Penn Traffic Co.(2) 225,800
$8,580,400
FOOD CHAINS--0.5%
TOBACCO--1.9% Philip Morris Cos., Inc. 550,000
31,625,000
ENERGY--5.5%
OIL AND GAS DRILLING--0.1% Noble Drilling Corp.(2) 350,000
2,056,250
OIL WELL SERVICES AND Dresser Industries, Inc. 500,000
9,437,500
EQUIPMENT--1.7% Halliburton Co. 300,000
9,937,500
Western Atlas, Inc.(2) 250,000 9,406,250
----------
28,781,250
OIL: INTEGRATED DOMESTIC--2.5% Atlantic Richfield Co. 200,000
20,350,000
Occidental Petroleum Corp. 700,000 13,475,000
Sun Co., Inc. 275,000 7,906,250
----------
41,731,250
OIL: INTEGRATED INTERNATIONAL--1.2% Amerada Hess Corp.
300,000
13,687,500
Shell Transport & Trading Co., PLC, New York Shares 100,000
6,537,500
----------
20,225,000
INDUSTRIAL--9.1%
BUILDING MATERIALS GROUP--1.1% Centex Construction Products, Inc.(2)
400,000
4,950,000
Vulcan Materials Co. 265,000 13,415,625
----------
18,365,625
COMMERCIAL SERVICES--1.0%
Reynolds & Reynolds Co., Cl. A 315,000 7,875,000
Sensormatic Electronics Corp. 250,000 9,000,000
----------
16,875,000
CONGLOMERATES--2.9% Hanson PLC, ADR 1,000,000
18,000,000
Litton Industries, Inc.(2) 400,000 14,800,000
Tenneco, Inc. 375,000 15,937,500
----------
48,737,500
ELECTRICAL EQUIPMENT--1.7% General Electric Co. 550,000
28,050,000
MANUFACTURING: Parker-Hannifin Corp. 275,000
12,512,500
DIVERSIFIED INDUSTRIALS--1.6% Tyco Laboratories, Inc. 300,000
14,250,000
----------
26,762,500
</TABLE>
10 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ ------------
<S> <C> <C> <C>
RAILROADS--0.7% Southern Pacific Rail Corp.(2) 600,000
$10,875,000
TRANSPORTATION: Stolt Comex Seaway SA(2) 200,000
1,400,000
MISCELLANEOUS--0.1%
FINANCIAL--6.5%
FINANCIAL SERVICES: H & R Block, Inc. 485,000
18,005,625
MISCELLANEOUS--1.6% Travelers, Inc. 270,000
8,775,000
-----------
26,780,625
INSURANCE: LIFE--0.5% Bankers Life Holding Corp. 400,000
7,600,000
MAJOR BANKS: REGIONAL--1.7% CoreStates Financial Corp. 650,000
16,900,000
First Interstate Bancorp 160,000 10,820,000
-----------
27,720,000
MONEY CENTER BANKS--2.1% Citicorp 440,000
18,205,000
First Chicago Corp. 365,000 17,428,750
-----------
35,633,750
SAVINGS AND LOANS/ TCF Financial Corp. 250,000
10,312,500
HOLDING COS.--0.6%
TECHNOLOGY--16.0%
AEROSPACE/DEFENSE--0.9% Martin Marietta Corp. 350,000
15,531,250
COMPUTER SOFTWARE Adobe Systems, Inc. 292,500
8,701,875
AND SERVICES--3.8% Bay Networks, Inc.(2) 405,001
11,947,530
Compuware Corp.(2) 420,000 15,120,000
Intersolv, Inc.(2) 160,000 2,900,000
Lotus Development Corp.(2) 250,000 10,250,000
Microsoft Corp.(2) 250,000 15,281,250
-----------
64,200,655
COMPUTER SYSTEMS--1.5% Adaptec, Inc.(2) 195,000
4,606,875
Apple Computer, Inc. 80,000 3,120,000
Auspex Systems, Inc.(2) 400,000 2,700,000
Cisco Systems, Inc.(2) 400,000 14,050,000
----------
24,476,875
ELECTRONICS: ADT Ltd.(2) 604,100
6,494,075
INSTRUMENTATION--0.9% Belden, Inc. 350,000
7,787,500
----------
14,281,575
</TABLE>
11 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ ------------
<S> <C> <C> <C>
ELECTRONICS: Actel Corp.(2) 250,000
$2,062,500
SEMICONDUCTORS--3.5% Applied Materials, Inc.(2) 300,000
12,675,000
Dallas Semiconductor Corp.(2) 145,000 2,410,625
Intel Corp. 100,000 6,387,500
Motorola, Inc. 300,000 17,362,500
Texas Instruments, Inc. 225,000 16,846,875
----------
57,745,000
OFFICE EQUIPMENT AND Moore Corp. Ltd. 912,200
17,217,775
SUPPLIES--1.0%
TELECOMMUNICATIONS--4.4% Airtouch Communications, Inc.(2)
500,000
14,562,500
AT & T Corp. 325,000 16,331,250
IDB Communications Group, Inc.(2) 700,000
6,431,250
LCI International, Inc.(2) 625,000 16,250,000
LDDS Communications, Inc.(2) 100,000 1,943,750
Millicom International Cellular SA(2) 150,000 4,518,750
PT Indosat, ADR(2) 149,000 5,326,750
Tele Danmark AS, ADR(2) 325,000 8,287,500
---------
73,651,750
UTILITIES--15.0%
ELECTRIC COMPANIES--12.3% Allegheny Power System, Inc. 450,000
9,787,500
American Electric Power Co., Inc. 350,000 11,506,250
Baltimore Gas & Electric Co. 450,000 9,956,250
Detroit Edison Co. 750,000 19,593,750
Dominion Resources, Inc. 250,000 8,937,500
Florida Progress Corp. 275,000 8,250,000
FPL Group, Inc. 350,000 12,293,750
Houston Industries, Inc. 625,000 22,265,625
Ohio Edison Co. 350,000 6,475,000
Pacific Gas & Electric Co. 800,000 19,500,000
Pennsylvania Power & Light Co. 400,000 7,600,000
Public Service Enterprise Group, Inc. 1,025,000 27,162,500
Texas Utilities Co. 1,000,000 32,000,000
Union Electric Co. 250,000 8,843,750
204,171,875
TELEPHONE--2.7% GTE Corp. 600,000
18,225,000
Pacific Telesis Group 600,000 17,100,000
Telecom Italia SpA 3,500,000 9,104,637
44,429,637
Total Common Stocks (Cost $1,246,440,057)
1,318,590,463
</TABLE>
12 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ -------------
<S> <C> <C> <C>
PREFERRED STOCKS--7.2%
Atlantic Richfield Co., 9% Exchangeable Notes for Common Stock of
Lyondell Petrochemical Co., 9/15/97 600,000
$15,675,000
Boise Cascade Corp., $1.58 Cum. Cv., Series G 390,000
9,311,250
Catellus Development Corp., $3.625 Cv., Series B(2) (4) 240,000
9,240,000
Compania de Inversiones en Telecomunicaciones SA, Provisionally
Redeemable Income Debt Exchangeable for Stock, 7%,3/3/98(4) 150,000
7,575,000
Fiat SpA(2) 4,500,000 10,346,739
Freeport-McMoRan Copper & Gold, Inc., Cv. Depositary Shares 320,000
6,640,000
General Motors Corp., $3.25 Cv., Series C 150,000
8,606,250
James River Corp. of Virginia, Dividend Enhanced Convertible Stock,
9% Cv. Exch. Depositary Shares, Series P 600,000
12,150,000
Noble Drilling Corp., $1.50 Cv. Exch. 150,000
3,150,000
Noble Drilling Corp., $2.25 Cv. Exch., Series A 130,000
4,257,500
Occidental Petroleum Corp., $3.00 Cum. Cv. Canadian Occidental
Petroleum Ltd.--Indexed 175,000 8,356,250
Olympic Financial Ltd., $2.00 Cum. Cv. Exch. 100,000
2,975,000
Reynolds Metals Co., 7% Preferred Redeemable Increased
Dividend Equity Securities, $3.31 Cv., 12/31/97 112,500
5,442,186
Transco Energy Co., $3.50 Cum. Cv., Series E(4) 100,000
4,550,000
Unisys Corp., $3.75 Cv., Series A 150,000 4,762,500
WHX Corp., $3.75 Cv., Series B 150,000
6,412,500
-----------
Total Preferred Stocks (Cost $121,452,540) 119,450,175
</TABLE>
<TABLE>
<CAPTION>
UNITS
-----
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Angeion Corp. Wts., Exp. 3/96(9) 500,000 125,000
Morgan Stanley Group Inc., Japanese Index Call Wts., Exp. 5/96 60,000
187,500
-------
Total Rights, Warrants and Certificates (Cost $360,340) 312,500
</TABLE>
<TABLE>
<CAPTION>
SHARES SUBJECT
DATE/PRICE TO PUT
---------- --------------
<S> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0%
Lowe's Cos., Inc. Jan./$35 600 56,250
Promus Cos., Inc. Jan./$25 500 3,125
Promus Cos., Inc. Jan./$30 750 60,938
Promus Cos., Inc. Feb./$30 700 91,875
-------
Total Put Options Purchased (Cost $288,088) 212,188
</TABLE>
13 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
------ ------------
<S> <C> <C>
TOTAL INVESTMENTS, AT VALUE (COST $1,628,364,892) 101.0%
$1,682,948,105
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0)
(16,809,945)
----- --------------
NET ASSETS 100.0% $1,666,138,160
=====
==============
</TABLE>
1. Face amount is reported in local currency. Foreign
currency abbreviations are as follows:
ARA--Argentine Austral
ESP--Spanish Peseta
2. Non-income producing security.
3. Represents the current interest rate for a variable
rate security.
4. Restricted security--See Note 6 of Notes to Financial
Statements.
5. Interest or dividend is paid in kind.
6. Represents the current interest rate for an
increasing rate security.
7. When-issued security to be delivered and settled
after December 31, 1994.
8. Securities with an aggregate market value of
$1,525,000 are held in escrow to cover outstanding call
options, as follows:
<TABLE>
<CAPTION>
SHARES EXPIRATION EXERCISE PREMIUM MARKET
VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE
1
--------------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Gap. Inc. (The) 50,000 1/95 $30.00 $36,499 $75,000
</TABLE>
9. Affiliated company. Represents ownership of at least
5% of the voting securities of the issuer and is or was
an affiliate, as defined in the Investment Company Act
of 1940, at or during the period ended December 31,
1994. The aggregate fair value of all securities of
affiliated companies as of December 31, 1994 amounted to
$18,485,000. Transactions during the period in which the
issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
BALANCE
DECEMBER 31, 1993 GROSS ADDITIONS
----------------- ---------------
SHARES/FACE COST SHARES/FACE COST
<S> <C> <C> <C> <C>
Angeion Corp. -- $ -- 500,000 $1,187,500
Angeion Corp. Wts. -- -- 500,000 --
Baldwin Piano & Organ Co.(10) 256,000 4,418,500 -- --
INTERLINQ Software Corp.(10) 300,000 2,332,500 -- --
Iwerks Entertainment, Inc. 465,000 14,569,045 145,000 3,267,500
Physician's Clinical Laboratory, Inc.,
7.50% Cv. Sub. Debs., 8/15/00 4,000,000 4,000,000 -- --
Regis Corp. of Minnesota 650,000 6,964,363 50,000 706,250
----------- ----------
$32,284,408 $5,161,250
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
BALANCE
GROSS REDUCTIONS DECEMBER 31, 1994
INTEREST
SHARES/FACE COST SHARES/FACE COST
INCOME
----------- ---- ----------- ---- --------
<S> <C> <C> <C> <C> <C>
Angeion Corp. -- $ -- 500,000 $ 1,187,500 $ --
Angeion Corp. Wts. -- -- 500,000 -- --
Baldwin Piano & Organ Co.(10) 256,000 4,418,500 -- -- --
INTERLINQ Software Corp.(10) 300,000 2,332,500 -- -- --
Iwerks Entertainment, Inc. 70,000 2,359,965 540,000 15,476,580 --
Physician's Clinical Laboratory, Inc.,
7.50% Cv. Sub. Debs., 8/15/00 -- -- 4,000,000 4,000,000 299,958
Regis Corp. of Minnesota -- -- 700,000 7,670,613 --
---------- ----------- --------
$9,110,965 $28,334,693 $299,958
========== ===========
========
</TABLE>
10. Not an affiliate as of December 31, 1994.
See accompanying Notes to Financial Statements.
14 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
<S> <C> <C>
ASSETS Investments, at value (cost $1,628,364,892)--see accompanying statement
$1,682,948,105
Cash 596,761
Receivables:
Interest and dividends 10,500,854
Investments sold 5,853,180
Shares of capital stock sold 3,031,040
Other 134,895
--------------
Total assets 1,703,064,835
LIABILITIES Options written, at value (premiums received $36,499)--see accompanying
statement--Note 4 75,000
Payables and other liabilities:
Investments purchased 29,258,939
Shares of capital stock redeemed 4,826,944
Distribution and service plan fees--Note 5 891,853
Dividends and distributions 619,022
Other 1,254,917
--------------
Total liabilities 36,926,675
NET ASSETS $1,666,138,160
==============
COMPOSITION OF Par value of shares of capital stock
$21,392,839
NET ASSETS Additional paid-in capital 1,617,136,104
Undistributed (overdistributed) net investment income 1,960,766
Accumulated net realized gain (loss) from investment,
written option and foreign currency transactions (28,896,123)
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies 54,544,574
--------------
Net assets $1,666,138,160
==============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets of $1,235,636,724
and 158,416,599 shares of capital stock outstanding) $7.80
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price)
$8.28
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $429,427,171 and 55,374,013 shares of capital stock outstanding)
$7.76
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,074,265 and 137,776 shares of capital stock outstanding) $7.80
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended
December 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME Interest:
Unaffiliated companies $14,804,215
Affiliated companies 299,958
Dividends (net of withholding taxes of $300,721) 48,337,266
-----------
Total income 63,441,439
EXPENSES Management fees-Note 5
8,860,284
Distribution and service plan fees:
Class A--Note 5 2,274,087
Class B--Note 5 3,604,784
Transfer and shareholder servicing agent fees--Note 5 2,768,911
Shareholder reports 863,738
Custodian fees and expenses 212,676
Legal and auditing fees 102,872
Directors' fees and expenses 81,296
Registration and filing fees:
Class A 119,368
Class B 201,613
Class Y 439
Other 417,432
-----------
Total expenses 19,507,500
NET INVESTMENT INCOME (LOSS)
43,933,939
REALIZED AND UNREALIZED Net realized gain (loss) on:
GAIN (LOSS) ON INVESTMENTS, Investments
(24,167,951)
OPTIONS WRITTEN Closing and expiration of options written--Note 4
449,883
AND FOREIGN CURRENCY Foreign currency transactions
774,143
TRANSACTIONS -----------
Net realized gain (loss) (22,943,925)
Net change in unrealized appreciation or depreciation on:
Investments (161,615,681)
Translation of assets and liabilities denominated in foreign currencies
1,957,256
------------
Net change (159,658,425)
------------
Net realized and unrealized gain (loss) on investments, options written and foreign
currency transactions (182,602,350)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$(138,668,411)
=============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Total Return Fund, Inc.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993
---- ----
<S> <C> <C> <C>
OPERATIONS Net investment income (loss) $ 43,933,939 $
22,572,620
Net realized gain (loss) on investments, options written
and foreign currency transactions (22,943,925) 82,466,024
Net change in unrealized appreciation or depreciation
on investments and translation of assets and
liabilities denominated in foreign currencies (159,658,425)
93,114,925
------------- ------------
Net increase (decrease) in net assets resulting from operations (138,668,411)
198,153,569
EQUALIZATION Net change --
3,854,582
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.2122 and $.20 per share, respectively) (32,935,100)
(23,576,552)
SHAREHOLDERS Class B ($.1563 and $.1091 per share, respectively) (7,410,674)
(1,142,362)
Class Y ($.1719 per share) (9,979) --
Distributions from net realized gain on investments, options written
and foreign currency transactions:
Class A ($.5834 per share) -- (76,215,894)
Class B ($.5834 per share) -- (13,016,692)
CAPITAL STOCK Net increase (decrease) in net assets resulting from Class A
TRANSACTIONS capital stock transactions--Note 2 150,027,163
335,283,270
Net increase (decrease) in net assets resulting from Class B
capital stock transactions--Note 2 251,910,438 223,296,915
Net increase (decrease) in net assets resulting from Class Y
capital stock transactions--Note 2 1,113,774 --
NET ASSETS Total increase (decrease) 224,027,211
646,636,836
Beginning of period 1,442,110,949 795,474,113
------------- ------------
End of period [including undistributed (overdistributed) net
investment income of $1,960,766 and $(750,275), respectively] $1,666,138,160
$1,442,110,949
==============
==============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Total Return Fund, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $8.69 $7.84 $7.49 $6.13 $6.68 $6.35 $5.95
Income (loss) from
investment operations:
Net investment income .23 .18 .17 .24 .24 .27 .26
Net realized and
unrealized gain (loss)
on investments, options
written and foreign
currency transactions (.91) 1.45 .75 1.91 (.49) .93 .53
Total income (loss)
from investment operations (.68) 1.63 .92 2.15 (.25) 1.20 .79
Dividends and distributions
to shareholders:
Dividends from net
investment income (.21) (.20) (.20) (.23) (.24) (.28) (.27)
Distributions from net
realized gain on investments,
options written and foreign
currency transactions -- (.58) (.37) (.56) (.06) (.59) (.12)
Total dividends and
distributions to shareholders (.21) (.78) (.57) (.79) (.30) (.87) (.39)
Net asset value,
end of period $7.80 $8.69 $7.84 $7.49 $6.13 $6.68 $6.35
========== ========== ======== ========
======== ======== ========
TOTAL RETURN,
AT NET ASSET VALUE(3) (7.86)% 21.24% 12.83% 36.26% (3.86)% 19.25%
13.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $1,235,637 $1,223,395 $795,474 $555,865 $396,240 $389,413 $314,039
Average net assets
(in thousands) $1,261,729 $992,381 $662,917 $475,741 $394,903 $356,994 $298,509
Number of shares
outstanding at end of period
(in thousands) 158,417 140,711 101,433 74,245 64,644 58,333 49,464
Ratios to average net assets:
Net investment income 2.88% 2.21% 2.68% 3.26% 3.87% 3.96%
4.22%
Expenses 1.01% .93% .96% .95% .98% .98% .94%
Portfolio turnover rate(5) 117.2% 143.9% 143.5% 161.5% 114.1% 151.6%
127.3%
</TABLE>
<TABLE>
<CAPTION>
CLASS A Class B Class Y
-------------------------------- ---------------------- --------
YEAR PERIOD
ENDED ENDED
DEC. 31, DEC 31
1987 1986 1985 1994 1993(2) 1994(1)
---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $6.76 $6.81 $5.40 $8.66 $8.23 $8.23
Income (loss) from
investment operations:
Net investment income .25 .35 .25 .17 .09 .15
Net realized and
unrealized gain (loss)
on investments, options
written and foreign
currency transactions .63 1.00 1.58 (.91) 1.03 (.41)
Total income (loss)
from investment operations .88 1.35 1.83 (.74) 1.12 (.26)
Dividends and distributions
to shareholders:
Dividends from net
investment income (.32) (.37) (.21) (.16) (.11) (.17)
Distributions from net
realized gain on investments,
options written and foreign
currency transactions (1.37) (1.03) (.21) -- (.58) --
Total dividends and
distributions to shareholders (1.69) (1.40) (.42) (.16) (.69) (.17)
Net asset value,
end of period $5.95 $6.76 $6.81 $7.76 $8.66 $7.80
======== ======== ======== ========
======== ======
TOTAL RETURN,
AT NET ASSET VALUE(3) 12.35% 19.70% 34.36% (8.64)% 13.91% (3.15)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $274,068 $234,674 $229,783 $429,427 $218,716 $1,074
Average net assets
(in thousands) $277,877 $246,530 $213,803 $360,773 $90,952 $320
Number of shares
outstanding at end of period
(in thousands) 46,080 34,703 33,720 55,374 25,261 138
Ratios to average net assets:
Net investment income 3.42% 4.37% 3.81% 2.11% 1.09%(4) 4.07%(4)
Expenses .88% .85% .89% 1.87% 1.87%(4) .96%(4)
Portfolio turnover rate(5) 173.4% 88.3% 143.9% 117.2% 143.9% 117.2%
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to December 31,
1994.
2. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, 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.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1994 were $2,221,635,120 and $1,847,495,076, respectively.
See accompanying Notes to Financial Statements.
18 Oppenheimer Total Return Fund, Inc.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT Oppenheimer Total Return Fund, Inc. (the Fund) is
ACCOUNTING registered under the Investment Company Act of 1940, as
POLICIES amended, as a diversified, open-end management investment
company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers
Class A, Class B and Class Y shares. Class A shares are
sold with a front-end sales charge. Class B shares may be
subject to a contingent deferred sales charge. All three
classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has
its own expenses directly attributable to a particular
class and exclusive voting rights with respect to matters
affecting a single class. Classes A and B have separate
distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after
the date of purchase. The following is a summary of
significant accounting policies consistently followed by
the Fund.
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 using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect
current market value, or under consistently applied
procedures established by the Board of Directors to
determine fair value in good faith. 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. Options are valued based upon the last sale
price on the principal exchange on which the option is
traded or, in the absence of any transactions that day,
the value is based upon the last sale 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. The market value of
the underlying securities is required to be at least 102%
of the resale price at the time of purchase. If the
seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an
insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily
to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a specific
class are charged against the operations of that class.
FEDERAL 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. At December 31, 1994, the Fund
had available for federal income tax purposes an unused
capital loss carryover of approximately $3,800,000 which
will expire in 2002.
19 Oppenheimer Total Return Fund, Inc.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT EQUALIZATION. Prior to September 24, 1993, the Fund
ACCOUNTING followed the accounting practice of equalization, by
POLICIES which a portion of the proceeds from sales and costs of
(CONTINUED) 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
cumulative 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.
CHANGE IN ACCOUNTING CLASSIFICATION OF DISTRIBUTIONS TO
SHAREHOLDERS. Net investment income (loss) and net
realized gain (loss) may differ for financial statement
and tax purposes primarily because of the recognition of
certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes. The character of the
distributions made during the year from net investment
income or net realized gains may differ from their
ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions,
the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain
(loss) was recorded by the Fund. Effective January 1,
1994, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. As a
result, the Fund changed the classification of
distributions to shareholders to better disclose the
differences between financial statement amounts and
distributions determined in accordance with income tax
regulations. Accordingly, subsequent to December 31,
1993, amounts have been reclassified to reflect a
decrease in paid-in capital of $45,349, a decrease in
undistributed net investment income of $301,605, and an
increase in accumulated net realized gain on investments
of $346,954. During the year ended December 31, 1994, in
accordance with Statement of Position 93-2, undistributed
net investment income was decreased by $ 614,718, and
accumulated net realized gain on investments was
increased by the same amount.
OTHER. Investment transactions are accounted for on the
date the investments are purchased or sold (trade date)
and dividend income is recorded on the ex-dividend date.
Discount on securities purchased is amortized over the
life of the respective securities, in accordance with
federal income tax requirements. Realized gains and
losses on investments and options written and unrealized
appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for
federal income tax purposes.
2. SHARES OF The Fund has authorized 450,000,000, 200,000,000, and
CAPITAL STOCK 50,000,000 shares of $.10 par value Class A, Class B and
Class Y capital stock, respectively. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994(1) YEAR ENDED
DECEMBER
31, 1993(2)
------------------------------ --------------------------------
SHARES AMOUNT SHARES
AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A:
Sold 36,009,865 $302,062,255 40,537,799
$349,550,087
Dividends and distributions reinvested 3,725,296 30,098,615 10,935,488
90,416,322
Redeemed (22,029,323) (182,133,707) (12,195,290)
(104,683,139)
----------- ------------ ----------- ------------
Net increase 17,705,838 $150,027,163 39,277,997
$335,283,270
=========== ============
=========== ============
Class B:
Sold 35,786,510 $297,977,920 24,707,937
$219,055,169
Dividends and distributions reinvested 864,830 6,912,262 1,561,693
13,222,296
Redeemed (6,537,842) (52,979,744) (1,009,115)
(8,980,550)
----------- ------------ ----------- ------------
Net increase 30,113,498 $251,910,438 25,260,515
$223,296,915
=========== ============
=========== ============
Class Y:
Sold 144,607 $1,168,840
Dividends and distributions reinvested 1,275 9,979
Redeemed (8,106) (65,045)
----------- ------------
Net increase 137,776 $1,113,774
=========== ============
</TABLE>
1. For the year ended December 31, 1994 for Class A and
Class B shares and for the period from June 1, 1994
(inception of offering) to December 31, 1994 for Class Y
shares.
2. 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.
20 Oppenheimer Total Return Fund, Inc.
<PAGE>
3. UNREALIZED GAINS At December 31, 1994, net unrealized appreciation on
AND LOSSES investments of $54,544,712 was composed of gross
ON INVESTMENTS appreciation of $141,457,423, and gross depreciation of
$86,912,711.
4. OPTION ACTIVITY The Fund may buy and sell put and call options, or write
covered call options on portfolio securities in order to
produce incremental earnings or protect against changes
in the value of portfolio securities.
The Fund generally purchases put options or writes
covered call options to hedge against adverse movements
in the value of portfolio holdings. When an option is
written, the Fund receives a premium and becomes
obligated to sell or purchase the underlying security at
a fixed price, upon exercise of the option. The Fund
segregates assets to cover its obligations under option
contracts.
Options are valued daily based upon the last sale
price on the principal exchange on which the option is
traded and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an
option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option,
or the cost of the security for a purchased put or call
option is adjusted by the amount of premium received or
paid.
In this report, securities segregated to cover
outstanding call options are noted in the Statement of
Investments. Shares subject to call, expiration date,
exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments.
Options written are reported as a liability in the
Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund
gives up the opportunity for profit if the market price
of the security increases and the option is exercised.
The risk in writing a put option is that the Fund may
incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying
an option is that the Fund pays a premium whether or not
the option is exercised. The Fund also has the additional
risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Call option activity for the year ended December 31, 1994
was as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
--------- ----------
<S> <C> <C>
Options outstanding at December 31, 1993 -- $ --
Options written 6,400 1,229,866
Options canceled in closing purchase transactions (3,400) (724,845)
Options exercised (1,250) (254,079)
Options lapsed (1,250) (214,443)
------ ----------
Options outstanding at December 31, 1994 500 $ 36,499
====== ==========
</TABLE>
5. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund
TRANSACTIONS which provides for an annual fee of .75% on the first
WITH AFFILIATES $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, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $8,832,144, of which $2,726,018 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, 1994, OFDI received contingent deferred
sales charges of $731,799 upon redemption of Class B
shares.
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, Class A and Class B
may expend up to .25% of net assets annually to reimburse
OFDI for costs incurred in distributing shares of the
Fund (prior to July 1, 1994, reimbursements were made
with respect to shares 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, the
Board of Directors may allow the Fund to continue payment
of the asset-based sales charge to OFDI for distribution
expenses incurred on Class B shares prior to termination
or discontinuance of the plan.
21 Oppenheimer Total Return Fund, Inc.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
5. MANAGEMENT FEES During the year ended December 31, 1994, OFDI paid
AND OTHER $144,910 and $7,941, respectively, to an affiliated
TRANSACTIONS broker/dealer as reimbursement for Class A and Class B
WITH AFFILIATES personal service and maintenance expenses and retained
(CONTINUED) $3,465,766 as reimbursement for Class B sales commissions
and service fee advances, as well as financing costs.
6. RESTRICTED The Fund owns securities purchased in private placement
SECURITIES 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, excluding securities
eligible for resale pursuant to Rule 144A of the Act,
amount to $30,780 or less than .01% of the Fund's net
assets at December 31, 1994. Illiquid and/or restricted
securities, including those restricted securities that
are transferable under Rule 144A of the Act, are listed
below.
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE COST PER
UNIT
-------- ---------------- -------------
<S> <C> <C>
Catellus Development Corp., $3.625 Cv., Series B(1) 10/28/93--6/17/94 $ 49.35
Compania de Inversiones en Telecomunicaciones SA, Provisionally
Redeemable Income Debt Exchangeable for Stock, 7%, 3/3/98(1) 3/3/94--6/28/94 $
65.47
Ecuador (Republic of) Bonds, 0%, 12/29/49(1) 10/25/94 $ 60.38
Food Lion, Inc., 5% Cv. Sub. Debs., 6/1/03(1) 3/21/94--6/3/94 $ 99.34
Lynx Therapeutics, Inc. 10/19/92 $ .67
Pharmaceutical Marketing Services, Inc.,
6.25% Cv. Sub. Debs., 2/1/03(1) 1/27/93--12/6/94 $ 91.14
Physicians Clinical Laboratory,
Inc., 7.50% Cv. Sub. Debs., 8/15/00(1) 8/17/93 $ 100.00
Transco Energy Co., $3.50 Cum. Cv., Series E(1) 10/27/93--1/20/94 $ 49.81
</TABLE>
<TABLE>
<CAPTION>
VALUATION PER UNIT AS
SECURITY OF DECEMBER 31, 1994
-------- ---------------------
<S> <C>
Catellus Development Corp., $3.625 Cv., Series B(1) $38.50
Compania de Inversiones en Telecomunicaciones SA, Provisionally
Redeemable Income Debt Exchangeable for Stock, 7%, 3/3/98(1) $50.50
Ecuador (Republic of) Bonds, 0%, 12/29/49(1) $54.38
Food Lion, Inc., 5% Cv. Sub. Debs., 6/1/03(1) $88.50
Lynx Therapeutics, Inc. $ .20
Pharmaceutical Marketing Services, Inc.,
6.25% Cv. Sub. Debs., 2/1/03(1) $68.00
Physicians Clinical Laboratory,
Inc., 7.50% Cv. Sub. Debs., 8/15/00(1) $94.88
Transco Energy Co., $3.50 Cum. Cv., Series E(1) $45.50
</TABLE>
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Transmission
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
<PAGE>
________________
* For purposes of the Fund's investment policy not to concentrate
in securities of issuers in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.
<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 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 LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf P.C.
1600 Broadway
Denver, Colorado 80202
