Registration No. 2-33043
File No. 811-1512
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 49 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 33 / X /
OPPENHEIMER EQUITY INCOME FUND
- -----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way
Englewood, Colorado 80112
- -----------------------------------------------------------------------
(Address of Principal Executive Offices)
(303)768-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFund, Inc.
Two World Trade Center, New York, New York 10048-0203
- -----------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ____________, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ X / On December 22, 1997, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On ________________, pursuant to paragraph (a)(2)
of Rule 485.
- -----------------------------------------------------------------------
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
August 31, 1997,was filed on November 5, 1997.
FORM N-1A
OPPENHEIMER EQUITY INCOME FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed--Organization and
History; Investment Objectives and Policies 5 How the Fund
is Managed; Expenses; Back Cover 5A Performance of the
Fund 6 How the Fund is Managed-Organization and History;
The Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objective and Policies-Portfolio Turnover
7 Shareholder Account Rules and Policies; How To Buy Shares;
How to Exchange Shares; Special Investor Services; Service
Plan for Class A Shares; Distribution and Service Plan for
Class B Shares; Distribution and Service Plan for Class C
Shares; How to Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Heading In Statement of Additional Information
10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other Investment Techniques
and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell Shares;
How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
- ----------------
* Not applicable or negative answer.
Oppenheimer Equity Income Fund
Prospectus dated December 22, 1997
Oppenheimer Equity Income Fund is a mutual fund with the primary
investment objective of seeking as much current income as is compatible with
prudent investment. Its secondary objective is to conserve principal while
providing an opportunity for capital appreciation. To seek current income, the
Fund invests primarily in common stocks that pay dividends, but the Fund also
invests in bonds, preferred stocks (including convertible stocks), debentures,
zero-coupon securities issued by the U.S. Government or corporations, and other
debt securities. The Fund also uses hedging instruments to try to reduce the
risks of market fluctuations that affect the value of the securities the Fund
holds. To seek its secondary objective, the Fund primarily invests in stocks
that the portfolio manager believes have growth possibilities. Please refer to
"Investment Objectives and Policies" for more information about the types of
securities the Fund invests in and refer to "Investment Risks" for a discussion
on the risks of investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the December
22, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
[OppenheimerFunds logo]
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
11 Investment Objectives and Policies
12 Investment Risks
15 Investment Techniques and Strategies
21 How the Fund is Managed
23 Performance of the Fund
ABOUT YOUR ACCOUNT
27 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
41 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
43 How to Sell Shares
By Mail
By Telephone
46 How to Exchange Shares
47 Shareholder Account Rules and Policies
49 Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements
-2-
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 fiscal year ended August 31, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of the Fund. Please refer to "About Your Account," from pages 27 through
51, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class Class Class
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases
(as a % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(as a % of the
lower of the
original offering
price or redemption
proceeds) None(1) 5% in the first 1% if
year, declining redeemed
to 1% in the within 12
sixth year months of
and eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on
Reinvested Dividends None None None
Redemption Fee None(3) None(3) None(3)
Exchange Fee None None None
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales
Charge" on page 32) in Class A shares, you may have to pay a sales charge
of up to 1% if you sell your shares within 12 calendar months (18 months
for shares purchased prior to May 1, 1997) from the end of the calendar
month during which you purchased those shares. See "How to Buy Shares
-Buying Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares
-Buying Class C Shares" below, for more information on the contingent
deferred sales charge.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by ACH transfer through
AccountLink. See "How to Sell Shares," below.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds the Fund's portfolio securities, audit fees and legal
expenses. Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Class Class Class
A Shares B Shares C Shares
Management Fees 0.53% 0.53% 0.53%
12b-1 Plan Fees 0.19% 1.00% 1.00%
Other Expenses 0.16% 0.16% 0.16%
----- ----- -----
Total Fund Operating
Expenses 0.88% 1.69% 1.69%
The numbers in the chart above are based upon the Fund's expenses in its
last fiscal year ended August 31, 1997. 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 Service Plan Fees for Class A shares are service fees (the maximum fee is
0.25% of average annual net assets of that class). Currently, the Board of
Trustees has set the maximum fee at 0.15% for assets representing shares sold
before April 1, 1991, and 0.25% for assets representing shares sold on or after
that date. For Class B and Class C shares, the 12b-1 Distribution and Service
Plan Fees are the service fees (the maximum fee is 0.25%) and the annual
asset-based sales charges of 0.75%. These plans are described in greater detail
in "How to Buy Shares."
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o 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 table above. If you were to redeem
your shares at the end of each period shown below, your investment would incur
the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
------ ------- ------- ---------
Class A Shares $66 $84 $103 $160
Class B Shares $67 $83 $112 $158
Class C Shares $27 $53 $92 $200
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $66 $84 $103 $160
Class B Shares $17 $53 $92 $158
Class C Shares $17 $53 $92 $200
*In the first example, expenses include the Class A initial sales charge and the
applicable Class B or Class C contingent deferred sales charge. In the second
example, Class A expenses include the initial sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. The Class B
expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the asset-based sales charge and the contingent
deferred sales charge on Class B and Class C shares, long term Class B and Class
C shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares is
designed to minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What are the Fund's Investment Objectives? The Fund's primary
investment objective is to seek as much current income as is compatible with
prudent investment. It has a secondary objective to conserve principal while
providing an opportunity for capital appreciation.
o What Does the Fund Invest in? To seek current income, the Fund
primarily invests in dividend-paying common and preferred stocks (these are
called "equity" securities). The Fund may invest in U.S. companies or foreign
companies and foreign government securities. The Fund can also invest in debt
securities, such as corporate bonds and U.S. Government securities. To seek its
secondary objective, the Fund's manager may choose common stocks that have
growth potential. The Fund may also use hedging instruments and some derivative
investments to try to manage investment risks. These investments are more fully
explained in "Investment Objectives and Policies," starting on page 11.
o Who Manages the Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios having over $75 billion in assets at September 30, 1997. The
Manager is paid an advisory fee by the Fund, based on its net assets. The Fund's
portfolio manager, John Doney, is employed by the Manager and is primarily
responsible for the selection of the Fund's securities. The Fund's Board of
Trustees, elected by shareholders, oversees the investment adviser and the
portfolio manager. Please refer to "How the Fund is Managed," starting on page
21 for more information about the Manager and its fees.
o 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 because of 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
price per share. In the Oppenheimer funds spectrum, the Fund is generally more
conservative than aggressive growth funds, but more aggressive than investment
grade bond funds. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased for
the portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objectives and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Risks" starting on page 12 for a more complete discussion of the
Fund's investment risks.
o 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 27 for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund offers three classes of
shares. Each class has the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 5.75%, and
reduced for larger purchases. Class B 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. Class C shares are offered without a front-end sales charge, but may
be subject to a contingent deferred sales charge of 1% if redeemed within one
year of buying them. There is also an annual asset-based sales charge on Class B
and Class C shares. Please review "How To Buy Shares" starting on page 27 for
more details, including a discussion about factors you and your financial
advisor should consider in determining which class may be appropriate for you.
o 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 43. The Fund also
offers exchange privileges to other Oppenheimer funds, described in "How to
Exchange Shares," on page 46.
o How Has the Fund Performed? The Fund measures its performance by
quoting its average annual total return and cumulative total return, which
measure historical performance. Those returns can be compared to the returns
(over similar periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can also be
compared to broad market indices, which we have done on pages 25 and 26. Please
remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data, 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 August 31, 1997 is included in
the Statement of Additional Information.
[highlights]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1997 1996(2) 1996 1995 1994 1993
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.36 $11.39 $10.25 $ 9.44 $10.01 $ 9.15
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .47 .09 .50 .50 .47 .50
Net realized and unrealized gain (loss) 3.17 (.12) 1.36 .92 (.39) .99
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 3.64 (.03) 1.86 1.42 .08 1.49
- --------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.48) -- (.48) (.48) (.47) (.48)
Dividends in excess of net
investment income -- -- -- -- (.01) --
Distributions from net realized gain (.40) -- (.24) (.13) (.12) (.15)
Distributions in excess of net realized gain -- -- -- -- (.05) --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.88) -- (.72) (.61) (.65) (.63)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.12 $11.36 $11.39 $10.25 $ 9.44 $10.01
====== ====== ====== ====== ====== ======
==========================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 33.39% (0.26)% 18.61% 15.66% 0.65% 16.76%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $2,722 $2,110 $2,141 $1,893 $1,773 $1,790
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,446 $2,109 $2,054 $1,798 $1,832 $1,658
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.97% 3.28%(5) 4.51% 5.15% 4.72% 5.12%
Expenses 0.88% 0.94%(5) 0.89% 0.96% 0.90% 0.79%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 23.7% 13.5% 42.9% 45.7% 30.4% 59.0%
Average brokerage commission rate(7) $0.0592 $0.0587 $0.0592 -- -- --
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
2. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
3. For the period from August 17, 1993 (inception of offering) to June 30,
1994.
8
<TABLE>
<CAPTION>
CLASS B
- --------------------------------------------------------- --------------------
YEAR ENDED AUGUST 31,
1992 1991 1990 1989 1988 1997 1996(2)
================================================================================
<S> <C> <C> <C> <C> <C> <C>
$8.86 $9.18 $9.11 $8.51 $9.85 $11.29 $11.33
- --------------------------------------------------------------------------------
.50 .48 .48 .52 .48 .37 .07
.39 (.17) .33 .58 (.35) 3.13 (.11)
------ ----- ----- ----- ----- ------ ------
.89 .31 .81 1.10 .13 3.50 (.04)
- --------------------------------------------------------------------------------
(.48) (.48) (.50) (.48) .60) (.38) --
-- -- -- -- -- -- --
(.12) (.15) (.24) (.02) (.87) (.40) --
-- -- -- -- -- -- --
------ ----- ----- ----- ----- ------ ------
(.60) (.63) (.74) (.50) (1.47) (.78) --
- --------------------------------------------------------------------------------
$9.15 $8.86 $9.18 $9.11 $8.51 $14.01 $11.29
===== ===== ===== ===== ===== ====== ======
================================================================================
10.26% 3.68% 9.07% 13.30% 2.04% 32.17% (0.35)%
================================================================================
$1,556 $1,393 $1,330 $1,017 $807 $431 $260
- --------------------------------------------------------------------------------
$1,526 $1,324 $1,180 $ 885 $743 $344 $255
- --------------------------------------------------------------------------------
5.33% 5.31% 5.10% 5.89% 5.48% 3.16% 2.48%(5)
0.82% 0.79% 0.79% 0.85% 0.83% 1.69% 1.76%(5)
- --------------------------------------------------------------------------------
37.0% 64.0% 122.0% 91.4% 124.1% 23.7% 13.5%
-- -- -- -- -- $0.0592 $0.0587
</TABLE>
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
9
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B CLASS C
--------------------------------- ----------------------------------------
PERIOD ENDED
YEAR ENDED JUNE 30, YEAR ENDED AUGUST 31, JUNE 30,
1996 1995 1994(3) 1997 1996(2) 1996(1)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.21 $ 9.40 $10.22 $11.30 $11.35 $10.76
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .41 .43 .36 .40 .07 .28
Net realized and unrealized gain (loss) 1.35 .91 (.58) 3.12 (.12) .88
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations 1.76 1.34 (.22) 3.52 (.05) 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.40) (.42) (.40) -- (.33)
Dividends in excess of net investment
income -- -- (.01) -- -- --
Distributions from net realized gain (.24) (.13) (.12) (.40) -- (.24)
Distributions in excess of net realized gain -- -- (.05) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.64) (.53) (.60) (.80) -- (.57)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.33 $10.21 $ 9.40 $14.02 $11.30 $11.35
====== ====== ====== ====== ====== ======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 17.58% 14.87% (2.35)% 32.31% (0.44)% 10.50%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $252 $161 $88 $48 $7 $6
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $208 $122 $47 $25 $7 $3
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.68% 4.34% 3.99%(5) 3.15% 2.55%(5) 3.53%(5)
Expenses 1.72% 1.79% 1.82%(5) 1.69% 1.79%(5) 1.81%(5)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 42.9% 45.7% 30.4% 23.7% 13.5% 42.9%
Average brokerage commission rate(7) $0.0592 -- -- $0.0592 $0.0587 $0.0592
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1997 were $717,104,040 and $599,983,689,
respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
10
-3-
<PAGE>
Investment Objectives and Policies
Objectives. The Fund has primary and secondary objectives. The Fund's primary
investment objective is to seek as much current income as is compatible with
prudent investment. Its secondary investment objective is to conserve principal
while providing an opportunity for capital appreciation.
Investment Policies and Strategies. The Fund seeks current income principally by
investing in common stocks that pay dividend income. The Fund may also seek
income by investing in bonds, preferred stocks (including convertible stocks),
debentures, zero-coupon securities issued by the U.S. Government or companies,
and other debt securities, such as notes. In its stock investments the Fund
primarily focuses on stocks of larger, more established companies with an
established history of operations. To seek its secondary objective the Fund may
invest in stocks of companies that the Manager believes offer growth potential
without excessive volatility.
Under normal conditions (when the Manager believes that the securities
markets are not in a volatile or unstable period), the Fund will invest at least
65% of its total assets in income-producing equity securities and equity
substitutes(common stocks, preferred stocks, and securities convertible into
common stocks). When market conditions are unstable, the Fund may invest
substantial amounts of its assets in debt securities, such as money market
instruments or government securities, as described in "Temporary Defensive
Investments," below.
When investing the Fund's assets, the Manager considers many factors,
including the financial condition of particular companies as well as general
economic conditions in the U.S. relative to foreign economies, and the trends in
domestic and foreign stock markets. In evaluating the potential for income from
particular securities, the Manager examines many factors, such as the
consistency of the company's earnings, the industry group the company is in (and
the prospects for that industry in the overall economy), how well the company is
managed, and the size of the company's capitalization. While the Fund focuses on
large or mid-size companies which tend to be more stable investments, the Fund
may invest in smaller issuers as well.
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 manager 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.
o Can the Fund's Investment Objectives and Policies Change? The Fund has
investment objectives, which are described above, as well as investment policies
it follows to try to achieve its objectives. Additionally, the Fund uses certain
investment techniques and strategies in carrying out 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 objectives are fundamental
policies.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Fund's Board of Trustees may change
non-fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus.
o Portfolio Turnover. "Portfolio turnover" describes that rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. Portfolio turnover affects brokerage costs
the Fund pays. The Fund ordinarily does not engage in short-term trading to try
to achieve its objectives. As a result, the Fund's portfolio turnover is not
expected to be more than 100% each year. The "Financial Highlights table" above,
shows the Fund's portfolio turnover rate during past fiscal years.
Investment Risks.
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income or preservation of capital. While the Manager tries to reduce risks by
diversifying investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes in overall
market prices can occur at any time, and because the income earned on securities
is subject to change, there is no assurance that the Fund will achieve its
investment objectives. When you redeem your shares, they may be worth more or
less than what you paid for them.
o 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 not all stock markets move in the same direction at the same time.
Other factors can affect a particular stock's prices, such as poor earnings
reports by an issuer, loss of major customers, major litigation against an
issuer, or changes in government regulations affecting an industry. Not all of
these factors can be predicted.
The Fund attempts to limit market risks by diversifying its investments,
that is, by not holding a substantial amount of stock of any one company and by
not investing too great a percentage of the Fund's assets in any one company.
Also, the Fund does not concentrate its investments in any one industry or group
of industries.
o Foreign Securities Have Special Risks. While foreign securities offer
special investment opportunities, there are also special risks. The change in
value of a foreign currency against the U.S. dollar will result in a change in
the U.S. dollar value of securities denominated in that foreign currency.
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 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. Securities of companies in
emerging market countries may be more difficult to sell and their prices may be
more volatile. More information about the risks and potential rewards of
investing in foreign securities is contained in the Statement of Additional
Information.
o Interest Rate Risks. In addition to credit risks, described below,
debt securities are subject to changes in their value 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.
o Special Risks of Lower-Grade Securities. The Manager may select
high-yield, below investment grade debt securities (including both rated and
unrated securities). These "lower-grade" securities are commonly known as "junk
bonds." All corporate debt securities (whether foreign or domestic) are subject
to some degree of credit risk. Credit risk relates to the ability of the issuer
to meet interest or principal payments on a security as they become due.
Generally, higher yielding lower-grade bonds whether rated or unrated, often
have speculative characteristics and special risks that make them riskier
investments than investment grade securities and are subject greater to credit
risks. 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 and principal due
on the bonds. The issuer's low creditworthiness may increase the potential for
its insolvency. A decline in their values is also likely in the high yield bond
market during a general economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield bonds and
adversely affect the value of outstanding bonds and the ability of the issuers
to repay principal and interest. For foreign lower-grade debt securities, these
risks are in addition to the risks of investing in foreign securities, described
above. 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, the Fund's
limitations on investments in these types of securities (see "Lower-Grade Debt
Securities," below) may reduce some of the risk, as will the Fund's policy of
diversifying its investments. Also, 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 other
risk factors.
o Hedging instruments can be volatile investments and may involve special
risks. The Fund may invest in a variety of hedging instruments. The use of
hedging instruments requires special skills and knowledge of investment
techniques that are different than what is required for normal portfolio
management. If the Manager uses a hedging instrument at the wrong time or judges
market conditions incorrectly, hedging strategies may reduce the Fund's return.
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 can not close
out a position because of an illiquid market for the future or option.
Options trading involves the payment of premiums, and options, futures and
forward contracts are subject to special tax rules that may affect the amount,
timing and character of the Fund's income for distributions. There are also
special risks in particular hedging strategies. For example, if a covered call
written by the Fund is exercised on a security that has increased in value, the
Fund will be required to sell the security at the call price and will not be
able to realize any profit if the security has increased in value above the call
price. The use of forward contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a foreign
currency. To limit its exposure in foreign currency exchange contracts, the Fund
limits its exposure to the amount of its assets denominated in the foreign
currency. 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 risk. The Fund could be obligated to pay more
under its swap agreements than it receives under them, as a result of interest
rate changes. These risks are described in greater detail in the Statement of
Additional Information.
o There are special risks in investing in derivative investments. The
Fund can invest in a number of different kinds of "derivative" investments. In
general, a "derivative investment" is a specially designed investment whose
performance is linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The company issuing the
instrument may fail to pay the amount due on the maturity of the instrument.
Also, the underlying investment or security on which the derivative is based,
and the derivative itself, may not perform the way the Manager expected it to
perform. Markets, underlying securities and indices may move in a direction not
anticipated by the Manager. Performance of derivative investments may also be
influenced by interest rate and stock market changes in the U.S. and abroad and
their prices may be subject to more volatility than other securities. All of
this can mean that the Fund will realize less principal or income from the
investment than expected. Certain derivative investments held by the Fund may be
illiquid. Please refer to "Illiquid and Restricted Securities."
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.
o Warrants and Rights. Warrants basically are options to purchase stock at
set prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed directly by the
issuer to its shareholders. The Fund may invest up to 5% of its total assets in
warrants or rights. That 5% limitation does not apply to warrants and rights the
Fund acquired as part of units with other securities or that are attached to
other securities. No more than 2% of the Fund's total assets may be invested in
warrants that are not listed on either The New York Stock Exchange or The
American Stock Exchange. These percentage limitations are fundamental policies.
For further details about these investments, please refer to "Warrants and
Rights" in the Statement of Additional Information.
o Investment in Bonds and Convertible Securities. The Fund also invests
in bonds, debentures and other fixed-income securities to help seek its primary
objective. While the Fund will normally limit its investments in fixed-income
securities to no more than 35% of its total assets (during normal market
conditions), the Fund may invest in a variety of different types of
income-producing securities.
Convertible securities are bonds, preferred stocks and other securities
that normally pay a fixed rate of interest or dividends and give the owner the
option to convert the security into common stock. While the value of convertible
securities depends in part on interest rate changes and the credit quality of
the issuer, the price will also change based on the price of the underlying
stock. While convertible securities generally have less potential for gain than
common stock, their income provides a cushion against the stock price declines.
They generally pay less income than non-convertible bonds. The Manager generally
analyzes these investment from the perspective of the growth potential of the
underlying stock and treats them as "equity substitutes."
o Lower-Grade Debt Securities. Subject to the limits described below,
the Fund may invest in "lower grade" debt securities commonly known as "junk
bonds." "Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps or similar ratings by other rating
organizations, or if unrated, are determined by the Manager to be of comparable
quality to debt securities rated below investment grade. The Fund may invest in
securities rated as low as "C" or "D" or which may be in default at the time the
Fund buys them. While securities rated "Baa" by Moody's or "BBB" by Standard &
Poor's or Duff & Phelps are investment grade and are not regarded as "junk
bonds," those securities may be subject to greater market fluctuation and risks
of loss of income and principal than higher-grade securities and may be
considered to have certain speculative risks. The Fund may not invest more than
25% of its total assets in "lower-grade" debt securities and no more than 10% of
its total assets may be invested in lower-grade debt securities that are not
convertible. For a description of these securities ratings, please refer to the
Appendix in the Statement of Additional information.
o Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S. Treasury or by private issuers. In general, zero coupon U.S.
Treasury securities include (1) U.S. Treasury notes or bonds that have been
"stripped" of their interest coupons, (2) U.S. Treasury bills issued without
interest coupons, or (3) certificates representing an interest in stripped
securities. A zero coupon Treasury security pays no current interest and trades
at a deep discount from its face value. It will be subject to greater market
fluctuations from changes in interest rates than interest-paying securities. The
Fund accrues interest on zero coupon securities without receiving the actual
cash. As a result of holding these securities, the Fund could possibly be forced
to sell portfolio securities to pay cash dividends or meet redemptions. Zero
coupon securities issued by non-government issuers are similar to U.S.
Government zero coupon securities. They have an additional risk that the issuing
company may fail to pay interest or repay the principal on the obligation.
o Preferred Stock. The Fund may invest in preferred stock. Generally,
preferred stock is an equity security that has a specified dividend and ranks
after bonds and before common stocks in its claim on income for dividend
payments and on assets should the issuing company be liquidated or enter
bankruptcy proceedings. While most preferred stocks pay a dividend, the Fund may
purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily for
their capital appreciation potential. Certain preferred stock may be convertible
into or exchangeable for a given number of common shares. Such preferred stock
tends to be more volatile than nonconvertible preferred stock, which behaves
more like a fixed-income security.
o Real estate investment trusts. The Fund may invest in real estate
investment trusts ("REITS"), real estate development and real estate operating
companies, and shares of companies engaged in other real estate related
businesses. REITs are trusts that sell shares to investors and use the proceeds
to invest in real estate or interests in real estate. A REIT may focus on a
particular project, such an apartment complex, or geographic region, such as the
Northeastern United States, or both.
o Derivative Investments. Derivative investments may be used by the Fund
for hedging purposes or in other cases to attempt to seek income. In the
broadest sense, exchange-traded options and futures contracts (discussed in
"Hedging,," below) may be considered "derivative investments." The Fund cannot
invest in physical commodities or physical commodity contracts, however, the
Fund may, (i) buy and sell hedging instruments permitted by any of its other
investment policies, and (ii) buy and sell options, futures, securities or other
instruments backed by, or the investment return from which is linked to changes
in the price of, physical commodities.
The Fund may invest in different types of derivatives. "Index- linked"
or "commodity-linked" notes are debt securities of companies that call for
interest payments and/or payment on the maturity of the note in different terms
than the typical note where the borrower agrees to make fixed interest payments
and/or to pay a fixed sum on the maturity of the note. Principal and/or interest
payments on an index-linked note depend on the performance of one or more market
indices, such as the S&P 500 Index or a weighted index of commodity futures,
such as crude oil, gasoline and natural gas. The Fund may invest in "debt
exchangeable for common stock" of an issuer or "equity-linked" debt securities
of an issuer. At maturity, the principal amount of the debt security is
exchanged for common stock of the issuer or is payable in an amount based on the
issuer's common stock price at the time of maturity. In either case there is a
risk that the amount payable at maturity will be less than the expected
principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value
at maturity, and/or an interest rate, determined by reference to one or more
foreign currencies. The currency-indexed securities purchased by the Fund may
make payments based on a formula. The payment of principal or periodic interest
may be calculated as a multiple of the movement of one currency against another
currency, or against an index. These investments may entail increased risk to
principal and increased price volatility.
o Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, counting the operations of any
predecessors. Securities of these companies may have limited liquidity (which
means that the Fund may have difficulty selling them at an acceptable price when
it wants to) and the prices of these securities may be volatile. The Fund may
not invest more than 5% of its net assets in securities of small, unseasoned
issuers. That limit is a fundamental policy. See "Investing in Small, Unseasoned
Companies" in the Statement of Additional Information for a further discussion
of the risks involved in such investments.
o Foreign Securities. To broaden its opportunities to seek income or
capital growth, the Fund may purchase equity and debt securities issued or
guaranteed by foreign companies or foreign governments, including foreign
government agencies. Foreign securities also include securities that are traded
primarily on a foreign securities exchange or over-the-counter market, as well
as securities of companies that derive a significant portion of their revenue or
profits from foreign business, investments or sales or have a significant
portion of their assets abroad. Foreign securities do not include securities of
foreign issuers represented in the U.S. markets by American Depository Receipts
(ADRs) or other similar arrangements. The Fund may buy securities of companies
or governments in any country, developed or underdeveloped. Currently the Fund
intends to invest no more than 35% of its total assets in foreign securities,
although the Fund may invest up to 100% of its assets in foreign securities. The
Fund will hold foreign currency only in connection with the purchase or sale of
foreign securities.
o 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, broadly-based stock indices and foreign currencies, and engage in
interest rate swap transactions. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them, described below. The hedging
instruments the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices on its portfolio securities may decline, or to
establish a position in the equity securities market as a temporary substitute
for purchasing individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, hedge the Fund's portfolio
against price fluctuations. Other hedging strategies, such as buying futures and
call options, tend to increase the Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect against
declines in the dollar value of foreign securities the Fund owns, or to protect
against an increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund to distribute to
shareholders, for liquidity purposes or for defensive reasons.
oFutures. The Fund may buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as Stock Index Futures), (2)
interest rates (Interest Rate Futures) (3) other securities indexes (Financial
Futures), and (4) commodities (Commodities Futures). All of these Futures are
described in the Statement of Additional Information.
oPut and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment
in the portfolio. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Fund will not write puts if more than 25% of the
Fund's net assets would have to be segregated to cover put options.
o 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 bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund limits its net exposure under forward
contracts in a particular foreign currency to the amount of its assets
denominated in that currency or denominated in a closely-correlated currency.
The Fund may also use cross-hedging where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
oInterest 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 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. Also, the Fund will segregate liquid assets of any type, including
equity and debt securities of any grade, 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.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 10% of its net assets in illiquid or restricted securities
(the Board may increase that limit to 15%). The Fund's percentage limitation on
these investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers. The Manager monitors
holdings of illiquid securities on an ongoing basis and at time the Fund may be
required to sell some holdings to maintain adequate liquidity.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. The Fund must receive collateral for a loan. These loans are
limited to not more than 10% of the Fund's net 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 its
total assets in the coming year.
o Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. They are used primarily for cash
liquidity purposes. 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 causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. There is no limit on
the amount of the Fund's net assets that may be subject to repurchase agreements
of seven days or less.
o "When-Issued" and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
o Temporary Defensive Investments. When stock market conditions are
unfavorable or in unusual economic or business circumstances, the Fund may
invest all or a portion of its assets in defensive securities. Securities
selected for defensive purposes usually will include debt securities, such as
(1) U.S. Treasury Bills and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (2) commercial paper rated "A-3"
or better by Standard & Poor's Corporation or "P-3" or better by Moody's
Investors Service, Inc., or (3) certificates of deposit, bankers' acceptances or
other bank obligations.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot do
any of the following:
o The Fund cannot buy securities issued or guaranteed by any one issuer (except
the U.S. Government or any of its agencies or instrumentalities) if (with
respect to 75% of its total assets) more than 5% of the Fund's total assets
would be invested in securities of that issuer, or if the Fund would then own
more than 10% of that issuer's voting securities;
o The Fund cannot engage in short sales or purchase securities on margin;
however, the Fund may make margin deposits in connection with any of its
investments;
o The Fund cannot mortgage, pledge or hypothecate the Fund's assets; the escrow,
collateral and margin arrangements involved with any of its investments are not
considered to involve a mortgage, hypothecation or pledge;
o The Fund cannot concentrate more than 25% of the Fund's assets in any one
industry. The Fund interprets this policy to mean that the Fund cannot
concentrate 25% of more of its assets in any one industry; or
o The Fund cannot invest in physical commodities or physical commodity
contracts; however, the Fund may, (i) buy and sell hedging instruments permitted
by any of its other investment policies, and (ii) buy and sell options, futures,
securities or other instruments backed by, or the investment return from which
is linked to changes in the price of, physical commodities.
o The Fund cannot borrow money, except for temporary, emergency purposes or
under other unusual circumstances.
o The Fund cannot invest in real estate or interests in real estate, but may
purchase securities of issuers holding real estate or interest therein.
Unless the Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was originally incorporated in 1967 but was
reorganized in 1986 as a Massachusetts business trust. The Fund is an open-end,
diversified management investment company, with an unlimited number of
authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
officers of the Fund and provides more information about them. Although the Fund
will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote as a class on matters
that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30, 1997
and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o Portfolio Manager. The Portfolio Manager of the Fund is John P. Doney. He
is a Vice President of the Manager. He has been the person principally
responsible for the day-to-day management of the Fund's portfolio since June 22,
1992. Prior to joining the Manager, Mr. Doney served as Senior Vice President
and Chief Investment Officer of Equities of National Securities & Research
Corporation (a mutual fund investment adviser) and was a Vice President of the
National Affiliated Investment Companies.
o 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 average annual 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 average annual
net assets in excess of $500 million. The Fund's management fee for its fiscal
year ended August 31, 1997 was 0.53% of average annual net assets.
The Fund pays expenses related to its daily operations, such as
custodian fees, certain Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's assets and are not
paid directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders through
their investment. 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.
o The Distributor. The Fund's shares are sold through brokers, dealers
and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as the
Fund's Distributor. The Distributor also distributes the shares of the other
Oppenheimer funds managed by the Manager and is sub- distributor for funds
managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class will usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a hypothetical
account in the Fund over various periods, and do not show the performance of
each shareholder's account (which will vary if dividends and distributions are
received in cash, or shares are sold or purchased). The Fund's performance
information may help you see how well your Fund has done over time and to
compare it to other funds or market indices.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but more
detailed information about how total returns are calculated is contained in the
Statement of Additional Information, which also contains information about other
ways to measure and compare the Fund's performance. The Fund's investment
performance will vary over time, depending on market conditions, the composition
of the portfolio, expenses and which class of shares you purchase.
o 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 normally include
the payment of the current maximum initial sales charge. When total returns are
shown for Class B and Class C shares, normally the contingent deferred sales
charge that applies to the period for which total return is shown has been
deducted. However total returns may also be quoted at "net asset value," without
including the effect of either a front-end or the appropriate contingent
deferred sales charge, as applicable, and those returns would be reduced if
sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the fiscal year ended
August 31, 1997, the Fund's performance was positively affected by a number of
factors including the strong performance of the U.S. stock market. The Fund's
investments in securities in the financial services sector, particularly banks
and insurance companies helped the Fund's performance.
During the Fund's last fiscal year, the performance of the U.S. Bond
markets was more volatile. In order to seek current income, the Fund increased
its holdings in convertible securities, zero coupon treasuries and foreign
bonds. This helped the fund's policy of attempting to maintain a constant
dividend for its Class A shares. The Fund's portfolio holdings, allocations and
strategies are subject to change.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in Class A , Class B and
Class C shares of the Fund held until August 31, 1997. In the case of Class A
shares, performance is measured over a ten-year period, and in the case of Class
B shares, performance is measured from the inception of the class on August 17,
1993. In the case of Class C shares, performance is measured from the inception
of the class on November 1, 1995.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a general
measurement 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 the securities in the S&P 500 index, which does
not include debt securities. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index.
Oppenheimer Equity Income Fund
Comparison of Change in Value
of $10,000 Hypothetical Investments
in Oppenheimer Equity Income Fund and
the S&P 500 Index
[Graph]
Past performance is not predictive of future performance.
Oppenheimer Equity Income Fund
(1)
Average Annual Total Returns of the Fund at 8/31/97
Class A Shares(2)
1-Year 5-Year 10-Year
25.72% 14.69% 10.59%
Class B Shares(3)
1-Year Life
27.17% 14.32%
Class C Shares (4)
1-Year Life
31.31% 22.72%
- -------------------
The returns and the ending account value in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
1. The Fund changed its fiscal year end from June to August. 2. The inception
date of the Fund (Class A shares) was 12/01/70. The average annual total returns
are shown net of the applicable 5.75% maximum sales charge. 3. Class B shares of
the Fund were first publicly offered on 8/17/93. The average annual total
returns are shown net of the applicable 5% and 3% contingent deferred sales
charge for the one year period and the life of the class, respectively. The
ending account value in the graph is net of the applicable 3% contingent
deferred sales charge. 4. Class C shares of the Fund were first publicly offered
on 11/1/95. The one year return is shown net of the applicable 1% contingent
deferred sales charge. Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 32). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares," below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
discussed in "Buying Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, considering the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase only one class of
shares and not a combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares,
for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million or
more of Class C shares, from a single investor.
o Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to invest
more than $100,000 over the long term, Class A shares will likely be more
advantageous than Class B shares or Class C shares, as discussed above, because
of the effect of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A shares under
the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore, you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B or
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for you. For
example, share certificates are not available for Class B or Class C shares, and
if you are considering using your shares as collateral for a loan, that may be a
factor to consider. Additionally, the dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne solely by that
class, such as the asset-based sales charge, as described below and in the
Statement of Additional Information.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charges and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares, that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
o 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.
o Under pension and profit-sharing plans, 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends and distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways --through
any dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with
the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for you.
o Payment by Federal Funds Wire: Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor ----- of the wire
and receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement instructions used
to establish your account. Please refer to "AccountLink," below, for more
details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
and entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, normally your order must be
transmitted to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as 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 commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases by a Retirement Plan qualified under section 401(a) if the
Retirement Plan has total plan assets of $500,000 or more;
o Purchases aggregating $1 million or more;
o Purchases by a Retirement Plan qualified under sections 401(a) or
401(k) of the Internal Revenue Code, by a non-qualified deferred compensation
plan, employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP-IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans")that, (1) buys shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that it projects
to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds-sponsored Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or registered investment
adviser that has made special arrangements with the Distributor for these
purchases, or (2) by a direct rollover of a distribution from a qualified
Retirement Plan if the administrator of that plan has made special arrangements
with the Distributor for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-retirement plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a Retirement Plan in which Oppenheimer
funds are also offered as investment options under a special arrangement with
the Distributor if the purchase occurs more than 30 days after the addition of
the Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997 within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge may be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all Oppenheimer funds
you purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges," below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will apply.
Shareholders of the Fund who acquired (and still hold) Fund shares as a result
of a reorganization of Advance America Funds, Inc. into the Fund on October 18,
1991, and who held shares of Advance America Funds, Inc. on March 30, 1990, may
purchase shares of the Fund at a maximum sales charge of 4.50%
o Special Arrangements With Dealers. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can also
count Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial or contingent deferred sales charge to reduce the sales
charge rate for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The Distributor will add
the value, at current offering price, of the shares you previously purchased and
currently own to the value of current purchases to determine the sales charge
rate that applies. The Oppenheimer funds are listed in "Reduced Sales Charges"
in the Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o 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);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor (1) providing specifically for
the use of shares of the Fund in particular investment products or employee
benefit plans made available to their clients (those clients may be charged a
transaction fee by their dealer, broker, bank or adviser for the purchase or
sale of Fund shares) or (2) 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;
o (1) investment advisors and financial planners who have entered into
an agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995; or
o qualified Retirement Plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements were
consummated and share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or its affiliates acts as
sponsor;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 30 days from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid (this waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner), this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require evidence of
your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the
dealer agreed in writing to accept the dealer's portion of the sales commission
in installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans
or other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions," if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares to reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Reimbursement is made quarterly at an annual
rate that may not exceed 0.25% of the average annual net assets of Class A
shares of the Fund. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares and to reimburse itself (if the Fund's Board of Trustees authorizes
such reimbursements, which it has not yet done) for its other expenditures under
the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. As discussed in "Annual Fund Operating Expenses," above, the
Board of Trustees has set a rate of 0.15% for net assets representing shares of
the Fund sold before April 1, 1991. That rate can change. The payments under the
Plan increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales change is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
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.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price
(including increases due to the reinvestment of dividends and capital gains
distributions). The Class C 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 C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
All purchases are considered to have been made on the first regular business day
of the month in which the purchase was made.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services and costs in distributing Class B
and C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year. If either Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to the Distributor for distributing
shares before the Plan was terminated.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge allows
investors to buy Class B or C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell those shares.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to dealers on a
quarterly basis.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount
paid by the Distributor to the dealer at the time of sale of Class B shares is
4.00% of the purchase price. The Fund pays the asset-based sales charge to the
Distributor for its services rendered in distributing Class B shares.
Asset-based sales charge payments are at a fixed rate that is not related to the
Distributor's expenses. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee payments it
makes, and its financing costs of distributing and selling Class B shares. The
Distributor may pay the Class B service fee and the asset-based sales charge to
the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is 1.00% of the
purchase price. Those payments, retained by the Distributor during the first
year Class C shares are outstanding, are at a fixed rate that is not related to
the Distributor's expenses. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. The Distributor may pay the Class C service fee
and asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C 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 August 31, 1997, the end of the Class B and Class C
Plan years, the Distributor had incurred unreimbursed expenses under the Class B
Plan of $9,440,081 (equal to 2.91% of the Fund's net assets represented by Class
B shares on August 31, 1997)and unreimbursed expenses under the Class C Plan of
$653,557(equal to 1.35% of the Fund's net assets represented by Class B shares
on August 31, 1997). If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for expenses it incurred before the Plan was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent
deferred sales charges will not be applied to shares purchased in certain types
of transactions nor will it apply to Class B and Class C shares redeemed in
certain circumstances as described below. The reasons for this policy are
discussed in "Reduced Sales Charges" in the Statement of Additional Information.
In order to receive a waiver of the Class B or Class C contingent deferred sales
charge, you must notify the Transfer Agent which conditions apply.
Waivers for Redemptions of Shares in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for redemptions of
shares in the following cases:
o distributions to participants or beneficiaries from Retirement Plans,
if the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59 1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually measured from the date the
Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account Rules
and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C shares
sold or issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o 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.
o 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 at 1-800-533-3310.
o 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.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o 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.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Information for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each other
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers o 403(b)(7) Custodial
Plans for employees of eligible tax-exempt organizations, such as schools,
hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners or
people with income from self-employment, including SAR SEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons and other
employers
o 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received and accepted
by the Transfer Agent. The Fund offers you a number of ways to sell your shares:
in writing 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.
o 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.
o 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):
o You wish to redeem more than $50,000 worth of shares and receive a check,
o The redemption check is not payable to all shareholders listed on the account
statement, o The redemption check is not sent to the address of record on your
account statement, o Shares are being transferred to a Fund account with a
different owner or name, o Shares are redeemed by someone other than the owners
(such as an Executor).
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing as a fiduciary on behalf of a corporation,
partnership or other business you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
o Your name,
o The Fund's name,
o Your Fund account number (from your account statement), o The dollar
amount or number of shares to be redeemed, o Any special payment
instructions, o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the account is
registered, and o Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person
asking to sell shares.
Use the following address Send courier or Express
for requests by mail: Mail requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D,
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your 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-sponsored retirement plan or under a share certificate by
telephone.
o To redeem shares through a service representative, call 1-800-
852-8457,
o To redeem shares automatically on PhoneLink, call 1-800-533-3310.
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds sent via ACH transfer to
that bank account.
o 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.
o Telephone Redemptions Through AccountLink or By Wire. There are no
dollar limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive dividends
on the proceeds of the shares you redeemed while they are waiting to be
transferred.
You may also have the Transfer Agent send redemption proceeds of $2,500
or more by Federal Funds wire to a designated commercial bank account. The bank
must be a member of the Federal Reserve wire system. There is a $10 fee for each
Federal Funds wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that the wire
may be delayed up to seven days to enable the Fund to sell securities to pay the
redemption proceeds. No dividends are accrued or paid on the proceeds of shares
that have been redeemed and are awaiting transmittal by wire. To establish wire
redemption privileges on an account that is already established, please contact
the Transfer Agent for instructions.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence,
o The Prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege,
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them, after the account is open 7 days, you
can exchange shares every regular business day,
o You must meet the minimum purchase requirements for the fund you purchase
by exchange, o Before exchanging into a fund, you should obtain and read its
Prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o 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."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered with
the same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by calling a
service representative at 1-800-525-7048. That list can change from time to
time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
o 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.
o 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.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund, which
may result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange that day, which is normally 4:00 P.M.
but may be earlier on some days, on each day the Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number of
shares of that class that are outstanding. The Fund's Board of Trustees has
established procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o 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.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o 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.
o 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.
o The redemption price for shares will vary from day to day because the
values of the securities in the Fund's portfolio fluctuate, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer Agent
receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker-dealer, payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 10 days from the date the shares were purchased. That
delay may be avoided if you purchase shares by Federal Funds wire, certified
check or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o 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.
o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be avoided
by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How to Buy Shares," you may be subject to
a contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income and pays such dividends to shareholders
quarterly on or about the 29th of March, June, September and December, but the
Board of Trustees can change that date. It is expected that distributions paid
with respect to Class A shares will generally be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares will
generally be higher.
During the Fund's fiscal year ended August 31, 1997, the Fund attempted
to pay dividends on its Class A shares at a constant level. That was done
keeping in mind the amount of net investment income and other distributable
income available from the Fund's portfolio investments. However, the amount of
each dividend can change from time to time (or there might not be a dividend at
all on any class) depending on market conditions, the Fund's expenses, and the
composition of the Fund's portfolio. Attempting to pay dividends at a constant
level required the Manager to monitor the Fund's income stream from its
investments and at times to select higher yielding securities (appropriate to
the Fund's objectives and investment restrictions) to maintain income at the
required level. This practice did not affect the net asset values of any class
of shares. The Board of Trustees may change or end the Fund's targeted dividend
level for Class A shares at any time. There is no targeted dividend level for
Class B or Class C shares.
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 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 calendar 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 and distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested. For
other accounts, you have four options:
o 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. o 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.
o 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 through AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you held your shares. Dividends paid
from short-term capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of all taxable
distributions you received in the previous year. So that the Fund will not have
to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code;
although the Fund reserves the right not to qualify in a particular year.
o "Buying a Dividend": If you buy shares on or just before the ex-
dividend date, or just before the Fund declares a capital gains distribution,
you will pay the full price for the shares and then receive a portion of the
price back as a taxable dividend or capital gain.
o Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally, 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.
o 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.
-4-
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement Plans. The
following table sets forth the initial sales charge rates for Class A shares
purchased by a "Qualified Retirement Plan" through a single broker, dealer or
financial institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement Plan or that
Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP-IRA or IRA plan for employees of a single
employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50
or more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages 32 and 33 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares of
the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of
any of the Former Quest For Value Funds pursuant to a special "strategic
alliance" with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the
following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the Internal Revenue Code or from custodial accounts under Section
403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation
plans under Section 457 of the Code, and other employee benefit plans, and
returns of excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or Class C shares
if the annual withdrawal does not exceed 10% of the initial value of the
account, and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum
value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following case, the contingent deferred sales
charge will be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund or by exchange
from an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6, 1995, but
prior to November 24, 1995: (1) distributions to participants or beneficiaries
from Individual Retirement Accounts under Section 408(a) of the Internal Revenue
Code or retirement plans under Section 401(a), 401(k), 403(b), and 457 of the
Code, if those distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or disability (as
defined in the Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but only
for Class B or C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less than the
required minimum account value. A shareholder's account will be credited with
the amount of any contingent deferred sales charge paid on the redemption of any
Class A, B or C shares of the Fund described in this section if within 90 days
after that redemption, the proceeds are invested in the same Class of shares in
this Fund or another Oppenheimer fund.
APPENDIX TO PROSPECTUS OF
OPPENHEIMER EQUITY INCOME FUND
Graphic material included in the Prospectus of Oppenheimer Equity Income
Fund: "Comparison of Total Return of Oppenheimer Equity Income Fund with the S&P
500 Index - Change in Value of a $10,000 Hypothetical Investments.
Linear graphs will be included in the Prospectus of Oppenheimer Equity
Income Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund. In the case of
the Fund's Class A shares, that graph will cover each of the Fund's last ten
fiscal year from 8/31/87 through 8/31/97; in the case of the Fund's Class B
shares the graph will cover the period from the inception of the class (August
17, 1993) through 8/31/97; and in the case of the Fund's Class C shares, the
graph will cover the period from the inception of the class through 8/31/97. The
graphs will compare such values with hypothetical $10,000 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 - Comparing the Fund's Performance
to the Market."
Fiscal Year Oppenheimer S&P 500
(Period) Ended Equity Income A Index
6/30/87 $9,425 $10,000
6/30/88 $9,618 $9,307
6/30/89 $10,897 $11,217
6/30/90 $11,885 $13,061
6/30/91 $12,323 $14,024
6/30/92 $13,587 $15,902
6/30/93 $15,864 $18,066
6/30/94 $15,969 $18,319
6/30/95 $18,469 $23,087
6/30/96 $21,907 $29,086
8/31/96(1) $21,849 $28,389
8/31/97 $29,144 $39,921
Fiscal Oppenheimer S&P
Period Ended Equity Income Fund B 500 Index
- ------------ -------------------- ---------
8/17/93(2) $10,000 $10,000
6/30/94 $9,765 $9,810
6/30/95 $11,216 $12,363
6/30/96 $13,188 $15,575
8/31/96(1) $13,141 $15,202
8/31/97 $17,169 $21,378
Fiscal Oppenheimer S & P
Period Ended Equity Income Fund C 500 Index
- ------------ -------------------- ---------
11/1/95(3) $10,000 $10,000
6/30/96 $11,050 $11,713
8/31/96 $11,001 $11,432
8/31/97 $14,554 $16,077
- ----------------------
(1) The fund changed its fiscal year end from June to August. (2) Class B shares
of the Fund were first publicly offered on August 17, 1993. (3) Class C shares
of the Fund were first publicly offered on November 1, 1995.
Oppenheimer Equity Income Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc. OppenheimerFunds
Distributor, Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
Oppenheimer Equity Income Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated December 22, 1997
This Statement of Additional Information of Oppenheimer Equity Income Fund
is not a Prospectus. This document contains additional information about the
Fund and supplements information in the Prospectus dated December 22 , 1997. It
should be read together with the Prospectus, which may be obtained by writing to
the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies.....................................2
Investment Policies and Strategies ...............................2
Other Investment Techniques and Strategies........................4
Other Investment Restrictions....................................17
How the Fund is Managed ..............................................18
Organization and History.........................................18
Trustees and Officers of the Fund................................18
The Manager and Its Affiliates...................................24
Brokerage Policies of the Fund........................................25
Performance of the Fund...............................................27
Distribution and Service Plans........................................31
About Your Account
How To Buy Shares.....................................................33
How To Sell Shares....................................................41
How To Exchange Shares................................................45
Dividends, Capital Gains and Taxes....................................46
Additional Information About the Fund.................................47
Financial Information About the Fund
Independent Auditors' Report..........................................49
Financial Statements..................................................50
Appendix A: Ratings of Investments..................................A-1
Appendix B: Corporate Industry Classifications......................B-1
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and StrategiThe investment objectives and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objectives. Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
adviser, OppenheimerFunds, Inc. (the "Manager"), evaluates the merits of
particular equity and fixed-income securities primarily through the exercise of
its own investment analysis. This may include, among other things, evaluation of
the history of the issuer's operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, the issuer's pending product
developments and developments by competitors, the effect of general market and
economic conditions on the issuer's business, and legislative proposals or new
laws that might affect the issuer.
The portion of the Fund's assets allocated to particular securities and
types of special investment methods selected will depend upon the judgment of
the Fund's Manager as to the future movement of the equity and fixed-income
securities markets. If the Manager believes that economic conditions favor
dividend-paying equity and convertible securities and fixed-income investments
having higher yields, the Fund will emphasize securities and investment methods
selected to achieve its investment objectives. If the Manager believes that a
market decline is likely, defensive shorter-term securities and investment
methods may be emphasized (See "Temporary Defensive Investments," below).
o Investment Risks of Fixed-Income Securities. All fixed-income securities
are subject to two types of risks: credit risk and interest rate risk. Credit
risk relates to the ability of the issuer to meet interest or principal payments
on a security as they become due. Generally, higher yielding lower-grade bonds
are subject to credit risk to a greater extent than lower yielding, investment
grade bonds. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting solely from the inverse relationship between
price and yield of outstanding fixed-income securities. An increase in
prevailing interest rates will generally reduce the market value of
already-issued fixed- income investments, and a decline in interest rates will
tend to increase their value. In addition, debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater changes in their prices from changes in interest rates than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest payable on
those securities, and thus the cash income from such securities is not affected
by interest rate changes. However, those price fluctuations will be reflected in
the valuations of these securities and therefore the Fund's net asset values.
As stated in the Prospectus, the Fund may not invest more than 10% of its
assets in non-convertible bonds and debentures in the lower rating categories of
Moody's Investors Service, Inc., Standard & Poor's Corporation, Fitch Investors
Service, L.P. and Duff & Phelps, the principal rating services. High yield
securities, whether rated or unrated, may be subject to greater market
fluctuations and risks of loss of income and principal than lower-yielding,
higher-rated, fixed-income securities. Risks of high yield securities may
include (i) limited liquidity and secondary market support, (ii) substantial
market price volatility resulting from changes in prevailing interest rates,
(iii) subordination of the obligations to the prior claims of banks and other
senior lenders, (iv) the operation of mandatory sinking fund or call/redemption
provisions during periods of declining interest rates that could cause the Fund
to be able to reinvest premature redemption proceeds only in lower-yielding
portfolio securities, (v) the possibility that earnings of the issuer may be
insufficient to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of rising interest
rates and economic downturn. As a result of the limited liquidity of high yield
securities, at times their prices have experienced significant and rapid
declines when a substantial number of holders decided to sell simultaneously. A
decline is also likely in the high yield bond market during a general economic
downturn. An economic downturn or an increase in interest rates could severely
disrupt the market for high yield bonds and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal and
interest. In addition, there have been several Congressional attempts to limit
the use of tax and other advantages of high yield bonds which, if enacted, could
adversely affect the value of these securities and the Fund's net asset value.
For example, federally-insured savings and loan associations have been required
to divest their investments in high yield bonds.
o Convertible Securities. While convertible securities are a form of debt
security in many cases, their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in the case of
non-convertible fixed-income securities. To determine whether convertible
securities should be regarded as "equity equivalents," the Manager examines the
following factors: (1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common stock of the
issuer, (2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis (considering the
effect of converting the convertible securities), and (3) the extent to which
the convertible security may be a defensive "equity substitute," providing the
ability to participate in any appreciation in the price of the issuer's common
stock.
o Warrants and Rights. Warrants basically are options to purchase equity
securities at set prices valid for a specified period of time. The prices of
warrants do not necessarily move in a manner parallel to the prices of the
underlying securities. The price the Fund pays for a warrant will be lost unless
the warrant is exercised prior to its expiration. Rights are similar to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
o Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S. Treasury or by private issuers, such as corporations. Zero
coupon U.S. Treasury securities include: (1) U.S. Treasury bills without
interest coupons, (2) U.S. Treasury notes and bonds that have been stripped of
their unmatured interest coupons and (3) receipts or certificates representing
interests in such stripped debt obligations or coupons. These securities usually
trade at a deep discount from their face or par value and will be subject to
greater fluctuations in market value in response to changing interest rates than
debt obligations of comparable maturities that make current payments of
interest. However, the lack of periodic interest payments means that the
interest rate is "locked in" and there is no risk of having to reinvest periodic
interest payments in securities having lower rates.
Because the Fund accrues taxable income from zero coupon securities without
receiving cash, the Fund may be required to sell portfolio securities in order
to pay dividends or redemption proceeds for its shares, which require the
payment of cash. This will depend on several factors: the proportion of
shareholders who elect to receive dividends in cash rather than reinvesting
dividends in additional shares of the Fund, and the amount of cash income the
Fund receives from other investments and the sale of shares. In either case,
cash distributed or held by the Fund that is not reinvested by investors in
additional Fund shares will hinder the Fund from seeking current income.
Other Investment Techniques and Strategies
o Hedging. The Fund may use hedging instruments for the purposes described
in the Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, or 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
Futures, (ii) buy puts on such Futures or on securities, or (iii) write covered
calls on securities or on Futures. When hedging to establish a position in the
equity securities markets as a temporary substitute for the purchase of
individual equity securities the Fund may: (i) buy Futures, or (ii) buy calls on
such Futures or securities held by it. Normally, the Fund would then purchase
the equity securities and terminate the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o Stock Index Futures, Financial Futures and Interest Rate Futures. The
Fund may buy and sell futures contracts relating to a securities index
("Financial Futures"), including "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. Financial futures are contracts based on the future value of the
basket of securities that comprise the underlying index. 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.
The Fund may also buy Futures relating to debt securities ("Interest Rate
Futures"). An Interest Rate Future obligates the seller to deliver and the
purchaser to take a specific type of debt security at a specific future date for
a fixed price to settle the futures transaction, or to enter into an offsetting
contract. As with Financial Futures, no monetary amount is paid or received by
the Fund on the purchase of an Interest Rate 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 Financial Futures and Stock Index
Futures by their terms call for settlement by the delivery of cash, and Interest
Rate Futures call for the delivery of a specific debt security, 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.
o Purchasing Puts and Calls. The Fund may purchase calls to protect against
the possibility that the Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund purchases a call (other than in a
closing purchase transaction), it pays a premium and, except as to calls on
stock indices, has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a fixed
exercise price. 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, 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 call on a stock index, it pays
a premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
The Fund may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable investment to
a purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market price
of the underlying investment) regardless of market price changes during the call
period. 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 option
transaction costs and the premium received on the call the Fund has written is
more or less than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised, because the Fund
retains the underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as are
premiums on lapsed calls, and when distributed by the Fund are taxable as
ordinary income. If the Fund could not effect a closing purchase transaction due
to the lack of a market, it would have to hold the callable investment until the
call lapsed or was exercised. The Fund may also write calls on Futures without
owning a futures contract or deliverable securities, provided that at the time
the call is written, the Fund covers the call by segregating in escrow an
equivalent dollar value of deliverable securities or liquid assets. The Fund
will segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances would
an exercise notice as to a Future put the Fund in a short futures position.
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 that are traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required from the Fund for such option
transactions. OCC will release the securities covering a call on the expiration
of the call or when the Fund enters into a closing purchase transaction. Call
writing affects the Fund's turnover rate and the brokerage commissions it pays.
Commissions, normally higher than on general securities transactions, are
payable on writing or purchasing a call.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures are
similar to puts and calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements of individual securities or futures contracts. When the Fund
buys a call on a stock index or Stock Index Future, it pays a premium. If the
Fund exercises the call during the call period, 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 stock 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 call 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 a stock
index or Stock Index 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 cash to the Fund to settle the put if the closing level of
the stock index or Stock Index 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.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, 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 the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments 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.
o Options on Foreign Currency. The Fund intends to write and purchase calls
on foreign currencies. The Fund may purchase and write puts and calls on foreign
currencies that are traded on a securities or commodities exchange or
over-the-counter markets or are quoted by major recognized dealers in such
options. It does so to protect against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign securities to be
acquired. If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of such securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If a decline in the dollar value of a foreign currency
is anticipated, the decline in value of portfolio securities denominated in that
currency may be partially offset by writing calls or purchasing puts on that
foreign currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call may be written by the Fund on a foreign currency to
provide a hedge against a decline due to an expected adverse change in the
exchange rate in the U.S. dollar value of a security which the Fund owns or has
the right to acquire and which is denominated in the currency underlying the
option. This is a cross-hedging strategy. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account with the Fund's
custodian, liquid securities of any type, including equity and debt securities
of any grade, in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The Fund
may enter into a Forward Contract in order to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency.
There is a risk that use of Forward Contracts may reduce the gain that would
otherwise result from a change in the relationship between the U.S. dollar and a
foreign currency. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to procedures
and regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign currency of
the forward contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." The success of cross hedging
is dependent on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the U.S.
dollar. To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
The Fund will not speculate with foreign currency exchange contracts. There
is no limitation as to the percentage of the Fund's assets that may be committed
to foreign currency exchange contracts. The Fund does not enter into such
forward contracts or maintain a net exposure in such contracts to the extent
that the Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that currency (or
another currency that is subject to the hedge), or enter into a "cross hedge,"
unless it is denominated in these currencies provided the excess amount is
"covered" by liquid assets of any type including equity and debt securities of
any grade, dominated in any currency, at least equal at all time to the amount
of such excess. See "Tax Aspects of Covered Calls and Hedging Instruments" below
for a discussion of the tax treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value of
portfolio positions ("position hedge"). In a position hedge, for example, when
the Fund believes that foreign currency may suffer a substantial decline against
the U.S. dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed U.S. dollar amount 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's Custodian will identify liquid assets for a separate account
having a value equal to the aggregate amount of the Fund's commitment under
Forward Contracts to cover its short positions. The Fund will not enter into
such Forward Contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge. The Fund, however, in order to avoid excess transactions
and transaction costs, may maintain a net exposure to Forward Contracts in
excess of the value of the Fund's portfolio securities or other assets
denominated in these currencies provided the excess amount is "covered" by
liquid securities denominated in any currency, at lest 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 contact 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 differed from 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.
o 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 be
greater than those received by it. Credit risk arises from the possibility that
the counterparty will default. If the counterparty to an interest rate swap
defaults, the Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap transactions
on an ongoing basis. The Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements.
A master netting agreement provides that all swaps done between the Fund
and that counterparty under the master agreement shall be regarded as parts of
an integral agreement. If on any date amounts are payable in the same currency
in respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with respect
to each swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as
"aggregation." The Fund will not invest more than 25% of its assets in interest
rate swap transactions.
o 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 excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5 adopted by the
CFTC. The Rule does not limit the percentage of the Fund's assets that may be
used for Futures margin and related option premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate initial
futures margin and related option premiums to no more than 5% of the Fund's net
assets for hedging strategies that are not considered bona fide hedging
strategies under the Rule. Under the Rule, the Fund also must use short futures
and options on futures positions solely for bona fide hedging purposes within
the meaning and intent of the applicable provisions of the Commodities Exchange
Act.
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. 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.
o 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).
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 and
timing of gains (or losses) recognized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a position(s) making up a
straddle is allowed only to the extent such loss exceeds any unrecognized gain
in the offsetting positions making up the straddle. Disallowed loss is generally
allowed at the point where there is no unrecognized gain in the offsetting
positions making up the straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as an 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.
o 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 (i) selling Stock Index Futures or (ii) purchasing puts on stock
indices or Stock Index Futures to attempt to protect against declines in the
value of the Fund's equity securities. The risk is that the prices of Stock
Index Futures 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 depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
decide to make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio diverges from the securities included in the applicable index. To
compensate for the imperfect correlation of movements in the price of the 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.
If the Fund uses hedging instruments to establish a position in the equities
markets as a temporary substitute for the purchase of individual equity
securities (long hedging) 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 a 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.
o Investing in Small, Unseasoned Companies. The securities of small,
unseasoned companies may have a limited trading market, which may adversely
affect the Fund's ability to dispose of them and can reduce the price the Fund
might be able to obtain for them. If other investors trade the same securities
when the Fund attempts to dispose of its holdings, the Fund may receive lower
prices than might otherwise be obtained, because of the thinner, less liquid
market for such securities. The limitation against investing more than 5% of the
Fund's net assets in securities of companies (including predecessors) with a
record of less than three years' continuous operation does not apply to public
utilities or pipeline companies.
o Foreign Securities. As noted in the Prospectus, the Fund may invest in
securities (which may be denominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational entities
(described below) and foreign governments or their agencies or
instrumentalities, and in securities issued by U.S. corporations denominated in
non-U.S. currencies. The types of foreign debt obligations and other securities
in which the Fund may invest are the same types of debts and equity securities
identified above. Foreign securities are subject however, to additional risks
not associated with domestic securities, as discussed below. These additional
risks may be more pronounced as to investments in securities issued by emerging
market countries or by companies located in emerging market countries.
"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 other similar
arrangements 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.
The Fund may invest in U.S. dollar-denominated foreign debt obligations
known as "Brady Bonds," which are issued for the exchange of existing commercial
bank loans to foreign entities for new obligations that are generally
collateralized by zero coupon U.S. Treasury securities having the same maturity.
Because the Fund may purchase securities denominated in foreign currencies, a
change in the value of such foreign currency against the U.S. dollar will result
in a change in the amount of income the Fund has available for distribution.
Because a portion of the Fund's investment income may be received in foreign
currencies, the Fund will be required to compute its income in U.S. dollars for
distribution to shareholders, and therefore the Fund will absorb the cost of
currency fluctuations. After the Fund has distributed income, subsequent foreign
currency losses may result in the Fund's having distributed more income in a
particular fiscal period than was available from investment income, which could
result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available from
investing solely in securities of domestic issuers, including the opportunity to
invest in foreign issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S. markets. If
the Fund's portfolio securities are held abroad, the sub-custodians or
depositories holding them must be approved by the Fund's Board of Trustees to
the extent that approval is required under applicable rules of the Securities
and Exchange Commission.
o Risks of Foreign Investing. Investments in foreign securities present
special additional risks and considerations not typically associated with
investments in domestic securities: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to changes in currency
rates and control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers; less volume on foreign exchanges than on
U.S. exchanges; greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and brokers than
in the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement of
portfolio transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign economies. In
the past, U.S. Government policies have discouraged certain investments abroad
by U.S. investors, through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
o 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. Illiquid
securities include repurchase agreements maturing in more than seven days or
certain participation interests other than those with puts exercisable within
seven days.
The 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 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.
o Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral on
each business day must at least equal the value of the loaned securities (by
"marking to market" daily) and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. When it lends securities, the
Fund receives amounts equal to the dividends or interest on loaned securities
and also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt securities
purchased with such loan collateral. Any of these payments may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. The terms of the Fund's loans must meet applicable tests
under the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter. The
Fund has undertaken that it will not increase the amount of its portfolio
securities that it may lend its to brokers, dealers and other financial
institutions over 10% of the Fund's net assets without first receiving an
affirmative vote of a majority of the Fund's shareholders as is defined under
the Investment Company Act.
o "When-Issued" and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. Although the Fund will enter into such transactions
for the purpose of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. When such
transactions are negotiated, the price (which is generally expressed in yield
terms) is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security for
which payment will be made on a future date may be deemed a separate security
and involve a risk of loss if the value of the security declines prior to the
settlement date. During the period between commitment by the Fund and settlement
(generally within two months but not to exceed 120 days), no payment is made for
the securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to market
fluctuation; the value at delivery may be less than the purchase price. The Fund
will maintain a segregated account with its Custodian, consisting of liquid
assets of any type, including equity and debt securities of any grade, at least
equal to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure what is
considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure of the buyer or seller to do so may result
in the Fund losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase or sell a
security on a when-issued or forward commitment basis, it records the
transaction and reflects the value of the security purchased, or if a sale, the
proceeds to be received, in determining its net asset value. If the Fund chooses
to (i) dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies and not for the purposes
of investment leverage. The Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above), when- issued securities and forward commitments may be sold prior to
settlement date. In addition, changes in interest rates before settlement in a
direction other than that expected by the Manager will affect the value of such
securities and may cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a technique
to use against anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling prices, the Fund might sell
securities in its portfolio on a forward commitment basis to attempt to limit
its exposure to anticipated falling prices. In periods of falling interest rates
and rising prices, the Fund might sell portfolio securities and purchase the
same or similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor" is 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
credit requirements set by the Fund's Board of Trustees from time to time. 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 value of the collateral must equal or exceed the
repurchase price to fully collateralize the repayment obligation. Additionally,
the Manager will impose creditworthiness requirements to confirm that the vendor
is financially sound and will continuously monitor the collateral's value.
o Temporary Defensive Investments. When the equity markets in general are
declining, the Fund may commit an increasing portion of its assets to defensive
securities. These may include the types of securities described in the
Prospectus. When investing for defensive purposes, the Fund will normally
emphasize investment in short-term debt securities (that is, securities maturing
in one year or less from the date of purchase), since those types of securities
are generally more liquid and usually may be disposed of quickly without
significant gains or losses so that the Manager may have liquid assets when it
wishes to make investments in securities consistent with its investment
objectives.
o Senior Securities. The Fund has undertaken that it will not issue "senior
securities," without first receiving an affirmative vote of a majority of the
Fund's shareholders as is defined under the Investment Company Act, however,
this does not prohibit it from borrowing money as described in the Prospectus,
or entering into margin, collateral, segregation or escrow arrangements, or
options, futures, hedging transactions or other investments as permitted by its
other investment policies.
Other Investment Restrictions
The Fund's most significant investment restrictions are described in the
Prospectus. The following are also fundamental policies, and together with the
Fund's fundamental investment policies described in the Prospectus, cannot be
changed without the approval of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, such a "majority" vote is defined
as the vote of the holders of the lesser of (i) 67% or more of the shares
present or represented by proxy at a shareholder meeting, if the holders of more
than 50% of the outstanding shares are present, or represented by proxy; or (ii)
more than 50% of the outstanding shares.
Under these additional restrictions:
o The Fund cannot act as an underwriter of securities of other issuers,
except in connection with sales of its portfolio securities;
o The Fund cannot buy or sell any securities, other than shares of the
Fund, from or to any officer or Trustee of the Fund or officer or director of
the Manager or firms of which any of them are members (however, such persons may
act as brokers for the Fund);
o The Fund cannot buy or retain securities of any issuer if those officers
and Trustees of the Fund or officers and directors of the Manager who
beneficially own more than .5% of the securities of the issuer together own more
than 5% of the securities of such issuer;
o The Fund cannot invest in securities of any company for the purpose of
management or the exercise of control;
o The Fund cannot cease to maintain its business as an investment company
as defined in the Investment Company Act; or
o The Fund cannot accept the purchase price for any of its shares without
immediately thereafter issuing an appropriate number of shares.
For purposes of the Fund's policy not to concentrate its assets described in
"Other Investment Restrictions" in the Prospectus, the Fund has adopted the
industry classifications set forth in Appendix B to this Statement of Additional
Information. This is not a fundamental policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. All of the Trustees are also trustees, directors or
managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer
Real Asset Fund, Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund,
Oppenheimer Cash Reserves, Oppenheimer Strategic Income Fund, Centennial
America Fund, L.P., The New York Tax-Exempt Income Fund, Inc., Oppenheimer
Variable Account Funds, Oppenheimer Champion Income Fund, Oppenheimer
International Bond Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Integrity Funds, Oppenheimer Limited-Term Government Fund, Oppenheimer Municipal
Fund, Panorama Series Fund, Inc., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax Exempt Trust and Centennial Tax Exempt Trust (all of the foregoing funds are
collectively referred to as the "Denver-based Oppenheimer funds") except for Ms.
Macaskill, who is a Trustee, Director or Managing General Partner of all the
Denver-based Oppenheimer funds except Oppenheimer Integrity Funds, Panorama
Series Fund, Inc., Oppenheimer Strategic Income Fund and Oppenheimer Variable
Account Funds. In addition, Mr. Fossel is not a Trustee of Centennial New York
Tax- Exempt Trust or a Managing General Partner of Centennial America Fund, L.P.
Messrs. Bishop, Bowen, Donohue, Farrar and Zack hold similar positions as
officers of all such funds. Ms. Macaskill is President and Mr. Swain is Chairman
of the Denver-based Oppenheimer funds. As of November 21, 1997, the Trustees and
officers of the Fund as a group owned less than 1% of its outstanding shares,
not including shares held of record by an employee benefit plan of the Manager
(for which two of the officers listed below, Ms. Macaskill and Mr. Donohue, are
trustees) other than shares beneficially owned under that plan by the officers
of the Fund listed above.
Robert G. Avis, Trustee*; Age 66
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 67
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services
management company); formerly Vice President of McDonnell Douglas Space
Systems Co. and associated with the National Aeronautics and Space
Administration.
Jon S. Fossel, Trustee+; Age 55
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a
national trade association of investment companies), Chairman of the
Investment Company Institute
------------------------
* A Trustee who is an "interested person" of the Fund. + Not a Trustee of
Centennial New York Tax-Exempt Trust nor a managing General Partner of
Centennial America Fund, L.P.
Education Foundation; formerly Chairman and a director of the Manager,
President and a director of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company, and Shareholder Services, Inc. ("SSI")
and Shareholder Financial Services, Inc.("SFSI"), transfer agent
subsidiaries of the Manager.
Sam Freedman, Trustee; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of
OAC and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company).
C. Howard Kast, Trustee; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells(an accounting firm)..
Robert M. Kirchner, Trustee; Age 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Trustee*#; Age: 49
President (since June 1991), Chief Executive Officer (since September 1995)
and a Director (since December 1994) of the Manager; President and director
(since June 1991) of HarbourView; Chairman and a director of SSI (since
August 1994), and SFSI (since September 1995); President (since September
1995) and a director (since October 1990) of OAC; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of the Manager ("OFIL") and Oppenheimer
Millennium Funds plc (since October 1997); President and a director of other
Oppenheimer funds; a director of the NASDAQ Stock Market, Inc. and of
Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Manager.
------------------------
* A Trustee who is an "interested person" of the Fund.
# Not a Trustee of Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Integrity Funds, Panorama Series Fund, Inc.,
Centennial New York Tax-Exempt Trust nor a Managing General Partner of
Centennial America Fund, L.P..
Ned M. Steel, Trustee; Age 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age 63 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager
(since September 1988); formerly President and a director of Centennial
Asset Management Corporation, an investment adviser subsidiary of the
Manager ("Centennial"), and Chairman of the Board of SSI.
John P. Doney, Vice President and Portfolio Manager; Age: 67
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1992); formerly Senior Vice
President and Chief Investment Officer - Equities of National Securities &
Research Corporation (mutual fund adviser) and Vice President of the
National Affiliated Investment Companies.
Andrew J. Donohue, Vice President and Secretary; Age 47
Two World Trade Center, New York, New York 10048
Executive Vice President (since January 1993), General Counsel (since
October 1991) and a Director (since September 1995) of the Manager;
Executive Vice President (since September 1993), and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel
and a director of HarbourView, SSI, SFSI and Oppenheimer Partnership
Holdings, Inc. (since September 1995) and MultiSource Services, Inc. (a
broker-dealer) (since December 1995); President and a director of Centennial
(since September 1995); President and a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of OAC; Vice President of OFIL and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age 61
6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President
(since September 1987) and Treasurer (since March 1985) of the Manager; Vice
President (since June 1983) and Treasurer (since March 1985) of the
Distributor; Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President (since February 1992), Treasurer
(since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President
and
------------------------
* A Trustee who is an "interested person" of the Fund.
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996);
Chief Executive Officer, Treasurer and a director of MultiSource Services,
Inc., a broker-dealer (since December 1995); an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of
the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Scott Farrar, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a
Fund Controller for the Manager.
Robert G. Zack, Assistant Secretary; Age 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of SSI (since May 1985), and
SFSI (since November 1989); Assistant Secretary of Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
o Remuneration of Trustees. The officers of the Fund and certain Trustees
of the Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the Manager
receive no salary or fee from the Fund. Mr. Fossel did not receive any salary or
fees from the Fund prior to January 1, 1997. The remaining Trustees of the Fund
received the compensation shown below. Mr. Freedman
became a Trustee on June 27, 1996, and received no compensation from the Fund
before that date. The compensation from the Fund was paid during its fiscal year
ended August 31, 1997. The compensation from all of the Denver-based Oppenheimer
funds includes the Fund and is compensation received as a director, trustee,
managing general partner or member of a committee of the Board during the
calendar year 1996.
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $9,040 $58,003
Trustee
------------------------
1 For the 1996 calendar year.
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
William a. Baker $12,423 $79,715
Audit and Review
Committee Ex-Officio
Member2 and Trustee
Charles Conrad, Jr. $11,645 $74,717
Trustee3
Jon S. Fossel - None
Trustee
Sam Freedman $4,598 $29,502
Audit and Review Committee
Member2 and Trustee
Raymond J. Kalinowski $11,560 $74,173
Audit and Review Committee
Member2 and Trustee
C. Howard Kast $11,560 $74,173
Audit and Review Committee
Chairman2 and Trustee
Robert M. Kirchner $11,645 $74,717
Trustee3
Ned M. Steel $9,040 $58,003
Trustee
------------------------
1 For the 1996 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enable them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds elected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustee's fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
o Major Shareholders. To the knowledge of the Fund, as of November 21, 1997,
no person owned of record or was known by the Fund to own beneficially 5% or
more of the respective outstanding shares of any of the classes of the Fund.
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 (Ms. Macaskill, Mr. Fossel and Mr. Swain) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect and
prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o The Investment Advisory Agreement. A management fee is payable monthly to
the Manager under the terms of the investment advisory agreement between the
Manager and the Fund and is computed on the aggregate net assets of the Fund as
of the close of business each day. The investment advisory agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective corporate
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor under the General Distributor's Agreement are paid by the
Fund. The advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage commissions, fees
to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. For the Fund's fiscal years
ended June 30, 1995 and 1996, the fiscal period ended August 31, 1996 and the
fiscal year ended August 31, 1997 the management fees paid by the Fund to the
Manager were $10,347,426, $12,078,956, $2,134,834 and $14,800,449 respectively.
The advisory agreement contains a provision limiting the Fund's expenses.
That provision provides that the Manager will reimburse the Fund for its annual
expenses, other than taxes, interest, brokerage commissions and extraordinary
non-recurring expenses, that exceed in any fiscal year 1.5% of the first $30
million of the Fund's average annual net assets plus 1% of the Fund's average
annual net assets in excess of $30 million. The payment of the management fee at
the end of any month will be reduced as necessary so that there will not be any
accrued but unpaid liability under this expense limitation.
The advisory agreement provides that as long as it shall have acted with due
care and in good faith, the Manager is not 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. However, the Agreement does not
exculpate the Manager from willful misfeasance, bad faith, or gross negligence
in the performance of its duties or from reckless disregard of its obligations
and duties under the Agreement. The Agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with other investment companies for which it may act
as investment adviser or general distributor. If the Manager shall no longer act
as investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
o 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 C 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 years ended June 30, 1995 and 1996, the fiscal period
ended August 31, 1996 and the fiscal year ended August 31, 1997 the aggregate
sales charges on sales of the Fund's Class A shares were $4,629,585, $4,966,513,
$632,850 and $5,179,851 respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate, $1,414,085, $1,546,454, $218,008 and
$1,573,826 in those respective years. During the Fund's fiscal year ended August
31, 1997 the sales charges advanced to broker-dealers by the Distributor on
sales of the Fund's Class B shares totaled $4,076,061 of which $344,565 was paid
by the Distributor to an affiliate. During the Fund's fiscal year ended August
31, 1997, sales charges advanced to broker-dealers by the Distributor on sales
of the Fund's Class C shares totaled $367,675 of which the $8,473 was paid by
the Distributor to an affiliate. For additional information about distribution
of the Fund's shares and the payments made by the Fund to the Distributor in
connection with such activities, please refer to "Distribution and Service
Plans," below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under 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 Trustees. 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 investment advisory agreement
and the procedures and rules described above. In either case, brokerage is
allocated under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. In connection with
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and thereby forego the benefit of negotiated commissions
available in U.S. markets. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it appears
likely that a better price or execution can be obtained. When 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. Option commissions may be
relatively higher than those which would apply to direct purchases and sales of
portfolio securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless 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 for in commission dollars.
The Board of Trustees permits the Manager to use concessions on fixed price
offerings of fixed income securities to obtain research, in the same manner as
is permitted for agency transactions. The Board also permits the Manager to use
stated commissions on secondary fixed-income agency trades to obtain research
where the broker has represented to the Manager that: (i) the trade is not from
or for the broker's own inventory, (ii) the trade was executed by the broker on
an agency basis at the stated commission, and (iii) the trade is not a riskless
principal transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Manager provides information as to the
commissions paid to brokers furnishing such services, together with the
Manager's representation that the amount of such commissions was reasonably
related to the value or benefit of such services.
During the Fund's fiscal years ended June 30, 1995, 1996 and for the period
from July 1, 1996 through August 31, 1996 and August 31, 1997 total brokerage
commissions paid by the Fund (not including spreads or concessions on principal
transactions on a net trade basis) were $2,355,811, $766,137, $168,229 and
$706,049, respectively. Of that amount, during the fiscal year ended August 31,
1997, $290,302 was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was $255,444,550.
The transactions giving rise to those commissions were allocated in accordance
with the Manager's internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each 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 C 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.
o 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: LEFT ( {~ERV~} OVER P~
right) SUP {1/n}~-1~=~Average~Annual~Total~ Return
o 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 ) 1/n
(-----) -1 = Average Annual Total Return
( P )
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, the payment of the 1% contingent deferred sales charge is
applied to the investment result for the one year period (or less). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The "average
annual total returns" on an investment in Class A shares of the Fund for the 1-,
5- and 10- year periods ended June 30, 1996 were 11.79%, 10.87% and 10.19%,
respectively. The "average annual total returns" on an investment in Class A
shares of the Fund (using the method described above) for the 1-, 5- and 10-year
periods ended August 31, 1997 were 25.72%, 14.69% and 10.59%, respectively.
During a portion of the periods for which total returns are shown for Class A
shares, the Fund's maximum initial sales charge rate was higher. As a result,
performance of an actual investment during those periods would be less than the
results shown. The cumulative "total return" on Class A shares for the 10-year
period ended August 31, 1997 was 173.65%. The "average annual total returns" on
an investment in Class B shares of the Fund for the 1-year period ended August
31, 1997 and for the period from August 17, 1993 (commencement of the offering
of Class B shares) through August 31, 1997 were 27.17% and 14.32%, respectively.
The cumulative "total return" on Class B shares for the period from August 17,
1993 through August 31, 1997 was 71.69%. The "average annual total returns" on
an investment in Class C shares of the Fund for the 1-year period ended August
31, 1997 and for the period from November 1, 1995 (commencement of the offering
of Class C shares) through August 31, 1997 were 31.31% and 22.72%, respectively
The cumulative "total return" on Class C shares for the period from November 1,
1995 through August 31, 1997 was 45.55%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
cumulative total return at net asset value of the Fund's Class A shares for the
10-year period ended August 31, 1997 was 190.35%. The "average annual total
return" at net asset value for the 1-, 5- and 10-year periods ended August 31,
1997 for Class A shares were 33.39%, 16.06% and 11.25%, respectively. The
cumulative total return at net asset value on the Fund's Class B shares for the
period from August 17, 1993 through August 31, 1997 was 73.69%. The average
annual total returns at net asset value on the Fund's Class B shares for the one
year period ended August 31, 1997 and for the period from August 17, 1993
through August 31, 1997 were 32.17% and 14.65%, respectively. The "cumulative
total return" on Class C shares from the period November 1, 1995 (commencement
of the offering of the Class) through August 31, 1997 was 45.55%. The average
annual total returns at net asset value on the Fund's Class C shares for the one
year period ended August 31, 1997 and for the period from November 1, 1995
through August 31, 1997 were 32.31% and 22.72%, respectively
Total return information may be useful to investors in reviewing the
performance of the Fund and Class A, Class B or Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an equity fund
seeking capital appreciation, its shares are subject to greater market risks and
volatility than shares of funds having more conservative investment objectives
and policies and that the Fund is designed for investors who are investing for
the long term and are willing to accept greater risk of loss in the hopes of
realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is ranked against
(i) all other funds, (ii) all other "equity income" funds and (iii) all other
"equity income" funds with assets of more than $1 billion. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time, the Fund may publish the star ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service. Morningstar ranks mutual funds in broad
investment categories; domestic stock funds, international stock funds, taxable
bond funds an municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among equity funds. Investment return measures a
fund's or class' 1-, 3-, 5- and 10-year average annual total returns (depending
on the inception of the fund or class) in excess of 90-day U.S. Treasury bill
returns. Risk and investment return are combined to produce star rankings
reflecting performance relative to the average fund in the fund's category. Five
stars is the "highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). The current star ranking is the
fund's or class' 3-year ranking or its combined 3- and 5-year ranking (weighted
60%/40%, respectively, or its combined 3-, 5- and 10-year ranking (weighted 40%,
30% and 30% respectively), depending on the inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
The total return on an investment in the Fund's Class A, Class B or Class C
shares may be compared with performance for the same period of either the
Dow-Jones Industrial Average ("Dow") or the Standard & Poor's 500 Index ("S&P
500"), both of which are widely recognized indices of stock market performance.
Both indices consist of unmanaged groups of common stocks; the Dow consists of
thirty such issues. The performance of both indices includes a factor for the
reinvestment dividends but does not reflect expenses or taxes. The performance
of the Fund's Class A, Class B or Class C shares may also be compared in
publications to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
Investors may also wish to compare the Fund's Class A, Class B or Class C
return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and Treasury bills
are guaranteed as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings of the
Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class.
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 Trustees and its Independent Trustees 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 Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
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. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by a
Securities and Exchange Commission rule to obtain the approval of Class B as
well as Class A shareholders for a proposed amendment to the Class A Plan that
would materially increase payments under the plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the Investment
Company Act), voting separately by class. All material amendments must be
approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which
payments were made and the services rendered in connection with the distribution
of shares. The Board also receives a report on 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. The Class A
report must also identify each recipient that received payments. Those reports,
will be subject to the review and approval of the Independent Trustees in the
exercise of their fiduciary duty. Each Plan further provides that while it is in
effect, the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision on selection or nomination is
approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter if
the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
The Board of Trustees has set the fees at the maximum rate (except for assets
representing Class A shares acquired prior to April 1, 1991, for which the rate
is 0.15% for the current fiscal year) and set no minimum amount.
For the fiscal year ended August 31, 1997 payments under the Plan for Class
A shares totaled $4,746,883, all of which was paid by the Distributor to
Recipients including $317,169, 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 Class B and Class C Plan allow the service fee payment to be paid by the
Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata portion of such
advance payment to the Distributor. Payments made under the Class B Plan during
the fiscal year ended August 31, 1997 totaled $3,437,105, of which $2,803,497
was retained by the Distributor $55,838 was paid to a dealer affiliated with the
Distributor, respectively. Payments made under the Class C Plan during their
fiscal year ended August 31, 1997 totaled $243,495 of which $208,411 was
retained by the Distributor.
Although the Class B and the Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such shares, or to
pay Recipients the service fee on a quarterly basis without payment in advance,
the Distributor presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be established from time to
time under the Class B and the Class C Plan by the Board. The Board has set no
minimum holding period. All payments under the Class B and the Class C Plan are
subject to the limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B and Class C Plans and
from contingent deferred sales charges. The asset-based sales charge paid to the
Distributor by the Fund under the Class B and Class C Plans are 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. The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment
to Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support distribution
of shares, and (iv) may bear the costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders), state "blue
sky" registration fees and certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B shares and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or more of Class B
shares or $1 million or more of Class C shares on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such shares will be reduced by expenses
borne solely by those classes, including the asset-based sales charge to which
both classes of 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 C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total assets, and then
equally to each outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii)
printing and mailing costs of shareholder reports, Prospectuses, Statements of
Additional Information and other materials for current shareholders, (iv) fees
to Independent Trustees, (v) custodian expenses, (vi) share issuance costs,
(vii`) organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (i) Distribution
and/or Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class rather
than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing the value of the Fund's net assets attributable to
that class by the number of shares of that class outstanding. The Exchange
normally closes at 4:00 P.M. New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. 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, the net asset values per share of Class A, Class B and
Class C shares of the Fund may be significantly affected at times when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's
securities, generally as follows:(i) equity securities traded on a securities
exchange or on the Automated Quotation System ("NASDAQ") of the Nasdaq Stock
Market, Inc. for which last sale information is regularly reported are valued at
the last reported sale price on the principal exchange for such security or
NASDAQ that day (the "Valuation Date") or, in the absence of sales that day, at
the last reported sale price preceding the Valuation Date if it is within the
spread of the closing "bid" and "asked" prices on the Valuation Date or, if not,
the closing "bid" price on the Valuation Date; (ii) equity securities traded on
a foreign securities exchange are generally valued at the last sales price
available to the pricing service approved by the Fund's Board of Trustees or to
the Manager as reported by the principal exchange on which the security is
traded at its last trading session on or immediately preceding the valuation
date, or, if unavailable, at the mean between "bid" and "asked" prices obtained
from the principal exchange or two active market makers in the security on the
basis of reasonable inquiry; (iii) a non-money market fund will value (x) debt
instruments that had a maturity of more than 397 days when issued, (y) debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity in excess of 60 days, and (z) non-money market type debt
instruments that had a maturity of 397 days or less when issued and have
remaining maturity of 60 days or less, at the mean between "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or, if unavailable, obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued and have a remaining maturity of 60 days or less, and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; and (v) securities (including restricted securities) not
having readily-available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate two market
makers willing to give quotes (see (ii) and (iii) above), the security may be
priced at the mean between the "bid" and "asked" prices provided by a single
active market maker (which in certain cases may be in "bid" price if no "asked"
price is available) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current market
value.
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities, or mortgage-backed securities for which last sale
information is not generally available. The Manager will monitor the accuracy of
such pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures established
by the Board of Trustees, determines that the particular event is likely to
effect a material change in the value of such security. Foreign currency,
including forward contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank, dealer or
pricing service. The values of securities denominated in foreign currency will
be converted to U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the principal
exchange on which they are traded, or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Trustees or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing "bid" and "ask" prices on
the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing "bid" price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an exchange or on
NASDAQ, it shall be valued at the mean between "bid" and "ask" prices obtained
by the Manager from two active market makers (which in certain cases may be the
"bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for such purchase through the ACH system before the close of the 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 three days after the transfers are initiated. The Distributor and
the Fund are not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, parents-in- law, brothers and sisters,
sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer California Municipal Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company
Fund
Oppenheimer Life Span Balanced Fund
Oppenheimer Life Span Growth Fund
Oppenheimer Life Span Income Fund
Limited Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Mid-Cap Fund
Oppenheimer Main Street California Municipal
Fund
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Growth & Income Value
Fund
Rochester Fund Municipals
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
and the following "Money Market Funds:"
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves Oppenheimer Money
Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge)
applicable to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional Information
and the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those amendments
will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchases amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen- month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints
the Transfer Agent as attorney-in-fact to surrender for redemption any or all
escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired in
exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Retirement Plans. In describing certain types of employee benefit plans that
may purchase Class A shares without being subject to the Class A contingent
deferred sales charge, the term "employee benefit plan" means any plan or
arrangement, whether or not "qualified" under the Internal Revenue Code,
including, medical savings accounts, payroll deduction plans or similar plans in
which Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or of affiliated
employers, if the Fund account is registered in the name of the fiduciary or
other person for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the record keeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the record keeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more is assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis by
Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less the
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch that are currently invested in
Class B shares of the Fund shall not be subject to the Class B contingent
deferred sales charge.
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.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for the Shareholder to increase the investment, and set
other terms and conditions so that the shares would not be involuntarily
redeemed.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under the
"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 that you
purchased subject to an initial sales charge, or (ii) Class A or Class B shares
on which the shareholder paid a contingent deferred sales charge when redeemed.
This privilege does not apply to Class C shares. The reinvestment may be made
without sales charge only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are exchangeable as described
below, at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized when
the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge at the time of transfer to the name of another person or
entity (whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares will
remain subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same manner
and at the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed at the time
of transfer, the priorities described in the Prospectus under "How to Buy
Shares" for the imposition of the Class B or Class C contingent deferred sales
charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds- sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under those plans.
The employer or plan administrator must sign the request. Distributions from
pension plans or 401(k) and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption.
The repurchase price per share will be the net asset value next computed after
the Distributor receives the order placed by the dealer or broker, except that
if the Distributor receives a repurchase order from a dealer or broker after the
close of The New York Stock Exchange on a regular business day, it will be
processed at that day's net asset value if the order was received by the dealer
or broker from its customers prior to the time the Exchange closes (normally
that is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt of the
required redemption documents in proper form, with the signature(s) of the
registered owners guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred sales
charge on such withdrawals (except where the Class B or Class C contingent
deferred sales charge is waived as described in the Prospectus under "Waivers of
Class B and Class C 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 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.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o 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. It may not be desirable to purchase additional shares of Class A
shares while making automatic withdrawals because of the sales charges that
apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal Plan
(the "Plan") as agent for the investor (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of capital
gains must be reinvested in shares of the Fund, which will be done at net asset
value without a sales charge. Dividends on shares held in the account may be
paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at the
net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B or Class C
shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All of the Oppenheimer funds offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust, Centennial
Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax Exempt
Trust, Centennial California Tax Exempt Trust and Centennial America Fund, L.P.
which only offer Class A shares and Oppenheimer Main Street California Municipal
Fund which only offers Class A and Class B shares, (Class B and Class C shares
of Oppenheimer Cash Reserves are generally available only by exchange from the
same class of shares of other Oppenheimer funds or through OppenheimerFunds
sponsored 401(k) plans). A current list showing which funds offer which class
can be obtained by calling the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of the Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc., purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc., are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 12 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, (18 months if the
shares were initially purchased prior to May 1, 1997), the Class A contingent
deferred sales charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they are redeemed
within 6 years of the initial purchase of the exchanged Class B shares. The
Class C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class A, Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class A, Class B or the Class C contingent deferred sales
charge will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any exchange on
the applicability and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange requests
submitted in bulk by anyone on behalf of more than one account. The Fund may
accept requests for exchanges of up to 50 accounts per day from representatives
of authorized dealers that qualify for this privilege. In connection with any
exchange request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include shares subject
to a restriction cited in the Prospectus or this Statement of Additional
Information or would include shares covered by a share certificate that is not
tendered with the request. In those cases, only the shares available for
exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or 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 and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the Transfer
Agent receives an exchange request in proper form (the "Redemption Date").
Normally, shares of the fund to be acquired are purchased on the Redemption
Date, but such purchases may be delayed by either fund up to five business days
if it determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund reserves the right, in its discretion, to refuse
any exchange request that may disadvantage it (for example, if the receipt of
multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to
the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
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.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company" under the Internal
Revenue Code, it will not be liable for Federal income taxes on amounts paid by
it as dividends and distributions. The Fund qualified as a regulated investment
company in its last fiscal year, and intends to qualify in future years, but
reserves the right not to qualify. The Internal Revenue Code contains a number
of complex tests relating to qualification which the Fund might not meet in any
particular year. If it did not so qualify, the Fund would be treated for tax
purposes as an ordinary corporation and receive no tax deduction for payments
made to shareholders.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent to
enable the investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, 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 Transfer Agent to establish
an account. The investment will be made at the net asset value per share in
effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund.
The Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian. It will be
the practice of the Fund to deal with the Custodian in a manner uninfluenced by
any banking relationship the Custodian may have with the Manager and its
affiliates. The Funds cash balances in excess of $100,000 is not protected by
Federal deposit insurance. Such uninsured balances may at times 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.
-2-
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
=====================================================================
The Board of Trustees and Shareholders of
Oppenheimer Equity Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Equity Income Fund as of August 31,
1997, the related statement of operations for the year then ended, the
statements of changes net assets for the year then ended, for the two-months
ended August 31, 1996 and the year ended June 30, 1996, and the financial
highlights for the period July 1, 1992 to August 31, 1997. 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 August
31, 1997 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 Equity
Income Fund at August 31, 1997, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods,
in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- ----------------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
September 22, 1997
<PAGE>
<PAGE>
Statement of Investments August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
=====================================================================
========================================== <S>
<C> <C> Common Stocks--56.1%
- ---------------------------------------------------------------------------------------------------------------
Basic Materials--2.9%
- ---------------------------------------------------------------------------------------------------------------
Chemicals--0.8%
Dexter Corp. 400,000 $ 15,200,000
- ---------------------------------------------------------------------------------------------------------------
Dow Chemical Co. 100,000 8,850,000
--------------
24,050,000
- ---------------------------------------------------------------------------------------------------------------
Metals--0.3%
Reynolds Metals Co. 131,200 9,274,200
- ---------------------------------------------------------------------------------------------------------------
Paper--1.8%
Sonoco Products Co. 600,000 19,537,500
- ---------------------------------------------------------------------------------------------------------------
Union Camp Corp. 200,000 11,862,500
- ---------------------------------------------------------------------------------------------------------------
Westvaco Corp. 375,000 12,703,125
- ---------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 250,000 14,437,500
--------------
58,540,625
- ---------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--3.5%
- ---------------------------------------------------------------------------------------------------------------
Autos & Housing--1.9%
Ford Motor Co. 300,000 12,900,000
- ---------------------------------------------------------------------------------------------------------------
General Motors Corp. 200,000 12,550,000
- ---------------------------------------------------------------------------------------------------------------
Prime Retail, Inc.(5) 592,200 8,549,887
- ---------------------------------------------------------------------------------------------------------------
Snap-On, Inc. 675,000 28,350,000
--------------
62,349,887
- ---------------------------------------------------------------------------------------------------------------
Retail: General--1.6%
Family Dollar Stores, Inc. 700,000 14,875,000
- ---------------------------------------------------------------------------------------------------------------
Penney (J.C.) Co., Inc. 300,000 18,000,000
- ---------------------------------------------------------------------------------------------------------------
Sears Roebuck & Co. 300,000 17,025,000
--------------
49,900,000
- ---------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--7.5%
- ---------------------------------------------------------------------------------------------------------------
Food--0.9%
SUPERVALU, Inc. 700,000 27,475,000
- ---------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--2.0%
American Home Products Corp. 200,000 14,400,000
- ---------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 400,000 30,400,000
- ---------------------------------------------------------------------------------------------------------------
Merck & Co., Inc. 200,000 18,362,500
--------------
63,162,500
- ---------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.5%
United States Surgical Corp. 476,500 15,694,719
- ---------------------------------------------------------------------------------------------------------------
Tobacco--4.1%
Philip Morris Cos., Inc. 1,800,000 78,525,000
- ---------------------------------------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 1,213,000 42,227,562
- ---------------------------------------------------------------------------------------------------------------
UST, Inc. 400,000 11,550,000
--------------
132,302,562 </TABLE>
10 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> Energy--3.0%
- ---------------------------------------------------------------------------------------------------------------
Oil-Integrated--3.0%
Elf Aquitaine SA, Sponsored ADR 100,000 $ 5,575,000
- ---------------------------------------------------------------------------------------------------------------
Mobil Corp. 200,000 14,550,000
- ---------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 400,000 9,375,000
- ---------------------------------------------------------------------------------------------------------------
Phillips Petroleum Co. 300,000 14,268,750
- ---------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares(5) 300,000
15,225,000
- ---------------------------------------------------------------------------------------------------------------
Ultramar Diamond Shamrock Corp. 400,000 13,050,000
- ---------------------------------------------------------------------------------------------------------------
Unocal Corp. 200,000 7,812,500
- ---------------------------------------------------------------------------------------------------------------
USX-Marathon Group 500,000 16,281,250
--------------
96,137,500
- ---------------------------------------------------------------------------------------------------------------
Financial--31.1%
- ---------------------------------------------------------------------------------------------------------------
Banks--24.9%
Banc One Corp. 770,000 41,291,250
- ---------------------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 700,000 31,237,500
- ---------------------------------------------------------------------------------------------------------------
BankAmerica Corp. 1,200,000 78,975,000
- ---------------------------------------------------------------------------------------------------------------
BankBoston Corp. 505,636 42,030,993
- ---------------------------------------------------------------------------------------------------------------
Bankers Trust New York Corp. 100,000 10,375,000
- ---------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 900,000 100,068,750
- ---------------------------------------------------------------------------------------------------------------
Citicorp 600,000 76,575,000
- ---------------------------------------------------------------------------------------------------------------
<PAGE>
Commonwealth Bank, ADR(1) 305,333 7,116,549
- ---------------------------------------------------------------------------------------------------------------
Crestar Financial Corp. 550,000 24,578,125
- ---------------------------------------------------------------------------------------------------------------
First Chicago NBD Corp. 600,000 43,050,000
- ---------------------------------------------------------------------------------------------------------------
First Union Corp. 1,600,000 76,900,000
- ---------------------------------------------------------------------------------------------------------------
Fleet Financial Group, Inc. 400,000 25,775,000
- ---------------------------------------------------------------------------------------------------------------
Greenpoint Financial Corp. 300,000 18,468,750
- ---------------------------------------------------------------------------------------------------------------
KeyCorp 400,000 24,250,000
- ---------------------------------------------------------------------------------------------------------------
Magna Group, Inc. 400,000 14,525,000
- ---------------------------------------------------------------------------------------------------------------
Mellon Bank Corp. 800,000 38,500,000
- ---------------------------------------------------------------------------------------------------------------
National City Corp. 500,000 28,250,000
- ---------------------------------------------------------------------------------------------------------------
PNC Bank Corp. 301,600 13,044,200
- ---------------------------------------------------------------------------------------------------------------
Signet Banking Corp. 400,000 20,725,000
- ---------------------------------------------------------------------------------------------------------------
Summit Bancorp 500,000 29,687,500
- ---------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc. 840,000 50,295,000
--------------
795,718,617
- ---------------------------------------------------------------------------------------------------------------
Diversified Financial--2.5%
American Express Co. 500,000 38,875,000
- ---------------------------------------------------------------------------------------------------------------
American General Corp. 600,000 28,912,500
- ---------------------------------------------------------------------------------------------------------------
Capital One Financial Corp. 300,000 11,550,000
--------------
79,337,500 </TABLE>
11 Oppenheimer Equity Income Fund
<PAGE>
Statement of Investments
(Continued)
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> Insurance--3.7%
Allstate Corp. 600,000 $ 43,837,500
- ---------------------------------------------------------------------------------------------------------------
American States Financial Corp. 550,000 25,746,875
- ---------------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 150,000 11,962,500
- ---------------------------------------------------------------------------------------------------------------
IPC Holdings Ltd. 419,000 12,308,125
- ---------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc. 2,141,500 26,233,375
--------------
120,088,375
- ---------------------------------------------------------------------------------------------------------------
Industrial--3.3%
- ---------------------------------------------------------------------------------------------------------------
Electrical Equipment--0.8%
AMP, Inc. 500,000 25,000,000
- ---------------------------------------------------------------------------------------------------------------
Industrial Services--0.4%
H & R Block, Inc. 300,000 11,775,000
- ---------------------------------------------------------------------------------------------------------------
Manufacturing--2.1%
Cooper Industries, Inc. 163,333 8,707,691
- ---------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 300,000 26,962,500
- ---------------------------------------------------------------------------------------------------------------
Tenneco, Inc. 365,300 17,739,881
- ---------------------------------------------------------------------------------------------------------------
United Technologies Corp. 200,000 15,612,500
--------------
69,022,572
- ---------------------------------------------------------------------------------------------------------------
Utilities--4.8%
- ---------------------------------------------------------------------------------------------------------------
Electric Utilities--2.9%
Allegheny Power System, Inc. 300,000 8,718,750
- ---------------------------------------------------------------------------------------------------------------
Central & South West Corp. 500,000 10,343,750
- ---------------------------------------------------------------------------------------------------------------
<PAGE>
DTE Energy Co. 300,000 8,887,500
- ---------------------------------------------------------------------------------------------------------------
Entergy Corp. 550,000 13,646,875
- ---------------------------------------------------------------------------------------------------------------
Florida Progress Corp. 500,000 16,093,750
- ---------------------------------------------------------------------------------------------------------------
New Century Energies, Inc.(2) 200,000 8,075,000
- ---------------------------------------------------------------------------------------------------------------
Ohio Edison Co. 400,000 8,800,000
- ---------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 400,000 9,075,000
- ---------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 300,000 10,462,500
--------------
94,103,125
- ---------------------------------------------------------------------------------------------------------------
Gas Utilities--0.2%
Pacific Enterprises 150,000 4,940,625
- ---------------------------------------------------------------------------------------------------------------
Telephone Utilities--1.7%
GTE Corp. 550,000 24,509,375
- ---------------------------------------------------------------------------------------------------------------
Portugal Telecom SA, Sponsored ADR 410,000
15,067,500
- ---------------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 300,000 16,312,500
- ---------------------------------------------------------------------------------------------------------------
55,889,375
-------------- Total Common Stocks (Cost $951,298,010)
794,762,182
</TABLE>
12 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
=====================================================================
<S> <C> <C> Preferred Stocks--3.7%
<PAGE>
- ---------------------------------------------------------------------------------------------------------------
American Heritage Life Investment Corp., 8.50% Cv. Preferred(2) 35,000 $
2,082,500
- ---------------------------------------------------------------------------------------------------------------
Armco, Inc., $3.625 Cv. Cum. 200,000 10,025,000
- ---------------------------------------------------------------------------------------------------------------
Banco Commercial Portuguese International Bank Ltd.,
8% Cv. Preferred Stock, Series A 396,000 27,423,000
- ---------------------------------------------------------------------------------------------------------------
California Federal Preferred Capital Corp., 9.125%
Non-Cum. Exchangeable Preferred, Series A, Non-Vtg. 55,000
1,443,750
- ---------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc. $3.75 Cv., Series B 180,000
10,282,500
- ---------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Trust, 9% Preferred Securities 1,600,000
1,660,000
- ---------------------------------------------------------------------------------------------------------------
Golden State Bancorp., 8.75% Cv. Preferred Stock, Series A 175,000
12,250,000
- ---------------------------------------------------------------------------------------------------------------
IXC Communications, Inc., 7.25% Cv. Cum., Non-Vtg.(1)(3) 50,906
6,566,874
- ---------------------------------------------------------------------------------------------------------------
MCN Energy Group, Inc., 8% Cv. Preferred Redeemable
Increased Dividend Equity Securities 50,000 2,668,750
- ---------------------------------------------------------------------------------------------------------------
National Australia Bank Ltd., ExCaps (each ExCap consists of $25 principal amount of 7.875%
Perpetual Capital Security and a purchase contract entitling the holder to exchange ExCaps for
ordinary shares of the Bank)(4) 590,000 16,851,875
- ---------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., $3.875 Cv. Cum.(1) 400,000
22,350,000
- ---------------------------------------------------------------------------------------------------------------
Sovereign Bancorp, Inc., 6.25% Cv., Series B 36,500 3,440,125
-------------- Total Preferred Stocks
(Cost $96,024,664) 117,044,374
=====================================================================
========================================== Other Securities--5.8%
- ---------------------------------------------------------------------------------------------------------------
Allstate Corp., $2.30 Debt Exchangeable for Common
Stock of PMI Group, Inc. 111,000 5,397,375
- ---------------------------------------------------------------------------------------------------------------
American General Delaware, LLC, $3.00 Cv. Monthly
<PAGE>
Income Preferred Securities, Series A 75,000 4,860,937
- ---------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co., 9% Exchangeable Nts. for Common
Stock of Lyondell Petrochemical Co., 9/15/97 400,000 9,500,000
- ---------------------------------------------------------------------------------------------------------------
Browning-Ferris Industries, Inc., 7.25% Cv. Automatic
Common Stock Exchangeable Securities 225,000 7,439,062
- ---------------------------------------------------------------------------------------------------------------
Corning Delaware LP, 6% Cv. Monthly Income
Preferred Securities 150,000 12,450,000
- ---------------------------------------------------------------------------------------------------------------
Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated
Preferred Securities(1) 250,000 11,437,500
- ---------------------------------------------------------------------------------------------------------------
Enron Corp., 6.25% Cv. Automatic Common Exchangeable
Securities, Redeemable into Enron Oil & Gas Co. Common Stock 270,000
6,193,125
- ---------------------------------------------------------------------------------------------------------------
Hollinger International, Inc., 9.75% Cv. Preferred Redeemable Increased Dividend Equity
Securities, 8/1/00 800,000 9,550,000
- ---------------------------------------------------------------------------------------------------------------
Houston Industries, Inc., 7% Automatic Common Exchange
Securities, Exchangeable for Time Warner, Inc.
Common Stock, 7/1/00 175,800 8,921,850
- ---------------------------------------------------------------------------------------------------------------
James River Corp. of Virginia, Depositary Shares each
representing a one-hundredth interest in a share of Series P, 9% Cum. Cv. Preferred Stock,
Dividend Enhanced Convertible Stock 700,000 26,687,500
- ---------------------------------------------------------------------------------------------------------------
MCN Energy Group, Inc., 8.75% Cv. Preferred Redeemable
Increased Dividend Equity Securities 135,000 3,872,813
</TABLE>
13 Oppenheimer Equity Income Fund
<PAGE>
Statement of Investments
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
=====================================================================
==========================================
<S> <C> <C> Other Securities (continued)
- ---------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6% Cv. Structured Yield Product Exchangeable for Common Stock of
Cox
Communications, Inc., 6/1/99 500,000 $ 12,375,000
- ---------------------------------------------------------------------------------------------------------------
Owens Corning Capital LLC, 6.50% Cv. Monthly Income
Preferred Securities, Non.Vtg.(1) 200,000 11,175,000
- ---------------------------------------------------------------------------------------------------------------
Salomon, Inc., 7.625% Cv. Preferred, Debt Exchangeable for Common Stock of Financial
Security Assurance Holdings Ltd. 460,000 16,215,000
- ---------------------------------------------------------------------------------------------------------------
SBC Communications, Inc., 7.75% Debt Exchangeable
for Common Stock 500,000 22,000,000
- --------------------------------------------------------------------------------------------------------------- U
S West, Inc., 7.625% Cv. Debt Exchangeable for Common
Stock of Enhance Financial Services Group, Inc. 415,000
17,689,375 -------------- Total
Other Securities (Cost $144,917,500) 185,764,537
Units
=====================================================================
========================================== Rights, Warrants and
Certificates--0.0%
- ---------------------------------------------------------------------------------------------------------------
Venezuela Oil Linked Wts., Exp. 4/20 (Cost $0) 7,140 --
Face
Amount(5)
=====================================================================
========================================== U.S. Government Obligations--13.3%
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
6.941%, 5/15/21(6) $900,000,000 182,860,977
7.201%, 8/15/08(6) 150,000,000 73,691,986
7.221%, 8/15/20(6) 800,000,000 170,948,731
-------------- Total U.S. Government
Obligations (Cost $404,708,154) 427,501,694
=====================================================================
========================================== Foreign Government
Obligations--3.3%
- ---------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Past Due Interest Bonds,
Series L, 6.75%, 3/31/05(7) 6,305,000 6,009,453
- ---------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
<PAGE>
22.50%, 5/7/98(6)(MXP) 121,441,670 13,540,973
28.213%, 9/4/97(6)(MXP) 48,667,190 6,240,314
- ---------------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds, 7.50%, 9/1/00(CAD) 19,460,000
14,971,559
- ---------------------------------------------------------------------------------------------------------------
Fideicomiso Petacalco Trust Nts., 10.16%, 12/23/09(8) 9,000,000
9,399,375
- ---------------------------------------------------------------------------------------------------------------
Hashemite (Kingdom of) Jordan Disc. Bonds,
6.75%, 12/23/23(7) 1,250,000 1,040,625
- ---------------------------------------------------------------------------------------------------------------
New South Wales State Bank Bonds, 9.25%, 2/18/03(AUD) 9,900,000
8,127,780
- ---------------------------------------------------------------------------------------------------------------
Peru (Republic of) Past Due Interest Bonds, 4%, 3/7/17(7) 350,000
229,688
- ---------------------------------------------------------------------------------------------------------------
Poland (Republic of) Bonds, 16%, 10/12/98(PLZ) 14,450,000
3,834,170
- ---------------------------------------------------------------------------------------------------------------
Quebec, Canada (Province of) Debs., 10.25%, 4/7/98(CAD) 10,000,000
7,479,526
- ---------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts.,
8%, 8/14/01(AUD) 33,650,000 26,564,286
- ---------------------------------------------------------------------------------------------------------------
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05(ZAR) 15,100,000 2,895,434
12.50%, 1/15/02ZAR 12,460,000 2,517,536
</TABLE>
14 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(5) See Note 1
=====================================================================
========================================== <S>
<C> <C> Foreign Government Obligations (continued)
<PAGE>
- ---------------------------------------------------------------------------------------------------------------
South Australia (Government of) Bonds, 9%, 9/23/02(AUD) 3,000,000 $
2,430,033
- ---------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Disc. Bonds, Series W-A,
6.812%, 3/31/20(7) 1,000,000 906,250
-------------- Total Foreign Government
Obligations (Cost $104,002,025) 106,187,002
=====================================================================
========================================== Non-Convertible Corporate Bonds
and Notes--4.9%
- ---------------------------------------------------------------------------------------------------------------
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 3,000,000 3,168,750
- ---------------------------------------------------------------------------------------------------------------
Auburn Hills Trust, 12% Gtd. Exchangeable Certificates, 5/1/20(7) 5,000,000
7,640,280
- ---------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 2,500,000 2,762,500
- ---------------------------------------------------------------------------------------------------------------
Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06(9) 2,800,000
1,960,000
- ---------------------------------------------------------------------------------------------------------------
CalEnergy, Inc., 9.50% Sr. Nts., 9/15/06 1,180,000 1,265,550
- ---------------------------------------------------------------------------------------------------------------
California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 4,350,000
4,687,125
- ---------------------------------------------------------------------------------------------------------------
Calpine Corp., 9.25% Sr. Nts., 2/1/04 820,000 835,375
- ---------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 9.125% Sr. Nts., 4/15/06 4,000,000
3,970,000
- ---------------------------------------------------------------------------------------------------------------
Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000
6,675,000
- ---------------------------------------------------------------------------------------------------------------
Cott Corp., 9.375% Sr. Nts., 7/1/05 6,350,000 6,635,750
- --------------------------------------------------------------------------------------------------------------- El
Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 6,000,000
6,540,000
- ---------------------------------------------------------------------------------------------------------------
Falcon Drilling Co., Inc., 8.875% Sr. Nts., Series B, 3/15/03 5,850,000
6,171,750
- ---------------------------------------------------------------------------------------------------------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., Series B, 6/15/06 5,000,000
5,200,000
<PAGE>
- ---------------------------------------------------------------------------------------------------------------
First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 6,190,000
6,809,000
- ---------------------------------------------------------------------------------------------------------------
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 4,500,000
4,792,500
- ---------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07 3,000,000
3,060,000
- ---------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 7,000,000
7,315,000
- ---------------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 2/1/06
5,000,000 5,200,000
- ---------------------------------------------------------------------------------------------------------------
Lenfest Communications, Inc., 8.375% Sr. Unsec. Nts., 11/1/05 6,000,000
5,910,000
- ---------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts.,
Series A, 4/15/04 7,095,000 7,910,925
- ---------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub.
Disc. Nts., 8/1/03(9) 3,750,000 3,672,637
- ---------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 9,000,000
9,461,250
- ---------------------------------------------------------------------------------------------------------------
Rowan Cos., Inc., 11.875% Sr. Nts., 12/1/01 5,302,000
5,606,865
- ---------------------------------------------------------------------------------------------------------------
Sun Media Corp., 9.50% Sr. Sub. Nts., 2/15/07 800,000 828,000
- ---------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
10.125% Sr. Sub. Nts., 3/1/05 5,000,000 5,500,000
8.625% Sr. Sub. Nts., 1/15/07 2,000,000 2,062,500
- ---------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A,12/1/11(1) 2,463,957
2,143,643
- ---------------------------------------------------------------------------------------------------------------
Viacom International, Inc., 10.25% Sr. Sub. Nts., 9/15/01 12,000,000
12,974,183
- ---------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc.:
8.75% Sr. Nts., 12/15/01 6,000,000 6,225,000
<PAGE>
9.375% Sr. Sub. Debs., 12/15/05 2,000,000 2,095,000
- ---------------------------------------------------------------------------------------------------------------
WorldCom, Inc., 9.375% Sr. Nts., 1/15/04 7,408,600 7,899,420
-------------- Total
Non-Convertible Corporate Bonds and Notes (Cost $147,042,015)
156,978,003 </TABLE>
15 Oppenheimer Equity Income Fund
<PAGE>
Statement of Investments
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(5) See Note 1
=====================================================================
========================================== <S>
<C> <C> Convertible Corporate Bonds and Notes--2.9%
- ---------------------------------------------------------------------------------------------------------------
ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 $ 10,000,000 $
10,187,500
- ---------------------------------------------------------------------------------------------------------------
Apple Computer, Inc., 6% Cv. Sub. Nts., 6/1/01 10,500,000
10,644,375
- ---------------------------------------------------------------------------------------------------------------
Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 5,000,000
5,000,000
- ---------------------------------------------------------------------------------------------------------------
Inco Ltd.:
5.75% Cv. Debs., 7/1/04 9,700,000 11,045,875
7.75% Cv. Debs., 3/15/16 9,800,000 10,020,500
- ---------------------------------------------------------------------------------------------------------------
Integrated Device Technology, Inc., 5.50% Cv. Sub.
Nts., 6/1/02 7,000,000 6,107,500
- ---------------------------------------------------------------------------------------------------------------
Mutual Risk Management Ltd., Zero Coupon Exchangeable
Sub. Debs., 1.214%, 10/30/15(1)(6) 19,500,000 9,993,750
- ---------------------------------------------------------------------------------------------------------------
Oryx Energy Co., 7.50% Cv. Sub. Debs., 5/15/14 7,000,000
7,105,000
- ---------------------------------------------------------------------------------------------------------------
Platinum Technology, Inc., 6.75% Cv. Sub. Nts., 11/15/01 4,100,000
,410,750
7,410,750
- ---------------------------------------------------------------------------------------------------------------
Stone Container Corp., 8.875% Cv. Sr. Sub. Nts., 7/15/00 3,000,000
4,706,250
- ---------------------------------------------------------------------------------------------------------------
VLSI Technology, Inc., 8.25% Cv. Sub. Nts., 10/1/05 11,800,000
12,154,000 -------------- Total
Convertible Corporate Bonds and Notes (Cost $81,685,268) 94,375,500
=====================================================================
========================================== Structured Instruments--0.0%
- ---------------------------------------------------------------------------------------------------------------
CS First Boston Corp. Argentina Structured Product Asset Return Trust Certificates, 9.40%,
9/1/97 [representing debt of Argentina (Republic of) Bonos del Tesoro Bonds, Series II, 5.83%,
9/1/97 and an interest rate swap between Credit Suisse Financial Products and the Trust] (Cost
$571,429)(8) 571,428 571,028
=====================================================================
========================================== Short-Term Notes--4.7%
- ---------------------------------------------------------------------------------------------------------------
CIT Group Holdings, Inc., 5.50%, 9/3/97(10) 50,000,000
49,984,722
- ---------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.50%, 9/17/97(10) 50,000,000
49,877,778
- ---------------------------------------------------------------------------------------------------------------
Household Finance Corp., 5.52%, 9/3/97(10) 50,000,000
49,984,667 -------------- Total
Short-Term Notes (Cost $149,847,167) 149,847,167
=====================================================================
========================================== Repurchase Agreements--5.5%
- ---------------------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.55%, dated 8/29/97, to be
repurchased at $176,508,780 on 9/2/97, collateralized by U.S. Treasury Bonds, 7.25%-11.25%,
2/15/03-8/15/19, with a value of $168,306,516 and U.S. Treasury Nts., 5.875%, 10/31/98, with a
value of $11,793,435
(Cost $176,400,000) 176,400,000 176,400,000
- ---------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $2,256,496,231) 100.2%
3,209,431,487
- ---------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.2) (7,910,605)
----------- -------------- Net Assets
100.0% $3,201,520,882
=========== ============== </TABLE>
16 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $70,783,316 or 2.21% of the Fund's net
assets, at August 31, 1997.
2. Non-income producing security.
3. Interest or dividend is paid in kind.
4. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
5. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD -- Australian Dollar PLZ -- Polish Zloty
CAD -- Canadian Dollar ZAR -- South African Rand MXP -- Mexican Peso
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents the current interest rate for a variable rate security.
8. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
10. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase. 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 August 31, 1997. There were no affiliate
securities as of August 31, 1997. Transactions during the period in which the
issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares Shares August 31, Gross
Gross August 31, Dividend 1996 Additions Reductions 1997
<PAGE>
Income -------------------------------------------------------------------------------------- <S>
<C> <C> <C> <C> <C> Santa Fe Energy Resources, Inc.,
8.25% Dividend Enhanced
Convertible Stock 805,000 --805,000 -- $294,630
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Equity Income Fund
<PAGE>
Statement of Assets and
Liabilities August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
=====================================================================
========================= <S> <C>
Assets
Investments, at value(cost $2,256,496,231)--see accompanying statement $3,209,431,487
- ---------------------------------------------------------------------------------------------- Unrealized
appreciation on forward foreign currency exchange contracts--Note 5 45,571
- ---------------------------------------------------------------------------------------------- Receivables:
Interest and dividends 14,210,143 Shares of beneficial
interest sold 2,715,160 Investments sold
174,417 Closed forward foreign currency exchange contracts
57,986 ----------------------------------------------------------------------------------------------
Other 70,430
-------------- Total assets
3,226,705,194
=====================================================================
========================= Liabilities
Bank overdraft 2,706,156
- ---------------------------------------------------------------------------------------------- Unrealized
depreciation on forward foreign currency exchange contracts--Note 5 176,042
- ---------------------------------------------------------------------------------------------- Payables and
other liabilities:
Shares of beneficial interest redeemed 11,390,355 Investments
purchased 8,534,019 Distribution and service plan fees
1,099,067 Shareholder reports
610,790 Closed forward foreign currency exchange contracts
254,828 Transfer and shareholder servicing agent fees 188,668
Trustees' fees 7,410 Other
216,977
- -------------- Total liabilities 25,184,312
=====================================================================
========================= Net Assets
$3,201,520,882 ==============
=====================================================================
========================= Composition of Net Assets
Paid-in capital $2,079,711,486
- ---------------------------------------------------------------------------------------------- Undistributed
net investment income 18,883,337
- ---------------------------------------------------------------------------------------------- Accumulated net
realized gain on investments and foreign currency transactions 150,225,211
- ---------------------------------------------------------------------------------------------- Net unrealized
appreciation on investments and translation of assets and liabilities denominated in foreign
currencies 952,700,848
-------------- Net assets $3,201,520,882
</TABLE>
18 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
=====================================================================
========================= <S> <C>
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $2,721,671,770 and
192,764,206 shares of beneficial interest outstanding) $14.12 Maximum offering price
per share (net asset value plus sales charge of 5.75% of offering price)
$14.98
- ---------------------------------------------------------------------------------------------- Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $431,481,249 and 30,788,852 shares of beneficial
interest outstanding) $14.01
- ---------------------------------------------------------------------------------------------- Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $48,367,863 and 3,450,666 shares of beneficial
interest outstanding) $14.02 </TABLE>
See accompanying Notes to Financial Statements
19 Oppenheimer Equity Income Fund
<PAGE>
<PAGE>
Statement of Operations For
the Year Ended August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
=====================================================================
========================= <S> <C>
Investment Income
Interest $ 76,575,702
- ---------------------------------------------------------------------------------------------- Dividends:
Unaffiliated companies 59,769,436 Affiliated companies
294,630
-------------- Total income 136,639,768
=====================================================================
========================= Expenses
Management fees--Note 4 14,800,449
- ---------------------------------------------------------------------------------------------- Distribution and
service plan fees--Note 4:
Class A 4,746,883 Class B
3,437,105 Class C
243,495 ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 2,968,029
- ---------------------------------------------------------------------------------------------- Shareholder
reports 1,207,169
- ---------------------------------------------------------------------------------------------- Custodian fees
and expenses 183,023
- ---------------------------------------------------------------------------------------------- Legal and
auditing fees 89,768
- ---------------------------------------------------------------------------------------------- Trustees' fees
and expenses 81,511
- ---------------------------------------------------------------------------------------------- Other
86,624
-------------- Total expenses 27,844,056
=====================================================================
========================= Net Investment Income
108,795,712
=====================================================================
========================= Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 156,623,918 Closing and expiration of
options written 18,500 Foreign currency transactions
(469,976) --------------
Net realized gain 156,172,442
- ---------------------------------------------------------------------------------------------- Net change in
unrealized appreciation or depreciation on:
Investments 528,174,101 Translation of assets and
<PAGE>
liabilities denominated in foreign currencies (3,863,950)
-------------- Net change
524,310,151 -------------- Net realized and
unrealized gain 680,482,593
=====================================================================
========================= Net Increase in Net Assets Resulting from Operations
$ 789,278,305 ==============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Equity Income Fund
<PAGE>
Statements of Changes in
Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Year Ended August 31, June 30,
1997 1996(1) 1996
=====================================================================
<S> <C> <C> <C> Operations
Net investment income $ 108,795,712 $ 17,326,356 $
100,321,496
- ------------------------------------------------------------------------------------------------------------------
- ------------------ Net realized gain 156,172,442
14,519,814 71,806,904
- ------------------------------------------------------------------------------------------------------------------
- ------------------ Net change in unrealized appreciation
or depreciation 524,310,151 (39,753,931)
206,616,780 --------------- ---------------
- ---------------- Net increase(decrease) in net assets resulting
from operations 789,278,305 (7,907,761)
378,745,180
=====================================================================
===============================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (90,387,132) --
(88,933,508) Class B (9,876,167) --
(7,653,335) Class C (666,754) --
<PAGEp
(81,369)
- ------------------------------------------------------------------------------------------------------------------
- ------------------ Distributions from net realized gain:
Class A (74,843,781) --
(45,033,840) Class B (9,970,652) --
(4,472,521) Class C (386,132) --
(15,717)
=====================================================================
===============================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A 85,811,376 (23,541,609)
35,013,412 Class B 99,076,120 8,288,875
70,965,886 Class C 36,069,145
1,564,603 5,782,628
=====================================================================
=============================================================== Net
Assets
Total increase (decrease) 824,104,328 (21,595,892)
344,316,816
- ------------------------------------------------------------------------------------------------------------------
- ------------------ Beginning of period 2,377,416,554
2,399,012,446 2,054,695,630
- --------------- --------------- ---------------- End of period(including undistributed
net investment income of $18,883,337,
$10,933,236 and $2,274,563, respectively) $ 3,201,520,882 $
2,377,416,554 $ 2,399,012,446
=============== =============== ===============
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30
to August 31.
See accompanying Notes to Financial Statements.
21 Oppenheimer Equity Income Fund
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
<PAGE>
Year Ended August 31, Year Ended June 30,
1997 1996(2) 1996 1995 1994 1993
=====================================================================
============================================
<S> <C> <C> <C> <C> <C> <C>Per Share Operating Data:
Net asset value, beginning of period $11.36 $11.39 $10.25 $9.44 $10.01
$9.15
- -----------------------------------------------------------------------------------------------------------------
Income (loss)from investment operations:
Net investment income .47 .09 .50 .50 .47 .50 Net
realized and
unrealized gain (loss) 3.17 (.12) 1.36 .92 (.39) .99
------- ------- ------- ------- ------- ------- Total income (loss)
from
investment operations 3.64 (.03) 1.86 1.42 .08 1.49
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.48) -- (.48) (.48) (.47) (.48) Dividends
in excess of net
investment income -- -- -- -- (.01) --
Distributions from net realized gain (.40) -- (.24) (.13) (.12) (.15)
Distributions in excess of net
realized gains -- -- -- -- (.05) --
------- ------- ------- ------- ------- ------- Total dividends and
distributions
to shareholders (.88) -- (.72) (.61) (.65) (.63)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.12 $11.36 $11.39 $10.25 $9.44
$10.01 ====== ====== ====== ====== =====
======
=====================================================================
============================================ Total Return, at Net Asset
Value(4) 33.39% (0.26)% 18.61% 15.66% 0.65% 16.76%
=====================================================================
============================================ Ratios/Supplemental Data:
Net assets, end of period
(in millions) $2,722 $2,110 $2,141 $1,893 $1,773 $1,790
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,446 $2,109 $2,054 $1,798 $1,832
$1,658
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
<PAGE>
Net investment income 3.97% 3.28%(5) 4.51% 5.15% 4.72%
5.12% Expenses 0.88% 0.94%(5) 0.89% 0.96% 0.90%
0.79%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 23.7% 13.5% 42.9% 45.7% 30.4%
59.0% Average brokerage
commission rate(7) $0.0592 $0.0587 $0.0592 -- -- --
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
2. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
3. For the period from August 17, 1993 (inception of offering) to June 30, 1994.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 5.
Annualized.
22 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------
Year Ended August 31, Year Ended June 30,
1997 1996(2) 1996 1995 1994(3)
=====================================================================
======================================
<S> <C> <C> <C> <C> <C> Per Share Operating Data:
Net asset value, beginning of period $11.29 $11.33 $10.21 $9.40 $10.22
- -----------------------------------------------------------------------------------------------------------
Income (loss)from investment operations:
Net investment income .37 .07 .41 .43 .36 Net realized
and
unrealized gain (loss) 3.13 (.11) 1.35 .91 (.58)
------- ------- ------- ------- ------- Total income (loss) from
Investment operations 3.50 (.04) 1.76 1.34 (.22)
- -----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.38) -- (.40) (.40) (.42) Dividends in
excess of net
investment income -- -- -- -- (.01) Distributions
from net realized gain (.40) -- (.24) (.13) (.12) Distributions in excess
of net
realized gains -- -- -- -- (.05)
------- ------- ------- ------- ------- Total dividends and distributions
to shareholders (.78) -- (.64) (.53) (.60)
- ----------------------------------------------------------------------------------------------------------- Net
asset value, end of period $14.01 $11.29 $11.33 $10.21 $9.40
====== ====== ====== ====== =====
=====================================================================
====================================== Total Return, at Net Asset Value(4)
32.17% (0.35)% 17.58% 14.87% (2.35)%
=====================================================================
====================================== Ratios/Supplemental Data:
Net assets, end of period
(in millions) $431 $260 $252 $161 $88
- -----------------------------------------------------------------------------------------------------------
Average net assets (in millions) $344 $255 $208 $122 $47
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.16% 2.48%(5) 3.68% 4.34% 3.99%(5)
Expenses 1.69% 1.76%(5) 1.72% 1.79% 1.82%(5)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 23.7% 13.5% 42.9% 45.7% 30.4%
Average brokerage
commission rate(7) $0.0592 $0.0587 $0.0592 -- --
<CAPTION>
Class C
- ------------------------------- Period
Ended Year Ended August 31,
June 30, 1997 1996(2) 1996(1)
=====================================================================
============= <S> <C> <C> <C> Per Share
Operating Data:
Net asset value, beginning of period $11.30 $11.35 $10.76
- ---------------------------------------------------------------------------------- Income (loss)from
investment operations:
Net investment income .40 .07 .28 Net realized and
unrealized gain (loss) 3.12 (.12) .88
<PAGE>
- ------- ------- ------- Total income (loss) from
investment operations 3.52 (.05) 1.16
- ---------------------------------------------------------------------------------- Dividends and distributions
to shareholders:
Dividends from net investment
income (.40) -- (.33) Dividends in excess of net
investment income -- -- -- Distributions from net realized
gain (.40) -- (.24) Distributions in excess of net
realized gains -- -- --
- ------- ------- ------- Total dividends and distributions
to shareholders (.80) -- (.57)
- ---------------------------------------------------------------------------------- Net asset value, end of
period $14.02 $11.30 $11.35 ======
====== ======
=====================================================================
============= Total Return, at Net Asset Value(4) 32.31% (0.44)% 10.50%
=====================================================================
============= Ratios/Supplemental Data:
Net assets, end of period
(in millions) $48 $7 $6
- ---------------------------------------------------------------------------------- Average net assets (in
millions) $25 $7 $3
- ---------------------------------------------------------------------------------- Ratios to average net
assets:
Net investment income 3.15% 2.55%(5) 3.53%(5) Expenses
1.69% 1.79%(5) 1.81%(5)
- ---------------------------------------------------------------------------------- Portfolio turnover rate(6)
23.7% 13.5% 42.9% Average brokerage
commission rate(7) $0.0592 $0.0587 $0.0592
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $717,104,040 and $599,983,689, respectively. 7. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
23 Oppenheimer Equity Income Fund
<PAGE>
-------------------------------------------------------------------------------
Notes to Financial Statements
-------------------------------------------------------------------------------
=====================================================================
1.Significant Accounting Policies Oppenheimer Equity Income Fund (the Fund)
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's investment
objective is to seek as much current income as is compatible with prudent
investment. The Fund's investment adviser is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares
may be subject to a contingent deferred sales charge. All classes of shares
have identical rights to earnings, assets and voting privileges, except
that each class has its own distribution and/or service plan, expenses
directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The
following is a summary of significant accounting policies consistently
followed by the Fund.
-------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last
sale price of the day or, in the absence of sales, at values based on the
closing bid or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such securities which
cannot be valued by an approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Trustees to determine fair value in good faith. Short-term
"money market type" debt securities having a remaining maturity of 60 days
or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Forward foreign
currency exchange contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value
is based upon the last sale price on the prior trading date if it is within
the spread between the closing bid and asked prices. If the last sale price
is outside the spread, the closing bid is used.
-------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of foreign securities
and investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
24 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
=====================================================================
=========== The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
- -------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- -------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- -------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income tax provision is required.
- -------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
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 its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
During the year ended August 31, 1997, the Fund adjusted the classification
of distributions to shareholders to reflect the differences between financial
statement amounts and distributions determined in accordance with income tax
regulations. Accordingly, during the period ended August 31, 1997, amounts have
been reclassified to reflect an increase in undistributed net investment income
of $84,443, a decrease in accumulated net realized gain on investments of
$12,734, and a decrease in paid-in capital of $71,709.
25 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued) Other. Investment transactions
are accounted for on the date the investments are purchased or sold (trade date)
and dividend income is recorded on the ex-dividend date. Discount on securities
purchased is amortized over the life of the respective securities, in accordance
with federal income tax requirements. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market adjustment is
made on the ex-date. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest The Fund has authorized an unlimited number of
no par value shares of beneficial interest of each class. Transactions in shares
of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended August 31, 1997 Period Ended August 31, 1996(2) Year Ended
June 30, 1996(1) -------------------------- ------------------------
- -------------------------- Shares Amount Shares Amount
Shares Amount
- ------------------------------------------------------------------------------------------------------------------
- - <S> <C> <C> <C> <C> <C> <C>
Class A: Sold 22,312,307 $
286,390,507 3,550,795 $ 40,479,520 20,146,940 $ 223,283,409 Dividends and
distributions
reinvested 12,636,963 155,744,291 -- -- 11,433,753
125,568,723 Redeemed (27,925,816) (356,323,422) (5,703,125) (64,021,129)
(28,310,542) (313,838,720) ---------- ------------- --------- ------------
- ---------- ------------- Net increase(decrease) 7,023,454 $ 85,811,376 (2,152,330)
$(23,541,609) 3,270,151 $ 35,013,412 ==========
<PAGE>
============= ========= ============ ========== =============
Class B: Sold 9,869,512 $
126,478,575 1,234,485 $ 13,913,799 8,424,677 $ 92,863,112 Dividends and
distributions
reinvested 1,509,887 18,517,384 -- -- 1,014,528 11,086,597
Redeemed (3,589,063) (45,919,839) (503,549) (5,624,924) (2,987,292)
(32,983,823) ---------- ------------- --------- ------------ ----------
- ------------- Net increase 7,790,336 $ 99,076,120 730,936 $ 8,288,875
6,451,913 $ 70,965,886 ========== ============= =========
============ ========== =============
Class C: Sold 3,032,244 $
39,122,283 153,840 $ 1,732,419 523,531 $ 5,887,218 Dividends and
distributions
reinvested 81,260 1,020,485 -- -- 8,456 94,181
Redeemed (315,866) (4,073,623) (14,976) (167,816) (17,823)
(198,771) ---------- ------------- --------- ------------ ----------
- ------------- Net increase 2,797,638 $ 36,069,145 138,864 $ 1,564,603
514,164 $ 5,782,628 ========== ============= =========
============ ========== =============
</TABLE>
1. For the year ended June 30, 1996 for Class A and Class B shares and for the
period from
November 1, 1995 (inception of offering) to June 30, 1996 for Class C shares.
2. The Fund changed its fiscal year end from June 30 to August 31.
26 Oppenheimer Equity Income Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
=====================================================================
=========== 3. Unrealized Gains and Losses on Investments
At August 31, 1997, net unrealized appreciation on investments of $952,935,256
was composed of gross appreciation of $962,664,064, and gross depreciation of
$9,728,808.
=====================================================================
=========== 4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% of the first
$100 million of average 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 Manager has
agreed to reimburse the Fund if aggregate expenses (with specified exceptions)
exceed 1.5% of the first $30 million of average annual net assets of the Fund,
plus 1% of average annual net assets in excess of $30 million.
<PAGE>
For the year ended August 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $5,179,851, of which $1,573,826
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $4,076,061 and $367,675, respectively, of which $344,565
and $8,473, respectively, was paid to an affiliated broker/dealer. During the
year ended August 31, 1997, OFDI received contingent deferred sales charges of
$477,296 and $5,172 upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI at the time of sale of such
shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund and for other registered investment
companies. OFS's total costs of providing such services are allocated ratably to
these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average annual
net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the period ended August 31, 1997, OFDI paid $317,169 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted a Distribution and Service Plan for Class B shares to
reimburse OFDI for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class B shares. OFDI also receives a service
fee of 0.25% per year to reimburse dealers for providing personal services for
accounts that hold Class B shares.
27 Oppenheimer Equity Income Fund
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
=====================================================================
=========== 4. Management Fees and Other Transactions with Affiliates
(continued) Both fees are computed on the average annual net assets of Class B
shares, determined as of the close of each regular business day. During the year
ended August 31, 1997, OFDI paid $55,838 to an affiliated broker/dealer as
reimbursement for Class B personal service and maintenance expenses and retained
$2,803,497 as reimbursement for Class B sales commissions and service fee
advances, as well as financing costs. If the Plan is terminated by the Fund, the
Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for distributing shares before the Plan was terminated. As
of August 31, 1997, OFDI had incurred unreimbursed
expenses of $9,440,081 for Class B.
<PAGE>
The Fund has adopted a Distribution and Service Plan for Class C shares to
compensate OFDI for its services and costs in distributing Class C shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class C shares. OFDI also receives a service
fee of 0.25% per year to compensate dealers for providing personal services for
accounts that hold Class C shares. Both fees are computed on the average annual
net assets of Class C shares, determined as of the close of each regular
business day. During the year ended August 31, 1997, OFDI retained $208,411 as
compensation for Class C sales commissions and service fee advances, as well as
financing costs. If the Plan is terminated by the Fund, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to OFDI
for distributing shares before the Plan was terminated. As of August 31, 1997,
OFDI had incurred unreimbursed expenses of $653,557 for Class C.
=====================================================================
=========== 5. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The Fund gen
erally enters into forward contracts as a hedge upon the purchase or sale of a
security denominated in a foreign currency. In addition, the Fund may enter into
such contracts as a hedge against changes in foreign currency exchange rates on
portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily basis
as provided by a reliable bank or dealer. The Fund will realize a gain or loss
upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where applicable.
Unrealized appreciation or depreciation on forward contracts is reported in the
Statement of Assets and Liabilities. Realized gains and losses are reported with
all other foreign currency gains and losses in the Fund's Statement of
Operations.
28 Oppenheimer Equity Income Fund
g<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
=====================================================================
=========== Risks include the potential inability of the counterparty to meet
the terms of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
<PAGE>
At August 31, 1997, the Fund had outstanding forward contracts to sell
foreign currencies as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized Contracts to
Sell Date Amount (000s) August 31, 1997 Appreciation Depreciation
- -------------------------------------------------------------------------------------------------- <S>
<C> <C> <C> <C> <C> German Deutsche Mark (DEM)
9/15/97 7,700 DEM $ 4,258,383 $ -- $ 98,099 Mexican Peso (MXP)
9/29/97 4,330 MXP 549,735 -- 33 Mexican Peso (MXP) 10/2/97
149,511 MXP 18,956,844 45,571 -- South African Rand (ZAR) 9/25/97
25,419 ZAR 5,378,504 -- 77,910
- ------- -------- $45,571 $176,042
======= ========
</TABLE>
=====================================================================
=========== 6. Option Activity
The Fund may buy and sell put and call options, or write covered put and call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
29 Oppenheimer Equity Income Fund
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial
Statements (Continued)
- --------------------------------------------------------------------------------
=====================================================================
=========== 6. Option Activity (continued)
Written option activity for the year ended August 31, 1997 was as follows:
Call Options Put Options ---------------------
-------------------- Number of Amount of Number of Amount of
<S> <C> <C> <C> <C>
Options Premiums Options Premiums
- -------------------------------------------------------------------------------- Options outstanding at
August 31, 1996 -- $ -- -- $ -- Options written 1,850
29,600 1,850 55,500 Options closed or expired (1,850) (29,600) (1,850)
(55,500) ------ -------- ------ -------- Options outstanding at
August 31, 1997 -- $ -- -- $ -- ======
</TABLE>
======== ====== ========
=====================================================================
=========== 7. Illiquid and Restricted Securities
At August 31, 1997, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily-available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at August 31, 1997 was $9,970,403, which represents
0.31% of the Fund's net assets.
<TABLE>
<CAPTION>
Acquisition Cost Valuation Per Unit Security
Date Per Unit As of August 31, 1997
- ------------------------------------------------------------------------------------------------- <S>
<C> <C> <C> CS First Boston Corp. Argentina Structured
Product
Asset Return Trust Certificates, 9.40%, 9/1/97 9/7/94 100.00% 99.93% Fideicomiso
Petacalco Trust Nts., 10.16%, 12/23/09 4/16/97 99.93 104.44 </TABLE>
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Ratings of Investments
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be
expected are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor prospects
of ever retaining any real investment standing.
Description of Standard & Poor's Corporation Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an
extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D"
are in default and payment of interest and/or repayment of principal is in
arrears.
Description of Fitch Investors Service, L.P. Ratings
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity through the
life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery of these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD," "DD," or "D" categories.
Description of Duff & Phelps Ratings
Long-Term Debt and Preferred Stock
AAA Highest credit quality. The risk factors are negligible, being only slightly
more than for risk- free US Treasury debt.
AA+, AA & AA- High credit quality protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A- Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB & BBB- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB- Below investment grade but deemed to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic
industry conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arreages.
A-1
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
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
Wireless Services
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER EQUITY INCOME FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
--------------------
(1) Condensed Financial Information (see Part A, Prospectus):
Filed herewith.
(2) Independent Auditors' Report(see Part B Statement of Additional
Information): Filed herewith.
(3) Statement of Investments at 8/31/97(see Part B Statement of
Additional Information): Filed herewith.
(4) Statement of Assets and Liabilities at 8/31/97 (see Part B
Statement of Additional Information): Filed herewith.
(5) Statement of Operations ended 8/31/97(see Part B Statement of
Additional Information): Filed herewith.
(6) Statements of Changes in Net Assets for the year ended
8/31/97(see Part B Statement of Additional Information): Filed herewith.
(7) Notes to Financial Statements(see Part B Statement of Additional
Information): Filed herewith.
(b) Exhibits:
--------
(1) Amended and Restated Declaration of Trust dated August
4, 1995: with Post-Effective Amendment No. 43, 8/31/95, to
Registrant's Registration Statement, and incorporated
herein by reference.
(2) Amended By-Laws dated June 26, 1990: Filed with Post Effective
Amendment No. 36, 11/1/91, to Registrant's Registration
Statement, and refiled with Post-Effective Amendment No. 42,
10/28/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(3) Not Applicable.
(4) (i) Specimen Class A Share Certificate: Previously
filed with Post-Effective amendment No. 46, to
Registrant's Registration Statement dated 10/24/96
and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Previously filed
with Post-Effective amendment No. 46, to
Registrant's Registration Statement dated 10/24/96
and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Previously filed
with Post-Effective amendment No. 46, to Registrant's
Registration Statement dated 10/24/96 and
incorporated herein by reference.
(5) Investment Advisory Agreement dated 10/22/90: Filed with
Post-Effective Amendment No. 34 to Registrant's
Registration Statement dated 11/1/90, and refiled with
Post-Effective Amendment No. 42, 10/28/94, pursuant to
Item 102 of Regulation S-T, and incorporated herein by
reference.
(6) (i) General Distributor's Agreement dated 10/13/92:
Filed with Post-Effective Amendment No. 42, 10/28/94,
and incorporated herein by reference.
(ii) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective
Amendment No. 12 of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
refiled with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-
17850), 9/30/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and refiled with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(iv) Broker Agreement between Oppenheimer Funds
Distributor, Inc. and Newbridge Securities dated
10/1/86: Previously filed with Post-Effective
Amendment No. 25 of Oppenheimer Special Fund (Reg.
No. 2-45272), 11/1/86, and refiled with Post-
Effective Amendment No. 45, of Oppenheimer Special
Fund (Reg. No. 2-45272) 8/22/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by
reference.
(v) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund
(Reg. No. 33-02769), 12/2/92, and refiled with Post-
Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(7) Not applicable.
(8) Custody Agreement dated October 6, 1992: Filed with Post-
Effective Amendment No. 37, to Registrant's Registration
Statement dated 10/28/93, and refiled with Post-Effective
Amendment No. 42, 10/28/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 9/30/70: Filed with
Registrant's Initial Registration Statement and refiled with
Post Effective amendment No. 42, 10/28/94, pursuant to Item
102 of Regulation S-T.
(11) Independent Auditor's Consent: Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) (i) Form of Individual Retirement Account Trust Agreement
(IRA): Previously filed with Post-
Effective Amendment No. 21 to the Registration
Statement of Oppenheimer U.S. Government Trust
(Reg. No. 2-76645), 8/25/93, and incorporated
herein by reference.
(ii) Form of prototype Standardized and Non-Standardized
Profit Sharing Plans and Money Purchase Plans for
self-employed persons and corporations: Filed with
Post-Effective Amendment No. 7 to the Registration
Statement of Oppenheimer Global Growth & Income
Fund (Reg. No. 33-33799), 12/2/94, and incorporated
herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-
exempt organizations: Previously filed with Post-
Effective Amendment No. 47 of Oppenheimer Growth
Fund (File No. 2-45272), 10/21/94, and
incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 15, to the
Registration Statement Oppenheimer Mortgage Income
Fund (Reg. No. 33-6614), 1/19/95, and incorporated
herein by reference.
(v) Form of prototype 401(k) plan: Previously filed with
Post-Effective Amendment No. 7, to the
Registration Statement of Oppenheimer Strategic
Income & Growth Fund (Reg. No. 33-47378), 9/28/95,
and incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A shares
under Rule 12b-1 of the Investment Company Act dated
June 22, 1993: Filed with Post-Effective Amendment
No.
38 to Registrant's Registration Statement, 8/3/93,
and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class
B shares under Rule 12b-1 of the Investment Company
Act dated July 16, 1997: Filed herewith.
(iii) Distribution and Service Plan and Agreement for Class
C Shares under Rule 12b-1 of the Investment Company
Act dated July 16, 1997: Filed herewith.
(16) Performance Data Computation Schedule: Filed herewith.
(17) (i) Financial Data Schedule for Class A shares at 8/31/97:
Filed herewith.
(ii) Financial Data Schedule for Class B shares at
8/31/97:Filed herewith.
(iii) Financial Data Schedule for Class C shares at
8/31/97:Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 dated
10/24/95; Filed with Post-Effective Amendment No. 12
to the Registration Statement of Oppenheimer California
Tax-Exempt Fund (33-23566), 11/1/95, and incorporated
herein by reference.
-- Powers of Attorney: For Bridget A. Macaskill and Sam
Freedman, filed with Registrant's Post-Effective amendment
No. 46, 10/24/96, and all others filed with Post-
Effective Amendment No. 42, to Registrant's Registration
Statement, 10/28/94, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
Number of Record
Holders as of
Title of Class November 21, 1997,
-------------- -------------------
Shares of Beneficial Interest, 141,423
Class A
Shares of Beneficial Interest, 32,688
Class B
Shares of Beneficial Interest, 2,467
Class C
Item 27. Indemnification
---------------
Reference is made to the provisions of Article SEVENTH of Registrant's
Declaration of Trust.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same capacity
to other registered investment companies as described in Parts A and B hereof
and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial nature in
which each officer and director of OppenheimerFunds, Inc. is, or at any
time during the past two fiscal years has been, engaged for his/her own
account or in the capacity of director, officer, employee, partner or
trustee.
<TABLE>
<CAPTION>
Name and Current Position Other Business and Connections During
with OppenheimerFunds, Inc. the Past Two Years
- --------------------------- ------------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers,
Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Senior
Vice President of HarbourView Asset
Management Corporation
("HarbourView"); prior to March, 1996
he was the senior equity portfolio
manager for the Panorama Series Fund,
Inc. (the "Company") and other mutual
funds and pension funds managed by
G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual Life
Insurance Company; was also
responsible for managing the common
stock department and common stock
investments of Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Formerly a Vice President and Senior
Portfolio Manager at First of
America Investment Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Vice President Formerly Vice President (January 1992 - February, 1996) of Asian
Equities for Barclays de Zoete Wedd,
Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds;
formerly an Assistant Vice President
of OFI/Mutual Fund Accounting (April
1994-May 1996), and a Fund Controller
for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc.
(the "Distributor"); Vice President
(since October 1989) and Treasurer
(since April 1986) of HarbourView;
Senior Vice President (since
February 1992), Treasurer (since
July 1991)and a director (since
December 1991) of Centennial;
President, Treasurer and a director
of Centennial Capital Corporation
(since June 1989); Vice President
and Treasurer (since August 1978)
and Secretary (since April 1981) of
Shareholder Services, Inc. ("SSI");
Vice President, Treasurer and
Secretary of Shareholder Financial
Services, Inc. ("SFSI") (since
November 1989); Treasurer of
Oppenheimer Acquisition Corp.
("OAC") (since June 1990); Treasurer
of Oppenheimer Partnership Holdings,
Inc. (since November 1989); Vice
President and Treasurer of ORAMI
(since July 1996); Chief Executive
Officer, Treasurer and a director
of MultiSource Services, Inc., a
broker-dealer (since December 1995);
an officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio manager
of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and a director
(since January 1992) of the
Distributor; Executive Vice
President, General Counsel and a
director of HarbourView, SSI, SFSI
and Oppenheimer Partnership
Holdings, Inc. since (September
1995) and MultiSource Services,
Inc. (a broker-dealer) (since
December 1995); President and a
director of Centennial (since
September 1995); President and a
director of ORAMI (since July
1996); General Counsel (since May
1996) and Secretary (since April
1997) of OAC; Vice President of
OppenheimerFunds International, Ltd.
("OFIL") and Oppenheimer Millennium
Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); an officer of other
Oppenheimer funds; formerly an
Assistant Vice President of
OFI/Mutual Fund Accounting (April
1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the Distributor; Secretary of
HarbourView, MultiSource and
Centennial; Secretary, Vice
President and Director of Centennial
Capital Corporation; Vice President
and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager of certain
Oppenheimer funds; Presently he
holds the following other positions:
Director (since 1995) of ICI Mutual
Insurance Company; Governor (since
1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography
at George Eastman House; Director
(since 1986) of GeVa Theatre.
Formerly he held the following
positions: formerly, Chairman of the
Board and Director of Rochester Fund
Distributors, Inc. ("RFD");
President and Director of Fielding
Management Company, Inc. ("FMC");
President and Director of Rochester
Capital Advisors, Inc. ("RCAI");
Managing Partner of Rochester
Capital Advisors, L.P., President
and Director of Rochester Fund
Services, Inc. ("RFS"); President
and Director of Rochester Tax
Managed Fund, Inc.; Director (1993 -1997) of VehiCare Corp.; Director
(1993 - 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions: An officer of certain
Oppenheimer funds (May, 1993 -January, 1996); Secretary of
Rochester Capital Advisors, Inc. and
General Counsel (June, 1993 -January 1996) of Rochester Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-
1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds. Formerly Vice
President and General Counsel of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for Schroder Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the Institute of Chartered Accountants;
formerly an accountant for Arthur
Young (London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for Bankers Trust Company (1993-
1996); Steering Committee Member,
Subcommittee Chairman for American
Savings Education Council (1995-
1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989 - January, 1997) of Bankers
Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997) of Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and Portfolio Manager for Warburg,
Pincus Counsellors, Inc. (1993-
1997), Co-manager of Warburg, Pincus
Emerging Markets Fund (12/94 -10/97), Co-manager Warburg, Pincus
Institutional Emerging Markets Fund
- Emerging Markets Portfolio (8/96 -10/97), Warburg Pincus Japan OTC
Fund, Associate Portfolio Manager of
Warburg Pincus International Equity
Fund, Warburg Pincus Institutional
Fund - Intermediate Equity
Portfolio, and Warburg Pincus EAFE
Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96), Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese
Finance Society; and Director (6/94-
6/95), Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March 1996, the senior bond
portfolio manager for Panorama
Series Fund Inc., other mutual funds
and pension accounts managed by G.R.
Phelps; also responsible for
managing the public fixed-income
securities department at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995); President and
director (since June 1991) of
HarbourView; Chairman and a director
of SSI (since August 1994), and SFSI
(September 1995); President (since
September 1995) and a director
(since October 1990) of OAC;
President (since September 1995) and
a director (since November 1989) of
Oppenheimer Partnership Holdings,
Inc., a holding company subsidiary
of OFI; a director of ORAMI (since
July 1996) ; President and a
director (since October 1997) of
OFIL, an offshore fund manager
subsidiary of OFI and Oppenheimer
Millennium Funds plc (since October
1997); President and a director of
other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and
of Hillsdown Holdings plc (a U.K.
food company); formerly an Executive
Vice President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 - June, 1996) of Manufacturers
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994
-present) for the Martin Luther King
Multi-Purpose Center (non-profit
community organization); Formerly Vice
President (January, 1995 -April, 1996)
for Lockheed Martin IMS.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly a Portfolio Manager (August,
1989 - August, 1995) with
Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November 1996) for Chase
Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for Prudential Insurance on behalf of the General
Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds;
Formerly, Vice President (June, 1983
- January, 1996) of RFS, President
and Director of RFD; Vice President
and Director of FMC; Vice President
and director of RCAI; General
Partner of RCA; Vice President and
Director of Rochester Tax Managed
Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
formerly Vice President and
Portfolio Manager/Security Analyst
for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp Investment Services
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based Oppenheimer Funds;
formerly Chairman of the Manager and
the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol Advisors,
L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group Pension Strategy and Marketing
for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March 1996, an equity portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension accounts managed by G.R.
Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the Denver-
based Oppenheimer Funds; President and
a Director of Centennial; formerly
President and Director of OAMC, and
Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
formerly Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New
York-based tax-exempt fixed income
Oppenheimer funds; Formerly, Managing
Director and Chief Fixed Income
Strategist at Prudential Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to
March 1996, an equity portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of
the Junior League of Denver, Inc.;
Point of Contact: Finance Supporters
of Children; Member of the Oncology
Advisory Board of the Childrens
Hospital; Member of the Board of
Directors of the Colorado Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985), and SFSI (since November
1989); Assistant Secretary of
Oppenheimer Millennium Funds plc
(since October 1997); an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds and the Oppenheimer/Quest
Rochester Funds, as set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, the Quest Funds, OppenheimerFunds Distributor,
Inc., HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade
Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood, Colorado 80112.
The address of MultiSource Services, Inc. is
1700 Lincoln Street, Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
Registrant's shares. It is also the Distributor of each of the other registered
open-end investment companies for which OppenheimerFunds, Inc. is the investment
adviser, as described in Part A and B of this Registration Statement and listed
in Item 28(b) above.
<TABLE>
<CAPTION>
(b) The directors and officers of the Registrant's principal
underwriter are:
<S> <C> <C>
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
- ---------------- ------------------- -----------------
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President
None
Rhonda Dixon-Gunner(1) Assistant Vice President
None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the Oppenheimer funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National
None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President
None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President
None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne a. LeBlang Senior Vice President
None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President
None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III(2) Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
</TABLE>
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act
of 1940 and rules promulgated thereunder are in the possession of
OppenheimerFunds, Inc. at its offices at 6803 South Tucson Way,
Englewood, Colorado
80112.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(i) Not applicable.
(ii) Not applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 16th day of December, 1997.
OPPENHEIMER EQUITY INCOME FUND
/s/ James C. Swain *
by:--------------------------
James C. Swain
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures: Title Date
/s/ James C. Swain * Chairman of the Board December 16,1997
- ---------------------- of Trustees
James C. Swain
/s/ George Bowen * Treasurer and December 16,1997
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis * Trustee December 16,1997
- ----------------------
Robert G. Avis
/s/ William A. Baker * Trustee December 16,1997
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr. * Trustee December 16,1997
- ----------------------
Charles Conrad, Jr.
/s/ Sam Freedman Trustee December 16,1997
- -----------------
Sam Freedman
/s/ Jon S. Fossel * Trustee December 16,1997
- ----------------------
Jon S. Fossel
/s/ Raymond J. Kalinowski * Trustee December 16,1997
- --------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast * Trustee December 16,1997
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner * Trustee December 16,1997
- ----------------------
Robert M. Kirchner
/s/ Bridget A. Macaskill President and December 16,1997
- --------------------- Trustee
Bridget A. Macaskill
/s/ Ned M. Steel * Trustee December 16,1997
- ---------------------
Ned M. Steel
/s/ Robert G. Zack
*By: --------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<PAGE>
OPPENHEIMER EQUITY INCOME FUND
EXHIBIT INDEX
-------------
Form N-1A
Item No. Description
- ---------- -----------
24(b)(11) Independent Auditors' Consent
24 (b) 15(ii) Amended Distribution and Service Plan and
Agreement for Class B shares
24 (b) 15(iii) Amended Distribution and Service Plan and
Agreement for Class C shares
24(b)(16) Performance Data Computation Schedule
8/31/97
24(b)(17)(i) Financial Data Schedule for Class A Shares
8/31/97
24(b)(17)(ii) Financial Data Schedule for Class B Shares
8/31/97
24(b)(17)(iii) Financial Data Schedule for Class C Shares
8/31/97
C-3
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Equity Income Fund:
We consent to the use in this Post-Effective Amendment No 49 to
Registration Statement No. 2-33043 of Oppenheimer Equity Income Fund of
our report dated September 22, 1997, appearing in the Statement of
Additional Information, which is a part of such Registration Statement,
and to the reference to us under the heading "Financial Highlights" in
Prospectus, which is also a part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
December 12, 1997
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER EQUITY INCOME FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated
the 16th day of July, 1997, by and between Oppenheimer Equity
Income Fund (the "Fund") and OppenheimerFunds Distributor, Inc.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution
and service plan for Class B shares of the Fund (the "Shares"),
contemplated by Rule 12b-1 as it may be amended from time to time
(the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor
for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that
hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The terms and provisions of
this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act,
(ii) the Rule, (iii) Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., or any amendment or
successor to such rule (the "NASD Conduct Rules") and (iv) any
conditions pertaining either to distribution-related expenses or to
a plan of distribution to which the Fund is subject under any order
on which the Fund relies, issued at any time by the U.S. Securities
and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares or
has provided administrative support services with respect to Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer
such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments
under the Plan.
(b) "Independent Trustees" shall mean the members of the
Fund's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers
or investment advisory or other clients of a Recipient, and/or
ccounts as to which such Recipient provides administrative support
<PAGE>
accounts as to which such Recipient provides administrative support
services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient, or
(ii) such Recipient's Customers, but in no event shall any such
Shares be deemed owned by more than one Recipient for purposes of
this Plan. In the event that more than one person or entity would
otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as
determined by the Distributor shall be deemed the Recipient as to
such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the
payments made by the Fund to the Distributor under this Plan, the
Distributor shall provide administrative support services and
distribution assistance services to the Fund. Such services
include distribution assistance and administrative support services
rendered in connection with Shares acquired (1) by purchase, (2) in
exchange for shares of another investment company for which the
Distributor serves as distributor or subdistributor, or (3)
pursuant to a plan of reorganization to which the Fund is a party.
If the Board believes that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board
with a written report or other information to verify that the
Distributor is providing appropriate services in this regard. For
such services, the Fund will make the following payments to the
Distributor:
(i) Administrative Support Services Fees. Within forty-five
(45) days of the end of each calendar quarter, the Fund will make
payments in the aggregate amount of 0.0625% (0.25% on an annual
basis) of the average during that calendar quarter of the aggregate
net asset value of the Shares computed as of the close of each
business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for
providing administrative support services with respect to Accounts.
The administrative support services in connection with Accounts may
include, but shall not be limited to, the administrative support
services that a Recipient may render as described in Section
3(b)(ii) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge).
Within ten (10) days of the end of each month, the Fund will make
payments in the aggregate amount of 0.0625% (0.75% on an annual
basis) of the average during the month of the aggregate net asset
value of Shares computed as of the close of each business day (the
<PAGE>
2 "Asset-Based Sales Charge") outstanding for no more than six years"Asset-Based
Sales Charge") outstanding for no more than six years (the "Maximum Holding
Period"). Such Asset-Based Sales Charge payments received from the Fund will
compensate the Distributor for providing distribution assistance in connection
with the sale of Shares.
The distribution assistance to be rendered by the Distributor
in connection with the Shares may include, but shall not be limited
to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity that sells Shares, and/or
paying such persons "Advance Service Fee Payments" (as defined
below) in advance of, and/or in amounts greater than, the amount
provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining
financing or providing such financing from its own resources, or
from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering
distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including
without limitation the costs of sales literature, advertising and
prospectuses (other than those prospectuses furnished to current
holders of the Fund's shares ("Shareholders")) and state "blue sky"
registration expenses.
(b) Payments to Recipients. The Distributor is authorized
under the Plan to pay Recipients (1) distribution assistance fees
for rendering distribution assistance in connection with the sale
of Shares and/or (2) service fees for rendering administrative
support services with respect to Accounts. However, no such
payments shall be made to any Recipient for any such quarter in
which its Qualified Holdings do not equal or exceed, at the end of
such quarter, the minimum amount ("Minimum Qualified Holdings"), if
any, that may be set from time to time by a majority of the
Independent Trustees. All fee payments made by the Distributor
hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do
not exceed the limits on payments to Recipients that are, or may
be, imposed by the NASD Conduct Rules. The Distributor may make
Plan payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor if such affiliated person qualifies as a
Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative
support services provided by a Recipient during a calendar quarter,
the Distributor shall make service fee payments to that Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of
<PAGE>
3
record the Recipient or by its Customers for a period of more than
the minimum period (the "Minimum Holding Period"), if any, that may
be set from time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
the following service fee payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter:
(i) "Advance Service Fee Payments" at a rate not to exceed 0.25% of
the average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of business on the day
such Shares are sold, constituting Qualified Holdings, sold by the
Recipient during that quarter and owned beneficially or of record
by the Recipient or by its Customers, plus (ii) service fee
payments at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more
than one (1) year. At the Distributor's sole option, the Advance
Service Fee Payments may be made more often than quarterly, and
sooner than the end of the calendar quarter. In the event Shares
are redeemed less than one year after the date such Shares were
sold, the Recipient is obligated to and will repay the Distributor
on demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such Shares were held to one (1)
year.
The administrative support services to be rendered by
Recipients in connection with the Accounts may include, but shall
not be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and maintenance
of accounts or sub-accounts in the Fund and processing Share
redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other
information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees: (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever
alternative method of making service fee payments to Recipients is
selected by the Distributor, in addition the Distributor may make
distribution service fee payments to a Recipient quarterly, within
forty-five (45) days after the end of each calendar quarter, at a
rate not to exceed 0.1875% (0.75% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of shares computed as of the close of each business day
constituting Qualified Holdings owned beneficially or of record by
the Recipient or its Customers for no more than six years and for
any minimum period that the Distributor may establish. Such
payments shall be made only to Recipients that are registered with
the SEC as a broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients
in connection with the sale of Shares may include, but shall not be
limited to, the following: distributing sales literature and
4
<PAGE>
prospectuses other than those furnished to current Shareholders,
providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient,
and providing such other information and services in connection
with the distribution of Shares as the Distributor or the Fund may
reasonably request.
(c) A majority of the Independent Trustees may at any time or
from time to time increase or decrease the rate of fees to be paid
to the Distributor or to any Recipient, but not to exceed the rates
set forth above, and/or direct the Distributor to increase or
decrease (the "Maximum Holding Period"), any Minimum Holding Period
or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding
Period and Minimum Holding Period, if any, that are established and
the rate of payments hereunder applicable to Recipients, and shall
provide each Recipient with written notice within thirty (30) days
after any change in these provisions. Inclusion of such provisions
or a change in such provisions in a revised current prospectus
shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on
Shares are subject to reduction or elimination under the limits to
which the Distributor is, or may become, subject under of the NASD
Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i)
by OppenheimerFunds, Inc. ("OFI") from its own resources (which may
include profits derived from the advisory fee it receives from the
Fund), or (ii) by the Distributor (a subsidiary of OFI), from its
own resources, from Asset-Based Sales Charge payments or from the
proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-
party beneficiaries under this Plan, subject to the limitations set
forth below. It may be presumed that a Recipient has provided
distribution assistance or administrative support services
qualifying for payment under the Plan if it has Qualified Holdings
of Shares that entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to
believe that, notwithstanding the level of Qualified Holdings, a
Recipient may not be rendering appropriate distribution assistance
in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the
Board shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard.
If the Distributor or the Board of Trustees still is not satisfied
after the receipt of such report, either may take the appropriate
steps to terminate the Recipient's status as such under the Plan,
whereupon such Recipient's rights as a third-party beneficiary
hereunder shall terminate. Additionally, in their discretion, a
5
<PAGE>
majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient,
where upon such person's or entity's rights as a third-party
beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way
make the Fund liable to make any payment whatsoever to any person
or entity other than directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is
in effect, the selection and nomination of persons to be Trustees
of the Fund who are not "interested persons" of the Fund
("Disinterested Trustees") shall be committed to the discretion of
the incumbent Disinterested Trustees. Nothing herein shall prevent
the incumbent Disinterested Trustees from soliciting the views or
the involvement of others in such selection or nominations as long
as the final decision on any such selection and nomination is
approved by a majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of
the Fund shall provide written reports to the Fund's Board for its
review, detailing services rendered in connection with the
distribution of the Shares, the amount of all payments made under
this Plan and the purpose for which the payments were made. The
reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan
shall be in writing and shall provide that: (i) such agreement may
be terminated at any time, without payment of any penalty, by a
vote of a majority of the Independent Trustees or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding Class B voting shares; (ii) such termination shall be
on not more than sixty days' written notice to any other party to
the agreement; (iii) such agreement shall automatically terminate
in the event of its "assignment" (as defined in the 1940 Act); (iv)
such agreement shall go into effect when approved by a vote of the
Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such agreement; and (v) such
agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and
its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved by a vote of the Board and its
Independent Trustees cast in person at meetings called on February
25, 1997 and April 29, 1997, for the purpose of voting on this
Plan, and shall take effect after being approved by Class B
shareholders of the Fund, at which time it shall replace the Fund's
Distribution and Service Plan for the Shares dated February 23,
1994. Unless terminated as hereinafter provided, it shall continue
6
<PAGEp
in effect until October 31, 1997 and thereafter from year to year
or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of
the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance.
This Plan may note be amended to increase materially the
amount of payments to be made under this Plan, without approval of
the Class B Shareholders in the manner described above, and all
material amendments must be approved by a vote of the Board and of
the Independent Trustees.
This Plan may be terminated at any time by vote of a majority
of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding
Class B voting shares. In the event of such termination, the Board
and its Independent Trustees shall determine whether the
Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in
respect of Shares sold prior to the effective date of such
termination.
8. Disclaimer of Shareholder and Trustee Liability. The
Distributor understands that the obligations of the fund under this
Plan are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and
Trustee liability for acts or obligations of the Fund.
Oppenheimer Equity Income Fund
By:________________________________
OppenheimerFunds Distributor, Inc.
By:________________________________
7
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER EQUITY INCOME FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated
the 16th day of July, 1997, by and between Oppenheimer Equity
Income Fund (the "Fund") and OppenheimerFunds Distributor, Inc.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution
and service plan for Class C shares of the Fund (the "Shares"),
contemplated by Rule 12b-1 as it may be amended from time to time
(the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor
for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that
hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The terms and provisions of
this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act,
(ii) the Rule, (iii) Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., or any applicable
amendment or successor to such rule (the "NASD Conduct Rules") and
(iv) any conditions pertaining either to distribution-related
expenses or to a plan of distribution to which the Fund is subject
under any order on which the Fund relies, issued at any time by the
U.S. Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares or
has provided administrative support services with respect to Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer
such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments
under the Plan.
(b) "Independent Trustees" shall mean the members of the
Fund's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the fund and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers
or investment advisory or other clients of a Recipient, and/or
<PAGE>
accounts as to which such Recipient provides administrative support
services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient, or
(ii) such Recipient's Customers, but in no event shall any such
Shares be deemed owned by more than one Recipient for purposes of
this Plan. In the event that more than one person or entity would
otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as
determined by the Distributor shall be deemed the Recipient as to
such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the
payments made by the Fund to the Distributor under this Plan, the
Distributor shall provide administrative support services and
distribution services to the Fund. Such services include
distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase
transactions, (2) issued in exchange for shares of another
investment company for which the Distributor serves as distributor
or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with
the sale of Shares, then the Distributor, at the request of the
Board, shall provide the Board with a written report or other
information to verify that the Distributor is providing appropriate
services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five
(45) days of the end of each calendar quarter, the Fund will make
payments in the aggregate amount of 0.0625% (0.25% on an annual
basis) of the average during that calendar quarter of the aggregate
net asset value of the Shares computed as of the close of each
business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for
providing administrative support services with respect to Accounts.
The administrative support services in connection with Accounts may
include, but shall not be limited to, the administrative support
services that a Recipient may render as described in Section
3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Basad Sales Charge).
Within ten (10) days of the end of each month, the Fund will make
payments in the aggregate amount of 0.0625% (0.75% on an annual
basis) of the average during the month of the aggregate net asset
value of Shares computed as of the close of each business day (the
2
<PAGE>
"Asset-Based Sales Charge"). Such Asset-Based Sales Charge
payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of
Shares.
The distribution assistance services to be rendered by the
Distributor in connection with the Shares may include, but shall
not be limited to, the following: (i) paying sales commissions to
any broker, dealer, bank or other person or entity that sells
Shares, and/or paying such persons "Advance Service Fee Payments"
(as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor
who support distribution of Shares by Recipients; (iii) obtaining
financing or providing such financing from its own resources, or
from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering
distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including
without limitation the costs of sales literature, advertising and
prospectus (other than those prospectuses furnished to current
holders of the Fund's shares ("Shareholders")) and state "blue sky"
registration expenses.
(b) Payments to Recipients. The Distributor is authorized
under the Plan to pay Recipients (1) distribution assistance fees
for rendering distribution assistance in connection with the sale
of Shares and/or (2) service fees for rendering administrative
support services with respect to Accounts. However, no such
payments shall be made to any Recipient for any quarter in which
its Qualified Holdings do not equal or exceed, at the end of such
quarter, the minimum amount ("Minimum Qualified Holdings"), if any,
that may be set from time to time by a majority of the Independent
Trustees. All fee payments made by the Distributor hereunder are
subject to reduction or chargeback so that the aggregate service
fee payments and Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
the NASD Conduct Rules. The Distributor may make Plan payments to
any "affiliated person" (as defined in the 1940 Act) of the
Distributor if such h affiliated person qualifies as a Recipient or
retain such payments if the Distributor qualifies as a Recipient.
In consideration of the services provided by Recipients, the
Distributor shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support
services provided by a Recipient during a calendar quarter, the
Distributor shall make service fee payments to that Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business
3
<PAGE>
day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more
than the minimum period (the "Minimum Holding Period"), if any,
that may be set from time to time by a majority of the Independent
Trustees.
Alternatively, the Distributor may, at its sole option, make
the following service fee payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter:
(A) "Advance Service Fee Payments" at a rate not to exceed 0.25% of
the average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of business on the day
such Shares are sold, constituting Qualified Holdings, sold by the
Recipient during that quarter and owned beneficially or of record
by the Recipient or by its Customers, plus (B) service fee payments
at a rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, Advance Service Fee
Payments may be made more often than quarterly, and sooner than the
end of the calendar quarter. In the event Shares are redeemed less
than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata
portion of such Advance Service Fee Payments, based on the ratio of
the time such Shares were held to one (1) year.
The administrative support services to be rendered by
Recipients in connection with the Accounts may include, but shall
not be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and maintenance
of accounts or sub-accounts in the Fund and processing Share
redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other
information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making
service fee payments to Recipients is selected by the Distributor,
in addition the Distributor shall make distribution service fee
payments to each Recipient quarterly, within forty-five (45) days
after the end of each calendar quarter, at a rate not to exceed
0.1875% (0.75% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares
computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient
or its Customers for a period of more than one (1) year.
Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at
4
<PAGE>
the rate described above, on Shares constituting Qualified Holdings
owned beneficially or of record by the Recipient or its Customers
without regard to the 1-year holding period described above. Such
payments shall be made only to Recipients that are registered with
the SEC as a broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients
in connection with the sale of Shares may include, but shall not be
limited to, the following: distributing sales literature and
prospectuses other than those furnished to current Shareholders,
providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient,
and providing such other information and services in connection
with the distribution of Shares as the Distributor or the Fund may
reasonably request.
(c) A majority of the Independent Trustees may at any time or
from time to time (i) increase or decrease the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the
rates set forth above, and/or (ii) direct the Distributor to
increase or decrease any Minimum Holding Period, any maximum period
set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned
beneficially or of record by a Recipient or by its Customers (the
"Maximum Holding Period") or Minimum Qualified Holdings. The
Distributor shall notify all Recipients of any Minimum Qualified
Holdings, Maximum Holding Period and Minimum Holding Period, if
any, that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such
provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on
Shares are subject to reduction or elimination under the limits to
which the Distributor is, or may become, subject under the NASD
Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i)
by OppenheimerFunds, Inc. ("OFI") from its own resources (which may
include profits derived from the advisory fee it receives from the
Fund), or (ii) by the Distributor (a subsidiary of OFI), from its
own resources, from Asset-Based Sales Charge payments or from the
proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-
party beneficiaries under this Plan, subject to the limitations set
forth below. It may be presumed that a Recipient has provided
distribution assistance or administrative support services
qualifying for payment under the Plan if it has Qualified Holdings
of Shares that entitle it to payments under the Plan. If either
5
<PAGE>
the Distributor or the Board believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the
Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If the Distributor or
the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the
Recipient's status as a Recipient under the Plan, whereupon such
Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the
Fund's Independent Trustees at any time may remove any broker,
dealer, bank or other person or entity as a Recipient, whereupon
such person's or entity's rights as a third-party beneficiary
hereof shall terminate. Notwithstanding any other provision of
this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other
than directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is
in effect, the selection and nomination of persons to be Trustees
of the Fund who are not "interested persons" of the Fund
("Disinterested Trustees") shall be committed to the discretion of
the incumbent Disinterested Trustees. Nothing herein shall prevent
the incumbent Disinterested Trustees from soliciting the views or
the involvement of others in such selection or nomination as long
as the final decision on any such selection and nomination is
approved by a majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of
the Fund shall provide written reports to the Fund's Board for its
review, detailing services rendered in connection with the
distribution of the Shares, the amount of all payments made under
this Plan and the purpose for which the payments were made. The
reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. An agreement related to this Plan
shall be in writing and shall provide that: (i) such agreement may
be terminated at any time, without payment of any penalty, by a
vote of a majority of the Independent Trustees or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting Class C shares; (ii) such termination shall be
on not more than sixty days' written notice to any other party to
the agreement; (iii) such agreement shall automatically terminate
in the event of its "assignment" (as defined in the 1940 Act); (iv)
such agreement shall go into effect when approved by a vote of the
Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such agreement; and (v) such
agreement shall, unless terminated as herein provided, continue in
6
<PAGE>
effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and
its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved by a vote of the Board and its
Independent Trustees cast in person at a meeting called on February
25, 1997, for the purpose of voting on this Plan, and shall take
effect as of the date first set forth above, at which time it shall
replace the Fund's Distribution and Service Plan for the Shares
dated August 4, 1995. Unless terminated as hereinafter provided,
it shall continue in effect until October 31, 1997 and thereafter
from year to year or as the Board may otherwise determine but only
so long as such continuance is specifically approved at least
annually by a vote of the Board and its Independent Trustees cast
in person at a meeting called for the purpose of voting on such
continuance.
This Plan may not be amended to increase materially the amount
of payments to be made under this Plan, without approval of the
Class C Shareholders in the manner described above, and all
material amendments must be approved by a vote of the Board and of
the Independent Trustees.
This Plan may be terminated at any time by a vote of a
majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding Class C voting shares. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund
of all or a portion of the Service Fee and/or the Asset-Based Sales
Charge in respect of Shares sold prior to the effective date of
such termination.
8. Disclaimer of Shareholder and Trustee Liability. The
Distributor understands that the obligations of the Fund under this
Plan are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and
Trustee liability for acts or obligations of the Fund.
Oppenheimer Equity Income Fund
By:________________________________
OppenheimerFunds Distributor, Inc.
By:________________________________
7
Oppenheimer Equity Income Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
10/08/87 0.1200000 0.0000000 9.350
12/23/87 0.1200000 0.3550000 7.940
03/24/88 0.1200000 0.0000000 8.200
06/23/88 0.1200000 0.0000000 8.500
09/22/88 0.1200000 0.0000000 8.330
12/22/88 0.1200000 0.0150000 8.420
03/22/89 0.1200000 0.0000000 8.660
06/22/89 0.1200000 0.0000000 9.310
09/20/89 0.1200000 0.0000000 9.600
12/21/89 0.1400000 0.2400000 9.150
03/28/90 0.1200000 0.0000000 9.110
06/20/90 0.1200000 0.0000000 9.230
09/26/90 0.1200000 0.0000000 8.460
12/26/90 0.1200000 0.1450000 8.470
03/20/91 0.1200000 0.0000000 8.990
06/25/91 0.1200000 0.0000000 8.850
09/25/91 0.1200000 0.0000000 9.210
12/24/91 0.1250000 0.1185000 9.120
03/25/92 0.1200000 0.0000000 9.110
06/24/92 0.1200000 0.0000000 9.090
09/24/92 0.1200000 0.0000000 9.220
12/24/92 0.1200000 0.1450000 9.320
03/25/93 0.1200000 0.0000000 9.840
06/24/93 0.1200000 0.0000000 9.880
09/23/93 0.1200000 0.0000000 10.200
12/27/93 0.1200000 0.1721000 10.010
03/24/94 0.1200000 0.0000000 9.860
06/23/94 0.1200000 0.0000000 9.490
09/22/94 0.1200000 0.0000000 9.700
12/23/94 0.1200000 0.1272000 9.140
03/23/95 0.1200000 0.0000000 9.510
06/20/95 0.1200000 0.0000000 10.230
09/21/95 0.1200000 0.0000000 10.830
12/22/95 0.1200000 0.2443500 10.840
03/20/96 0.1200000 0.0000000 11.290
06/20/96 0.1200000 0.0000000 11.280
09/19/96 0.1200000 0.0000000 11.510
12/19/96 0.1200100 0.4026200 12.150
03/20/97 0.1200000 0.0000000 12.650
06/20/97 0.1200000 0.0000000 13.770
Oppenheimer Equity Income Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares
09/23/93 0.1150000 0.0000000 10.180
12/27/93 0.1060000 0.1721000 9.990
03/24/94 0.1030000 0.0000000 9.830
06/23/94 0.1020000 0.0000000 9.460
09/22/94 0.1020000 0.0000000 9.670
12/23/94 0.1010000 0.1272000 9.100
03/23/95 0.1020000 0.0000000 9.480
06/20/95 0.1020000 0.0000000 10.180
09/21/95 0.0990000 0.0000000 10.780
12/22/95 0.0984800 0.2443500 10.780
03/20/96 0.0990000 0.0000000 11.230
06/20/96 0.0970000 0.0000000 11.220
09/19/96 0.0970000 0.0000000 11.450
12/19/96 0.0927200 0.4026200 12.080
03/20/97 0.0960000 0.0000000 12.580
06/20/97 0.0940000 0.0000000 13.680
Class C Shares
12/22/95 0.1168900 0.2443500 10.820
03/20/96 0.1050000 0.0000000 11.260
06/20/96 0.1010000 0.0000000 11.240
09/19/96 0.0990000 0.0000000 11.460
12/19/96 0.0958300 0.4026200 12.100
03/20/97 0.1040000 0.0000000 12.580
06/20/97 0.0970000 0.0000000 13.690
Oppenheimer Equity Income Fund
Page 3
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
{($1,257.19/$1,000)^ 1} - 1 = 25.72% {($1,333.89/$1,000)^ 1} - 1 = 33.39%
Five Year Five Year
{($1,984.79/$1,000)^.2} - 1 = 14.69% {($2,105.84/$1,000)^.2} - 1 = 16.06%
Ten Year Ten Year
{($2,736.54/$1,000)^.1} - 1 = 10.59% {($2,903.41/$1,000)^.1} - 1 = 11.25%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
2.00% for the inception year:
One Year One Year
{($1,271.72/$1,000)^ 1} - 1 = 27.17% {($1,321.72/$1,000)^ 1} - 1 = 32.17%
Inception Inception
{($1,716.90/$1,000)^.2476}-1 = 14.32% {($1,736.90/$1,000)^.2476}- 1 = 14.65%
Class C Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
{($1,313.06/$1,000)^ 1} - 1 = 31.31% {($1,323.05/$1,000)^ 1} - 1 = 32.31%
Inception Inception
{($1,455.47/$1,000)^.5455}-1 = 22.72% {($1,455.47/$1,000)^.5455}-1 = 22.72%
<PAGE>
Oppenheimer Equity Income Fund
Page 4
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating cumulative total return is as follows:
( ERV - P ) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
$1,257.19 - $1,000/$1,000 = 25.72% $1,333.89 - $1,000/$1,000 = 33.39%
Five Year Five Year
$1,984.79 - $1,000/$1,000 = 98.48% $2,105.84 - $1,000/$1,000 = 110.58%
Ten Year Ten Year
$2,736.54 - $1,000/$1,000 = 173.65% $2,903.41 - $1,000/$1,000 = 190.34%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
2.00% for the inception year:
One Year One Year
$1,271.72 - $1,000/$1,000 = 27.17% $1,321.72 - $1,000/$1,000 = 32.17%
Inception Inception
$1,716.90 - $1,000/$1,000 = 71.69% $1,736.90 - $1,000/$1,000 = 73.69%
Class C Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
$1,313.06 - $1,000/$1,000 = 31.31% $1,323.05 - $1,000/$1,000 = 32.31%
Inception Inception
$1,455.47 - $1,000/$1,000 = 45.55% $1,455.47 - $1,000/$1,000 = 45.55%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 045156
<NAME> OPPENHEIMER EQUITY INCOME FUND -A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 2,256,496,231
<INVESTMENTS-AT-VALUE> 3,209,431,487
<RECEIVABLES> 17,157,706
<ASSETS-OTHER> 70,430
<OTHER-ITEMS-ASSETS> 45,571
<TOTAL-ASSETS> 3,226,705,194
<PAYABLE-FOR-SECURITIES> 8,534,019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,650,293
<TOTAL-LIABILITIES> 25,184,312
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,079,711,486
<SHARES-COMMON-STOCK> 192,764,206
<SHARES-COMMON-PRIOR> 185,740,752
<ACCUMULATED-NII-CURRENT> 18,883,337
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150,225,211
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<ACCUM-APPREC-OR-DEPREC> 952,700,848
<NET-ASSETS> 2,721,671,770
<DIVIDEND-INCOME> 60,064,066
<INTEREST-INCOME> 76,575,702
<OTHER-INCOME> 0
<EXPENSES-NET> 27,844,056
<NET-INVESTMENT-INCOME> 108,795,712
<REALIZED-GAINS-CURRENT> 156,172,442
<APPREC-INCREASE-CURRENT> 524,310,151
<NET-CHANGE-FROM-OPS> 789,278,305
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 90,387,132
<DISTRIBUTIONS-OF-GAINS> 74,843,781
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,312,307
<NUMBER-OF-SHARES-REDEEMED> 27,925,816
<SHARES-REINVESTED> 12,636,963
<NET-CHANGE-IN-ASSETS> 824,104,328
<ACCUMULATED-NII-PRIOR> 10,933,236
<ACCUMULATED-GAINS-PRIOR> 79,266,067
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<GROSS-ADVISORY-FEES> 14,800,449
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> OPPENHEIMER EQUITY INCOME FUND -B
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<NAME> OPPENHEIMER EQUITY INCOME FUND -C
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