Registration No. 2-76547
File No. 811-3420
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 29 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 28 / X /
OPPENHEIMER INTEGRITY FUNDS
- -------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
- -------------------------------------------------------------------------
(Address of Principal Executive Offices)
1-303-671-3200
- -------------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center - Suite 3400
New York, New York 10048-0203
- -------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ x / On April 1, 1996, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On _______________, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On ________________, pursuant to paragraph (a)(2) of
Rule 485
- -------------------------------------------------------------------------
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1995, was filed on February 28, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
---------------------
Prospectus for Oppenheimer Bond Fund
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed -- Organization
and History; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Expenses; Dividends, Capital Gains and Taxes
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; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Prospectus for Oppenheimer Value Stock Fund
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed -- Organization
and History; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Expenses; Dividends, Capital Gains and Taxes
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; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
__________________
* Not applicable or negative answer.
<PAGE>
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
---------------------
Statement of Additional Information for Oppenheimer Bond Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
Appendix A (Prospectus) - Description of Securities Ratings
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;
Additional Information about the Fund
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 *
Statement of Additional Information for Oppenheimer Value Stock Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
Appendix A (Prospectus) - Description of Securities Ratings
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;
Additional Information about the Fund
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.
<PAGE>
OPPENHEIMER
Bond Fund
Prospectus dated April 1, 1996.
Oppenheimer Bond Fund (the "Fund"), formerly named "Oppenheimer Investment
Grade Bond Fund," is a mutual fund with the investment objective of
seeking a high level of current income by investing mainly in debt
instruments. The Fund will, under normal market conditions, invest at
least 65% of its total assets in a diversified portfolio of investment
grade debt securities. You should carefully review the risks associated
with an investment in the Fund. Please refer to "Investment Objectives
and Polices" beginning on page ____.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the April 1, 1996, 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, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A
A-1 Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
Appendix B
B-1 Special Sales Charge Arrangements for Fund Shareholders Who Were
Shareholders of the Former Connecticut Mutual Investment
Accounts, Inc.
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and shareholder transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended December 31, 1995.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ___ for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
- ------------------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None None
- ------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption sixth year and purchase(2)
proceeds) eliminated
thereafter(2)
- ------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
1. If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month in 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," below and "How to Buy
Shares - Buying Class C Shares" below.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, OppenheimerFunds,
Inc. (which is referred to in this Prospectus as the "Manager"). The
rates of the Manager's fees are set forth in "How the Fund is Managed,"
below. The Fund has other regular expenses for services, such as transfer
agent fees, custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are detailed
in the Fund's financial statements in the Statement of Additional
Information.
Annual Fund Operating Expenses as a Percentage of Average Net Assets
Class A Class B Class C
Shares Shares Shares(1)
- ----------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
(Restated)
- ----------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.25% 1.00% 1.00%
- ----------------------------------------------------------------------
Other Expenses 0.38% 0.40% 0.40%
- ----------------------------------------------------------------------
Total Fund 1.38% 2.15% 2.15%
Operating Expenses
1. Total Annual Fund Operating expenses for Class C shares are estimates
based on amounts that would have been payable assuming Class C shares were
outstanding for the full year.
The numbers in the table above are based on the Fund's expenses in
its last fiscal year ended December 31, 1995. These amounts are shown as
a percentage of the average net assets of each class of the Fund's shares
for that year. The management fees have been restated to reflect the
Fund's new management fees set forth in the new investment advisory
agreement dated July 10, 1995 with OppenheimerFunds, Inc. The restated
management fee rate is as if the new investment advisory agreement had
been in effect during the entire fiscal year ended December 31, 1995. Had
the management fee rate not changed, the actual management fee would have
been 0.50% for Class A and Class B shares, respectively, and total fund
operating expenses would have been 1.07% for Class A and 1.82% for Class
B, respectively.
The 12b-1 Distribution Plan Fees for Class A shares are service fees
(the maximum fee is 0.25% of average annual net assets of that class), and
for Class B and Class C shares, are the service fees (the maximum service
fee is 0.25% of average annual net assets of the class) and the asset-
based sales charge of 0.75%. These Plans are discussed in greater detail
in "How to Buy Shares." Class C shares were not publicly offered before
July 11, 1995. Therefore, the "Annual Fund Operating Expenses" as to
Class C shares are estimates based on expenses for the period from the
inception date until December 31, 1995.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above
as restated. 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Class A Shares $61 $89 $119 $205
- ----------------------------------------------------------------------
Class B Shares $72 $97 $135 $211
- ----------------------------------------------------------------------
Class C Shares $32 $67 $115 $248
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $61 $89 $119 $205
- ----------------------------------------------------------------------
Class B Shares $22 $67 $115 $211
- ----------------------------------------------------------------------
Class C Shares $22 $67 $115 $248
</TABLE>
*The Class B expenses in years 7 through 10 are based on Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect 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 an amount greater 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 - 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 will be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund seeks to achieve
a high level of current income by investing mainly in debt instruments.
- What Does The Fund Invest In? Under normal market conditions, the
Fund invests at least 65% of its total assets in a diversified portfolio
of investment grade fixed-income securities. These include (i)
investment-grade debt securities rated BBB or above by Standard and Poor's
Corporation or Baa or above by Moody's Investors Service, Inc. or, if
unrated, are of comparable quality as determined by the Fund's Manager;
(ii) securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities or obligations secured
by such securities ("U.S. Government Securities"); and (iii) high-quality,
short-term money market instruments.
The Fund may invest up to 35% of its total assets in non-investment
grade debt instruments. Although non-investment grade securities
generally offer the potential for higher income than investment grade
securities, they may be subject to greater market fluctuations and a
greater risk of default because of the issuer's low creditworthiness. The
Fund may also write covered calls and use certain types of securities
called "derivative investments" and hedging instruments to try to manage
investment risks. These investments are more fully explained in
"Investment Objective and Policies" starting on page ___.
- Who Manages The Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc., (which changed its name from
Oppenheimer Management Corporation effective January 5, 1996). The
Manager (including a subsidiary) manages investment company portfolios
currently having over $50 billion in assets. The Manager is paid a
management fee by the Fund, based on its net assets. The Fund's portfolio
managers, who are primarily responsible for the selection of the Fund's
securities, are David P. Negri and David A. Rosenberg. The Fund's Board
of Trustees, elected by shareholders, oversees the Manager. Please refer
to "How the Fund is Managed," starting on page ___ for more information
about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in fixed-income securities are subject to changes
in their value and their yield from a number of factors, including changes
in the general bond market and changes in interest rates. Non-investment
grade securities may have speculative characteristics and be subject to
a greater risk of default than investment grade securities. These changes
affect the value of the Fund's investments and its share prices for each
class of its shares. In the OppenheimerFunds spectrum the Fund is
generally considered a moderately risky income fund, more aggressive than
money market funds but less aggressive than high yield 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 objective and your shares may be worth
more or less than their original cost when you redeem them. Please refer
to "Investment Objectives and Policies" starting on page ___ for a more
complete discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
starting on page ___ for more details.
- Will I Pay A Sales Charge To Buy Shares? The Fund has three
classes of shares. All classes have the same investment portfolio but
different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75%, which are reduced for larger purchases. Class
B and Class C shares are offered without a front-end sales charge, but may
be subject to a contingent deferred sales charge if redeemed within 6
years or 12 months of purchase, respectively. There is also an annual
asset-based sales charge on Class B and Class C shares. Please review
"How to Buy Shares" starting on page ____ for more details, including a
discussion about factors you and your financial advisor should consider
in determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer or by using Checkwriting. Please refer to "How to Sell Shares"
starting on page ___. The Fund also offers exchange privileges to other
Oppenheimer funds, described in "How to Exchange Shares" on page ___.
- How Has The Fund Performed? The Fund measures its performance by
quoting its yield, average annual total return and cumulative total
return, which measure historical performance. Those yields and total
returns can be compared to the returns (over similar periods) of other
funds. Prior to July 10, 1995, the Fund's investments were limited to
investment grade bonds, U.S. Government Securities, and money market
instruments. Of course, other funds may have different objectives,
investments, and levels of risk. The Fund's performance can also be
compared to broad market indices, which we have done on pages ____.
Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information
about the Fund, including per share data and expense ratios and other data
based on the Fund's average net assets. This information for the 1991
through 1995 fiscal years has been audited by Deloitte & Touche LLP, the
Fund's independent auditors, whose report on the Fund's financial
statements for the fiscal year ended December 31, 1995 is included in the
Statement of Additional Information. Class C shares were publicly offered
only during a portion of that period, commencing July 11, 1995. The
information in the table for the fiscal periods prior to 1991 was audited
by the Fund's previous independent auditors.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991(4)
<S> <C> <C> <C> <C> <C>
==========================================================
===========================================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.12 $10.74 $10.80 $9.86
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .69 .65 .69 .75 .82
Net realized and unrealized gain (loss) .96 (1.08) .40 (.05) .90
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.65 (.43) 1.09 .70 1.72
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.68) (.65) (.71) (.76) (.78)
Dividends in excess of net investment
income -- (.03) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.68) (.68) (.71) (.76) (.78)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.12 $10.74 $10.80
==========================================================
=============
==========================================================
===========================================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.94% (3.87)% 10.30% 6.77% 18.28%
==========================================================
===========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $169,059 $96,640 $110,759 $106,290 $90,623
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $116,940 $102,168 $111,702 $98,672 $86,471
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.47% 6.25% 6.20% 7.00% 8.02%
Expenses, before voluntary reimbursement
by the Manager 1.27% 1.06% 1.06% 1.10% 1.23%
Expenses, net of voluntary reimbursement
by the Manager 1.26% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 116.4% 97.1%
<FN>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
4. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
ELEVEN
MONTHS
ENDED
DEC. 31, YEAR ENDED JANUARY 31,
1990 1989 1988(3) 1988(3) 1987(3) 1986(3)
<S> <C> <C> <C> <C> <C> <C>
==========================================================
==========================================================
================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.29 $10.12 $10.55 $11.30 $11.16 $10.91
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .88 .92 .93 1.09 1.16 1.22
Net realized and unrealized gain (loss) (.43) .19 (.36) (.55) .22 .35
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .45 1.11 .57 .54 1.38 1.57
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.88) (.94) (1.00) (1.29) (1.24) (1.32)
Dividends in excess of net investment
income -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (.94) (1.00) (1.29) (1.24) (1.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.86 $10.29 $10.12 $10.55 $11.30 $11.16
==========================================================
==============================
==========================================================
==========================================================
================
TOTAL RETURN, AT NET ASSET VALUE (5) 4.74% 11.31% 4.48% N/A N/A
N/A
==========================================================
==========================================================
================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $87,021 $96,380 $102,293 $118,568 $125,513 $121,979
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $90,065 $100,891 $111,264 $118,724 $123,045 $118,253
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.85% 8.85% 8.75% 10.28% 10.45% 11.26%
Expenses, before voluntary reimbursement
by the Manager 1.26% 1.14% 1.05% 0.98% 0.93% 0.97%
Expenses, net of voluntary reimbursement
1.24% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 80.4% 41.3% 45.0% 19.5% 59.8% 36.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ -------------
PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993(2) 1995(1)
<S> <C> <C> <C> <C>
==========================================================
===============================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.11 $11.10 $10.89
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .63 .58 .40 .28
Net realized and unrealized gain (loss) .94 (1.08) .03 .10
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.57 (.50) .43 .38
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.60) (.57) (.42) (.28)
Dividends in excess of net investment
income -- (.03) -- --
- ---------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.60) (.60) (.42) (.28)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.11 $10.99
==========================================================
===
==========================================================
===============================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.06% (4.53)% 3.91% 3.76%
==========================================================
===============================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $39,187 $3,451 $1,809 $3,971
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $12,823 $2,747 $922 $979
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.84% 5.53% 4.80%(6) 6.32%(6)
Expenses, before voluntary reimbursement
by the Manager 2.12% 1.78% 1.90%(6) 2.25%(6)
Expenses, net of voluntary reimbursement
by the Manager 2.08% N/A N/A 1.96%(6)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 175.4%
<FN>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1995 were $233,752,932 and $211,825,884, respectively.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks a high level of current income by investing
mainly in debt instruments.
Investment Policies and Strategies.
Under normal market conditions, the Fund invests at least 65% of its total
assets in investment grade debt securities, U.S. Government Securities,
and money market instruments. Investment-grade debt securities are those
rated in one of the four highest categories by Standard & Poor's
Corporation ("Standard & Poor's"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. or other nationally-recognized
rating organization. A description of these rating categories is included
as an Appendix to the Fund's Statement of Additional Information. Debt
securities (often referred to as "fixed-income securities") are used by
issuers to borrow money from investors. The issuer promises to pay the
investor interest at a fixed or variable rate, and to pay back the amount
it borrowed (the "principal") at maturity. Some debt securities, such as
zero coupon bonds (discussed below) do not pay current interest. The Fund
may invest up to 35% of its total assets in debt securities rated less
than investment grade or, if unrated, judged by the Manager to be of
comparable quality to such lower-rated securities (collectively,
"lower-grade securities"). Lower-grade securities include securities
rated BB, B, CCC, CC and D by Standard & Poor's or Ba, B, Caa, Ca and C
by Moody's. Lower-grade securities (often called "junk bonds") are
considered speculative and involve greater risk. They may be less liquid
than higher-rated securities. If the Fund were forced to sell a lower-
grade debt security during a period of rapidly-declining prices, it might
experience significant losses especially if a substantial number of other
holders decide to sell at the same time. Other risks may involve the
default of the issuer or price changes in the issuer's securities due to
changes in the issuer's financial strength or economic conditions. The
Fund is not obligated to dispose of securities when issuers are in default
or if the rating of the security is reduced. These risks are discussed
in more detail in the Statement of Additional Information.
The Manager anticipates that the Fund would generally invest at least
75% of its total assets in: (i) U.S. corporate bonds rated "A" or better
and (ii) U.S. government and agency bonds. The Manager further
anticipates that the Fund would invest an additional 15% of its total
assets in non-investment grade domestic corporate bonds and 10% of its
total assets in non-investment grade foreign bonds. These anticipated
investment targets, including the allocation between domestic and foreign
lower-grade debt securities, are subject to fluctuation and may be changed
by the Manager without further notice to shareholders or amended
prospectus disclosure. Under normal market conditions, the Fund's target
duration will be approximately five. Duration is a measure of the
anticipated rise or decline in value for a 1% change in interest rates.
For example, a duration of 2 in a portfolio indicates that for every 1%
rise in general interest rates, the portfolio's value would be expected
to fall 2%, and vice versa.
When investing the Fund's assets, the Manager considers many factors,
including current developments and trends in both the economy and the
financial markets. The Fund may try to hedge against losses in the value
of its portfolio of securities by using hedging strategies described
below. The Manager may employ special investment techniques, also
described below. Additional information about the securities the Fund may
invest in, the hedging strategies the Fund may employ and the special
investment techniques may be found under the same headings in the
Statement of Additional Information.
- 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 values 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.
- Credit Risks. Debt securities are also subject to credit risks.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds (which the Fund may hold)
are subject to greater credit risk than higher-rated bonds. Securities
issued or guaranteed by the U.S. Government are subject to little, if any,
credit risk. While the Manager may rely to some extent on credit ratings
by nationally recognized rating agencies, such as Standard & Poor's or
Moody's, in evaluating the credit risk of securities selected for the
Fund's portfolio, it may also use its own research and analysis. However,
many factors affect an issuer's ability to make timely payments, and there
can be no assurance that the credit risks of a particular security will
not change over time.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those investment policies. The Fund's investment policies
and techniques are not "fundamental" unless this Prospectus or the
Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Fund's Board of Trustees may
change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
- U.S. Government Securities. Certain U.S. Government Securities,
including U.S. Treasury bills, notes and bonds, and mortgage participation
certificates guaranteed by Government National Mortgage Association
("Ginnie Mae") are supported by the full faith and credit of the U.S.
government, which in general terms means that the U.S. Treasury stands
behind the obligation to pay principal and interest. Ginnie Mae
certificates are one type of mortgage-related U.S. Government Security the
Fund invests in. Other mortgage-related U.S. Government Securities the
Fund invests in that are issued or guaranteed by federal agencies or
government-sponsored entities are not supported by the full faith and
credit of the U.S. government. Those securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Mortgage Corporation ("Freddie
Mac"), obligations supported only by the credit of the instrumentality,
such as Federal National Mortgage Association ("Fannie Mae") and
obligations supported by the discretionary authority of the U.S.
Government to repurchase certain obligations of U.S. Government agencies
or instrumentalities such as the Federal Land Banks and the Federal Home
Loan Banks. Other U.S. Government Securities the Fund invests in are
collateralized mortgage obligations ("CMOs").
The value of U.S. Government Securities will fluctuate depending on
prevailing interest rates. Because the yields on U.S. Government
Securities are generally lower than on corporate debt securities, when the
Fund holds U.S. Government Securities it may attempt to increase the
income it can earn from them by writing covered call options against them,
when market conditions are appropriate. Writing covered calls is
explained below, under "Other Investment Techniques and Strategies."
- Short-Term Debt Securities. The high quality, short-term money
market instruments in which the Fund may invest include U.S. Treasury and
agency obligations; commercial paper (short-term, unsecured, negotiable
promissory notes of a domestic or foreign company); short-term obligations
of corporate issuers; bank participation certificates; and certificates
of deposit and bankers' acceptances (time drafts drawn on commercial banks
usually in connection with international transactions) of banks and
savings and loan associations.
- Mortgage-Backed Securities and CMOs. Certain mortgage-backed
securities, whether issued by the U.S. government or by private issuers,
"pass-through" to investors the interest and principal payments generated
by a pool of mortgages assembled for sale by government agencies. Pass-
through mortgage-backed securities entail the risk that principal may be
repaid at any time because of prepayments on the underlying mortgages.
That may result in greater price and yield volatility than traditional
fixed-income securities that have a fixed maturity and interest rate.
The Fund may also invest in collateralized mortgage-backed
obligations (referred to as "CMOs"), which generally are obligations fully
collateralized by a portfolio of mortgages or mortgage-related securities.
Payment of the interest and principal generated by the pool of mortgages
is passed through to the holders as the payments are received. CMOs are
issued with a variety of classes or series which have different
maturities. Certain CMOs may be more volatile and less liquid than other
types of mortgage-related securities, because of the possibility of the
prepayment of principal due to prepayments on the underlying mortgage
loans.
The Fund may also invest in CMOs that are "stripped." That means
that the security is divided into two parts, one of which receives some
or all of the principal payments (and is known as a "P/O") and the other
which receives some or all of the interest (and is known as an "I/O").
P/Os and I/Os are generally referred to as "derivative investments,"
discussed further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall, and
in times of rapidly falling interest rates, the Fund might receive back
less than its investment.
The value of "principal only" securities generally increases as
interest rates decline and prepayment rates rise. The price of these
securities is typically more volatile than that of coupon-bearing bonds
of the same maturity.
Private-issuer stripped securities are generally purchased and sold
by institutional investors through investment banking firms. At present,
established trading markets have not yet developed for these securities.
Therefore, most private-issuer stripped securities may be deemed
"illiquid." If the Fund holds illiquid stripped securities, the amount
it can hold will be subject to the Fund's investment policy limiting
investments in illiquid securities to 10% of the Fund's net assets.
The Fund may also enter into "forward roll" transactions with
mortgage-backed securities. The Fund sells mortgage-backed securities it
holds to banks or other buyers and simultaneously agrees to repurchase a
similar security from that party at a later date at an agreed-upon price.
Forward rolls are considered to be a borrowing. The Fund is required to
segregate liquid assets with its custodian bank in an amount equal to its
obligation under the forward roll. The main risk of this investment
strategy is risk of default by the counterparty.
- Asset-Backed Securities. The Fund may invest in "asset-backed"
securities. These represent interests in pools of consumer loans and
other trade receivables, similar to mortgage-backed securities. They are
issued by trusts and "special purpose corporations." They are backed by
a pool of assets, such as credit card or auto loan receivables, which are
the obligations of a number of different parties. The income from the
underlying pool is passed through to holders, such as the Fund. These
securities may be supported by a credit enhancement, such as a letter of
credit, a guarantee or a preference right. However, the extent of the
credit enhancement may be different for different securities and generally
applies to only a fraction of the security's value. These securities
present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in
the related collateral.
- Zero Coupon Securities. These securities, which may be issued by
the U.S. government, its agencies or instrumentalities or by private
issuers, are purchased at a substantial discount from their face value.
They are subject to greater fluctuations in market value as interest rates
change than debt securities that pay interest periodically. Interest
accrues on zero coupon bonds even though cash is not actually received.
- - Other Debt Securities. The Fund may invest in preferred stocks.
Preferred stock, unlike common stock, generally offers a stated dividend
rate payable from the corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, fixed, participating, or
auction rate. If interest rates rise, a fixed dividend on preferred
stocks may be less attractive, causing the price of preferred stocks to
decline. The rights to payment of preferred stocks are generally
subordinate to rights associated with a corporation's debt securities.
- Securities of Foreign Governments and Companies. The Fund may
invest in debt securities issued or guaranteed by foreign companies, and
debt securities of foreign governments or their agencies. These foreign
securities may include debt obligations such as government bonds,
debentures issued by companies, as well as notes. Some of these debt
securities may have variable interest rates or "floating" interest rates
that change in different market conditions. Those changes will affect the
income the Fund receives. These securities are described in more detail
in the Statement of Additional Information. If the Fund's assets are held
abroad, the countries in which they are held and the sub-custodians
holding them will be approved by the Trust's Board of Trustees if required
to do so by applicable regulations.
Foreign securities have special risks. There are certain risks of
holding foreign securities. The first is the risk of changes in foreign
currency values. Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of a foreign currency against
the U.S. dollar will result in a change in the U.S. dollar value of the
Fund's securities denominated in that currency. The currency rate change
will also affect its income available for distribution. Although the
Fund's investment income from foreign securities may be received in
foreign currencies, the Fund will be required to distribute its income in
U.S. dollars. Therefore, the Fund will absorb the cost of currency
fluctuations. If the Fund suffers losses on foreign currencies after it
has distributed its income during the year, the Fund may find that it has
distributed more income than was available from actual investment income.
That could result in a return of capital to shareholders.
There are other risks of foreign investing. For example, foreign
issuers are not required to use generally-accepted accounting principles.
If foreign securities are not registered for sale in the U.S. under U.S.
securities laws, the issuer does not have to comply with the disclosure
requirements of our laws, which are generally more stringent than foreign
laws. The values of foreign securities investments will be affected by
other factors, including exchange control regulations or currency blockage
and possible expropriation or nationalization of assets. There may also
be changes in governmental administration or economic or monetary policy
in the U.S. or abroad that can affect foreign investing. In addition, it
is generally more difficult to obtain court judgments outside the United
States if the Fund has to sue a foreign broker or issuer. Additional
costs may be incurred because foreign broker commissions are generally
higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." While it is a policy of the Fund
generally not to engage in trading for short-term gains, portfolio changes
will be made without regard to the length of time a security has been held
or whether a sale would result in a profit or loss, if in the Manager's
judgment, such transactions are advisable in light of the circumstances
of a particular company or within a particular industry or in light of
market, economic or financial conditions. High portfolio turnover may
affect the ability of the Fund to qualify as a "regulated investment
company" under the Internal Revenue Code for tax deductions for dividends
and capital gains distributions the Fund pays to shareholders. Portfolio
turnover affects brokerage costs, dealer markups and other transaction
costs, and results in the Fund's realization of capital gains or losses
for tax purposes. See "Financial Highlights" above, "Dividends, Capital
Gains and Taxes" below and "Brokerage Policies of the Fund" in the
Statement of Additional Information.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- Hedging. The Fund may purchase and sell certain kinds of futures
contracts, put and call options, forward contracts, and options on
futures, broadly-based stock or bond indices and foreign currency, or
enter into interest rate swap agreements. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on the use of them, described below.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options and
writing puts, tend to increase the Fund's exposure to the securities
market. Forward contracts are used to try to manage foreign currency
risks on the Fund's foreign investments. Foreign currency options are
used to try to protect against declines in the dollar value of foreign
securities the Fund owns, or to protect against an increase in the dollar
cost of buying foreign securities. Writing covered call options may also
provide income to the Fund for liquidity purposes, defensive reasons, or
to raise cash to distribute to shareholders.
-Futures. The Fund may buy and sell futures contracts that relate
to (1) foreign currencies (these are Forward Contracts), (2) financial
indices, such as U.S. or foreign government securities indices, corporate
debt securities indices or equity securities indices (these are referred
to as Financial Futures), and (3) interest rates (these are referred to
as Interest Rate Futures). These types of Futures are described in
"Hedging" in the Statement of Additional Information.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls on securities, indices, foreign currencies,
or Futures, or to terminate its obligation on a call the Fund previously
wrote. The Fund may write (that is, sell) call options on securities,
indices, foreign currencies or Futures, but only if they are "covered."
That means the Fund must own the security subject to the call while the
call is outstanding or segregate appropriate liquid assets. Calls on
Futures must be covered by securities or other liquid assets the Fund owns
and segregated to enable it to satisfy its obligations if the call is
exercised. When the Fund writes a call, it receives cash (called a
premium). The call gives the buyer the ability to buy the investment on
which the call was written from the Fund at the call price during the
period in which the call may be exercised. If the value of the investment
does not rise above the call price, it is likely that the call will lapse
without being exercised, while the Fund keeps the cash premium (and the
investment). Up to 50% of the Fund's total assets may be subject to
calls.
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund may buy puts that relate to
securities, indices, Futures, or foreign currencies. The Fund may buy a
put on a security whether or not the Fund owns the particular security in
its portfolio. The Fund may sell a put on securities, indices, Futures,
or foreign currencies, but only if the puts are covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the
Fund's net assets would have to be segregated to cover put obligations.
A call or put may be purchased only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the
Fund's total assets. The Fund may buy and sell put and call options that
are traded on U.S. or foreign securities or commodity exchanges or are
traded in the over-the-counter markets. In the case of foreign currency
options, they may be quoted by major recognized dealers in those options.
Options traded in the over-the-counter market may be "illiquid," and
therefore may be subject to the Fund's restrictions on illiquid
investments.
-Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to try to "lock in" the
U.S. dollar price of a security denominated in a foreign currency that the
Fund has purchased or sold, or to protect against possible losses from
changes in the relative value of the U.S. dollar and a foreign currency.
The Fund may also use "cross hedging," where the Fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated.
-Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive, or their obligation to pay,
interest on a security. For example, they may swap a right to receive
floating rate interest payments for fixed rate payments. The Fund enters
into swaps only on securities it owns. The Fund may not enter into swaps
with respect to more than 25% of its total assets. The Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
-Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing puts, there is a risk that the Fund may be required to
buy the underlying security at a disadvantageous price. The use of
Forward Contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
Interest rate swaps are subject to the risk that the other party will fail
to meet its obligations (or that the underlying issuer will fail to pay
on time), as well as interest rate risks. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a
result of interest rate changes. These risks are described in greater
detail in the Statement of Additional Information.
- Short Sales "Against-the-Box". The Fund may not sell securities
short except in collateralized transactions referred to as short sales
"against-the-box". The Fund may not enter into these transactions if more
than 15% of the Fund's net assets will be held as collateral for such
short sales at any one time.
- Non-Concentration. The Fund shall not invest 25% or more of its
total assets in any industry; however, for the purposes of this
restriction, obligations of the U.S. government, its agencies or
instrumentalities are not considered to be part of any single industry.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery or are to be delivered at a later date.
There may be a risk of loss to the Fund if the value of the security
changes prior to the settlement date.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Fund will not enter into
a repurchase agreement that will cause more than 10% of the Fund's net
assets to be subject to repurchase agreements maturing in more than seven
days. There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements of seven days or less. See the
Statement of Additional Information for more details.
- Illiquid and Restricted Securities. Under the policies 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 Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
- Loans of Portfolio Securities. 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 25% of the value of the Fund's total assets and are subject to other
conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it
does, the value of securities loaned is not expected to exceed 5% of the
value of the Fund's total assets in the coming year.
- 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 Fund may not purchase or sell physical
commodities; however, the Fund may purchase and sell foreign currency and
engage in hedging transactions. This shall not prevent the Fund from
buying or selling options and futures contracts or from investing in
securities or other instruments backed by physical commodities.
Derivative investments used by the Fund are used in some cases for
hedging purposes and in other cases to seek income. In the broadest
sense, exchange-traded options and futures contracts (discussed in
"Hedging," above) may be considered "derivative investments."
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 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.
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or security
might not perform the way the Manager expected it to perform. Markets,
underlying securities and indices may move in a direction not anticipated
by the Manager. Performance of derivative investments may also be
influenced by interest rate and stock market changes in the U.S. and
abroad. All of this can mean that the Fund will realize less principal
or income from the investment than expected. Certain derivative
investments held by the Fund may be illiquid. Please refer to "Illiquid
and Restricted Securities."
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:
- make short sales except for sales "against the box";
- borrow money or enter into reverse repurchase agreements, except
that the Fund may borrow money from banks and enter into reverse
repurchase agreements as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of making investments),
provided that the aggregate amount of all such borrowings and commitments
under such agreements does not, at the time of borrowing or of entering
into such an agreement, exceed 10% of the Fund's total assets taken at
current market value; the Fund will not purchase additional portfolio
securities at any time that the aggregate amount of its borrowings and its
commitments under reverse repurchase agreements exceeds 5% of the Fund's
net assets (for purposes of this restriction, entering into portfolio
lending agreements shall not be deemed to constitute borrowing money);
- concentrate its investments in any particular industry except that
it may invest up to 25% of the value of its total assets in the securities
of issuers in any one industry (of the utility companies, gas, electric,
water and telephone will each be considered as a separate industry); and
- buy securities issued or guaranteed by any one issuer (except the
U.S. Government or any of its agencies or instrumentalities) if with
respect to 75% of its total assets (1) more than 5% of the Fund's total
assets would be invested in the securities of that issuer, or (2) the Fund
would own more than 10% of that issuer's voting securities.
All of the percentage restrictions described above and elsewhere in
this Prospectus and the Statement of Additional Information apply only at
the time the Fund purchases a security, and the Fund need not dispose of
a security merely because the size of the Fund's assets has changed or the
security has increased in value relative to the size of the Fund. There
are other fundamental policies discussed in the Statement of Additional
Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the "Trust") was
organized in 1982 as a multi-series Massachusetts business trust and the
Fund is a series of that Trust. That Trust is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest. The Fund is one of two series of the Trust.
Each of the two series of the Trust issues its own shares, has its own
investment portfolio, and its own assets and liabilities.
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 provides more information about them
and the officers of the Fund. Although the Fund will not normally hold
annual meetings of its shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call
a meeting to remove a Trustee or to take other action described in the
Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions, and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Shares of each class may have
separate voting rights on matters in which interests of one class are
different from interests of another class, and shares of a particular
class vote as a class on matters that affect that class alone. Shares are
freely transferrable.
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. Prior to July 10, 1995, the Manager had
contracted with Massachusetts Mutual Life Insurance Company ("MassMutual")
to act as the Fund's Sub-Adviser. The Sub-Adviser was responsible for
choosing the Fund's investments. The Manager, not the Fund, paid the Sub-
Adviser. Effective July 10, 1995, the Sub-Advisory Agreement between the
Manager and MassMutual terminated and the Manager is responsible for
selecting the Fund's investments as well as for its day to day business,
pursuant to an investment advisory agreement dated July 10, 1995.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets in excess of $50 billion
as of March 1, 1996, and with more than 2.8 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 (the "Manager").
- Portfolio Managers. The Portfolio Managers of the Fund are David
P. Negri and David A. Rosenberg. They have been the individuals
principally responsible for the day-to-day management of the Fund's
portfolio since July 10, 1995. Mr. Negri and Mr. Rosenberg is each a Vice
President of the Manager. They each serve as officers and portfolio
managers of other Oppenheimer funds.
- Fees and Expenses. Under a new investment advisory agreement dated
July 10, 1995 with the Manager, the Fund pays the Manager the following
annual fees, which decline on additional assets as the Fund grows: 0.75%
of the first $200 million of the Fund's average annual net assets, 0.72%
of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $200 million, and 0.50% of net assets
in excess of $1 billion. The Fund's management fee for its last fiscal
year, restated to reflect the management fee set forth in the new
investment advisory agreement, was 0.75% of average annual net assets for
both its Class A, Class B and Class C shares, as set forth in the "Annual
Fund Operating Expenses" chart on page _____.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of 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. Because the Fund
purchases most of its portfolio securities directly from the sellers and
not through brokers, it incurs relatively little expense for brokerage.
When deciding which brokers to use, the Manager is permitted by the
advisory agreement to consider whether brokers have sold shares of the
Fund or any other funds for which the Manager or its affiliates serve as
investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds Distributor,
Inc., a subsidiary of the Manager that is the Fund's Distributor. The
Distributor also distributes the shares of the other Oppenheimer funds
managed by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund and the other Oppenheimer funds on an "at-
cost" basis. 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
"cumulative total return," "average annual total return" and "yield" to
illustrate its performance. The performance of each class of shares is
shown separately, because the performance of each class of shares will
usually be different, as a result of the different kinds of expenses each
class bears. This performance information may be useful to help you see
how well your investment has done and to compare it to other funds or
market indices, as we have done below.
It is important to understand that the Fund's total return and yield
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Fund's performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they normally
include the payment of the maximum initial sales charge. When total
returns are shown for Class B and Class C shares, they include the
applicable contingent deferred sales charge. Total returns may also be
quoted "at net asset value," without including the initial sales charge
or CDSC, and those returns would be reduced if sales charges were
deducted.
- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1995,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's fiscal
year ended December 31, 1995, declines in interest rates lead to a strong
rally in Treasury securities, which contributed to the Fund's positive
overall performance. In the third and fourth quarters of 1995, the Fund
reduced its allocation of Treasury securities, in order to realize profits
and to emphasize investments in different categories of U.S. Government
and corporate bonds. During that period, the Fund added to its holdings
in the corporate bond sector, favoring companies in industries expected
to experience earnings growth, such as cable, communications, broadcasting
and media firms. The Fund also allocated assets to non-agency mortgage-
backed securities, which have a higher degree of issuer default and
therefore pay higher yields than Government agency mortgage obligations.
Bonds issued by utilities and cyclical industries such as mining and
metals companies were underweighted in the Fund's portfolio.
- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in Class A,
Class B and Class C shares of the Fund held until December 31, 1995; in
the case of Class A shares, from the inception of the class on April 15,
1988, in the case of Class B shares, from the inception of the class on
May 1, 1993 and in the case of Class C shares, from inception of the class
on July 11, 1995.
The performance of each class of the Fund's shares is compared to the
performance of the Lehman Brothers Corporate Bond Index, a broad-based,
unmanaged index of publicly-issued nonconvertible investment grade
corporate debt of U.S. issuers, widely recognized as a measure of the U.S.
fixed-rate corporate bond market. Prior to July 10, 1995, the Fund's
investments were limited to investment grade bonds, U.S. Government
Securities, and money market instruments. The Lehman Brothers Corporate
Bond Index includes a factor for the reinvestment of interest, but does
not reflect expenses or taxes. 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 any one index.
Moreover, the index performance data does not reflect any assessment of
the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class A) and Lehman Brothers Corporate Bond Index
(graph)
Average Annual Total Return of Class A Shares of the Fund at 12/31/95(1)
1 Year 5 Years Life
- ---------------------------------------------------------------------
11.38% 8.33% 8.05%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class B) and Lehman Brothers Corporate Bond Index
(graph)
Average Annual Total Return of Class B Shares of the Fund at 12/31/95(2)
1 Year Life
- --------------------------------------------------------------------
11.06% 4.40%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class C) and Lehman Brothers Corporate Bond Index
(graph)
Average Annual Total Return of Class C Shares of the Fund at 12/31/95(3)
1 Year Life
- --------------------------------------------------------------------
2.76%
1 The inception date of the Fund (Class A shares) was 4/15/88. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 4.75% maximum initial sales charge.
2 Class B shares of the Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions, and are shown net of the applicable 5% and
4% contingent deferred sales charges, respectively, for the 1-year period
and life-of-the-class. The ending account value in the graph is net of
the applicable 4% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
3 Class C shares of the Fund were first publicly offered on 7/11/95. The
cumulative total return for Class C shares reflects the reinvestment of
all dividends and capital gains distributions and is shown net of the
applicable 1% contingent deferred sales charge.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of $1 million ($500,000 or more for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge but if you
sell any of those shares within 18 months of buying them, you may pay a
contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. These sales charges are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years of
buying them, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares. These sales charges are
described in "Buying Class B Shares" below.
- Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1%. These sales charges are described in "Buying Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charges 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 assume that you will purchase only one class
of shares, and not a combination of shares of different classes.
- - How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C
shares for which no initial sales charge is paid.
- Investing for the Short-Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to shares 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 (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 (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 $1 million or more of Class
B or Class C shares, respectively, from a single investor.
- Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need access
to your money for seven years or more, Class B shares may be an
appropriate consideration, if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares
will likely be more advantageous than Class B shares or Class C shares,
as discussed above, because of the effect of the expected lower expenses
for Class A shares and the reduced initial sales charges available for
larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumed annual performance return stated above, and
therefore should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to or advisable for
Class B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of shares is
better for you. For example, share certificates are not available for
Class B or Class C shares and if you are considering using your shares as
collateral for a loan, that may be a factor to consider. Also,
checkwriting privileges are not available for Class B or Class C shares
or Class A shares, subject to a contingent deferred sales charge.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes, such
as the asset-based sales charges described below and in the Statement of
Additional Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class 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 charge for Class B and Class C shares
is the same as the purpose of the front-end sales charge on sales of Class
A shares: to compensate the Distributor for commissions it pays to dealers
and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under
special investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension, profit-sharing or 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as
little as $250 (if your IRA is established under an Asset Builder Plan,
the $25 minimum applies), and subsequent investments may be as little as
$25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of
them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
or to have the Transfer Agent send redemption proceeds, or to transmit
dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink," below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the Statement
of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor in its sole discretion may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A and
Appendix B 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 Appendix A) or by a person who was a shareholder of one of
the former Connecticut Mutual Investment Accounts, Inc. funds (as defined
in Appendix B).
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as a commission. The current
sales charge rates and commissions paid to dealers and brokers are as
follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as a as a as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
<S> <C> <C> <C>
- ----------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ----------------------------------------------------------------------
$50,000 or more but 4.50% 4.71% 3.75%
less than $100,000
- ----------------------------------------------------------------------
$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
- ----------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
- ----------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
- purchases aggregating $1 million or more, or
- purchases by an OppenheimerFunds prototype 401(k) plan 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.
Shares of any of the Oppenheimer funds that offers only one class of
shares that has no designation are considered "Class A shares" for this
purpose. The Distributor pays dealers of record commissions on those
purchases in an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million ($500,000 for purchases by
OppenheimerFunds 401(k) prototype plans) that were not previously subject
to a front-end sales charge and dealer commissions.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
either (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 cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
contingent deferred sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of Oppenheimer funds
(other than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also count Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the Oppenheimer
funds. The value of those shares will be based on the greater of the
amount you paid for the shares or their current value (at offering price).
The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases
and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A shares and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the sales
charge rate that applies to your purchase 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 Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
- dealers, brokers or registered investment 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 made
available to their clients (those clients may be charged a transaction fee
by their dealer, broker or adviser for the purchase or sale of Fund
shares) or (2) to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administrative services;
- directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons;
- accounts for which Oppenheimer Capital is the investment 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;
- any unit investment trust that has entered into an appropriate
agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund
were exchanged for Class A shares of that Fund due to the termination of
the Class B and C TRAC-2000 program on November 24, 1995; or
- qualified retirement plans that had agreed with the former Quest
for Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through DCXchange,
a sub-transfer agency mutual fund clearinghouse, provided that such
arrangements are consummated and share purchases commence by December 31,
1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor;
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver; or
- shares purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
There is a further discussion of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without sales charge as
described in the two sections above. It is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
- for retirement distribution or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans"); or
- to return excess contributions made to Retirement Plans; or
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original value; or
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below); or
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees in writing to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if the shares are
redeemed within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or 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) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Board of Trustees authorizes such reimbursements, which it has not yet
done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its expenses
of providing distribution-related services to the Fund in connection with
the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Beginning of Month in which On Redemptions in That Year
Purchase Order Was Accepted (As % of Amount Subject to Charge)
- ----------------------------------------------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. 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.
- 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 Class C shares and servicing accounts. Under the
Plans, the Fund pays the Distributor an annual "asset-based sales charge"
of 0.75% per year on Class B shares that are outstanding for 6 years or
less and on Class C shares. This payment is made at a fixed rate that is
not related to the Distributor's expenses. The Distributor also receives
from the Fund 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 Class C shares without a front-
end sales charge while allowing the Distributor to compensate dealers that
sell those shares. The asset-based sales charge and service fees increase
Class B and Class C expenses by up to 1.00% of the net assets per year of
the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class 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 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.
The Fund pays the asset-based sales charge to the Distributor to
compensate it for its services rendered in connection with the
distribution of Class B and Class C shares. Those services include paying
sales commissions, advancing service fee payments, and paying or financing
the costs of distributing and selling Class B and Class C shares. The
Distributor retains the asset-based sales charges paid by the Fund for
Class B shares. For Class C shares, the Distributor retains the asset-
based sales charge paid by the Fund during the first year Class C shares
are outstanding, and after the first year the Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class
C shares that have been outstanding for a year or more.
The Distributor's actual expenses in selling Class B 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 and Class C shares. Therefore,
those expenses may be carried over and paid in future years. At December
31, 1995, the end of the Class B Plan year, the Distributor had incurred
unreimbursed expenses under the Plan of $1,004,267 (equal to 2.56% of the
Fund's net assets represented by Class B shares on that date), which have
been carried over into the present Plan year. At December 31, 1995, the
end of the Class C plan year, the Distributor had incurred unreimbursed
expenses under the plan of $21,412 (equal to .54% of the Fund's net assets
represented by Class C shares on that date), which have been carried over
into the present plan year.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B and
Class C contingent deferred sales charge will be waived for redemptions
of shares in the following cases:
- to make distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long as the
payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the
death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the account was opened;
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the disability must
have occurred after the account was established and you must provide
evidence of a determination of disability by the Social Security
Administration),
- to make returns of excess contributions to Retirement Plans,
- to make distributions from retirement plans that qualify as
"substantially equal periodic payments" under Section 72(t) of the
Internal Revenue Code, provided the distributions do not exceed 10% of the
account value annually, measured from the date the Transfer Agent receives
the request,
- for distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order,
as defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; or
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales Charges"
in the Statement of Additional Information.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. Automatic
Withdrawal Plans are not advisable for Class B and Class C shares subject
to a contingent deferred sales charge ("CDSC") unless waivers of the CDSC
apply. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each 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:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
- 401(k) prototype retirement plans for business
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 using the Fund's
checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- A redemption check is not payable to all shareholders listed on the
account statement
- A redemption check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send Courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, 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. Shares held in an
OppenheimerFunds retirement plan or under a share certificate may not be
redeemed by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds transferred to that
bank account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. If you previously signed a signature card to establish
checkwriting in one of the other Oppenheimer funds, you may call 1-800-
525-7048 to request check writing for an account in this Fund that has the
same registration as that other fund account.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 10 days.
- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please call
your dealer for more information about this procedure. Please refer to
"Special Arrangements for Repurchase of Shares from Dealers and Brokers"
in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present Oppenheimer Money Market Fund, Inc. offers only one class of
shares, which are considered to be Class A shares for this purpose. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same names 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 their names
by calling a service representative at 1-800-525-7048. That list can
change from time to time.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to seven days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange which is normally 4:00 P.M.
but may be earlier on some days, on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely in the
Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $1,000 for reasons other than the
fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders.
- Under unusual circumstances shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell Shares"
in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A, Class B or Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
- Transfer Agent and Shareholder Servicing Agent. The transfer
agent and shareholder servicing agent is OppenheimerFunds Services.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent for former shareholders of the AMA Family of Funds and
clients of AMA Investment Advisers, L.P. who owned shares of the Former
Quest for Value Quality Income Fund when it merged into the Fund on
November 24, 1995.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are paid
on the last business day of every month, but the Board of Trustees can
change that date. Distributions may be made monthly from any net short-
term capital gains the Fund realizes in selling securities. It is
expected that distributions paid with respect to Class A shares will
generally be higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher.
From time to time, the Fund may adopt the practice, to the extent
consistent with the amount of the Fund's net investment income and other
distributable income, of attempting to pay dividends on Class A shares at
a constant level, although the amount of such dividends may be subject to
change from time to time depending on market conditions, the composition
of the Fund's portfolio and expenses borne by the Fund or borne separately
by that Class. A practice of attempting to pay dividends on Class A
shares at a constant level would require the Manager, consistent with the
Fund's investment objective and investment restrictions, to monitor the
Fund's portfolio and select higher yielding securities when deemed
appropriate to maintain necessary net investment income levels. If the
Fund, from time to time, seeks to pay dividends on Class A shares at a
target level, the Fund anticipates it would pay dividends at the targeted
dividend level from net investment income and other distributable income
without any impact on the Fund's Class A net asset value per share. The
Board of Trustees could change the Fund's targeted dividend level at any
time, without prior notice to shareholders. The Fund would not otherwise
have a fixed dividend rate. Regardless, there can be no assurance as to
the payment of any dividends or the realization of any capital gains.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions in Another Oppenheimer Fund Account.
You can reinvest all distributions in another Oppenheimer funds account
you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER BOND FUND
Graphic material included in Prospectus of Oppenheimer Bond Fund:
"Comparison of Total Return of Oppenheimer Bond Fund and The Lehman
Brothers Corporate Bond Index - Change in Value of a $10,000 Hypothetical
Investment"
Linear graphs will be included in the Prospectus of Oppenheimer Bond
Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 in the Fund. In the case of the
Fund's Class A shares, that graph will cover each of the Fund's fiscal
years since the inception of the class on April 15, 1988 through December
31, 1995, in the case of Class B shares the graph will cover the period
from the inception of the class on May 1, 1993 through December 31, 1995
and in the case of Class C shares the graph will cover the period from
inception on July 11, 1995 through December 31, 1995. The graphs will
compare such values with the same investments over the same time periods
with The Lehman Brothers Corporate Bond Index. Set forth below are the
relevant data points that will appear on the linear graphs. Additional
information with respect to the foregoing, including a description of The
Lehman Brothers Corporate Bond Index, is set forth in the Prospectus under
"Performance of the Fund -- Comparing the Fund's Performance to the
Market"
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund A Bond Index
04/15/88 $9,525 $10,000
12/31/88 $9,952 $10,368
12/31/89 $11,077 $11,885
12/31/90 $11,602 $12,759
12/31/91 $13,723 $15,170
12/31/92 $14,653 $16,392
12/31/93 $16,163 $18,310
12/31/94 $15,538 $17,530
12/31/95 $18,169 $21,429
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund B(1) Bond Index
05/01/93 $10,000 $10,000
12/31/93 $10,391 $10,503
12/31/94 $ 9,920 $10,056
12/31/95 $11,216 $12,292
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund C(2) Bond Index
07/11/95 $10,000 $10,000
12/31/95 $10,276 $11,348
- ----------------------
(1) Class B shares of the Fund were first publicly offered on May 1,
1993.
(2) Class C shares of the Fund were first publicly offered on July 11,
1995.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers
for Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those shareholders
of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund,
Quest for Value Opportunity Fund, Quest for Value Small Capitalization
Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995,
when OppenheimerFunds, Inc. became the investment 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
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for
Class A shares purchased by a "Qualified Retirement Plan" through a single
broker, dealer or financial institution, or by members of "Associations"
formed for any purpose other than the purchase of securities if that
Qualified Retirement Plan or that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this purpose
only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan,
and SEP/IRA or IRA plan for employees of a single employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement plans and Associations having
50 or more eligible employees or members, there is no initial sales charge
on purchases of Class A shares, but those shares are subject to the Class
A contingent deferred sales charge described on pages ___ to ___ of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of eligible employees
in a Qualified Retirement Plan or members of an Association or the sales
charge rate that applies under the Rights of Accumulation described above
in the Prospectus. In addition, purchases by 401(k) plans that are
Qualified Retirement Plans qualify for the waiver of the Class A initial
sales charge if they qualified to purchase shares of any of the Former
Quest For Value Funds by virtue of projected contributions or investments
of $1 million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of Associations, or
as eligible employees in Qualified Retirement Plans also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Fund's Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund issued in the reorganization on November 24,
1995 for shares of Quest For Value Investment Quality Income Fund that
were subject to a contingent deferred sales charge, will be subject to a
contingent deferred sales charge at the following rates: if they are
redeemed within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs within
12 months of their initial purchase and at a rate of 0.50 of 1.0% if the
redemption occurs in the subsequent six months. This contingent deferred
sales charge rate also applies to shares of the Fund purchased by exchange
of shares of other Oppenheimer funds that were acquired as a result of the
merger of Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales charge
prior to November 24, 1995. Class A shares of any of the Former Quest for
Value Funds purchased without an initial sales charge on or before
November 22, 1995 will continue to be subject to the applicable contingent
deferred sales charge in effect as of that date as set forth in the then-
current prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
- Participants in Qualified Retirement Plans that purchased shares
of any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's
Distributor will pay a commission to the dealer for purchases of Fund
shares as described above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest for Value Fund or into which
such fund merged, if those shares were purchased prior to March 6, 1995:
in connection with (i) distributions to participants or beneficiaries of
plans qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457 of the
Code, and other employee benefit plans, and returns of excess
contributions made to each type of plan, (ii) withdrawals under an
automatic withdrawal plan holding only either Class B or C shares if the
annual withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a)
of the Internal Revenue Code or retirement plans under Section 401(a),
401(k), 403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from service
or (b) following the death or disability (as defined in the Code) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by
a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but
only for Class B or C shares) where the annual withdrawals do not exceed
10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in
the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, B or C shares
of the Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares in this
Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and that were transferred to an OppenheimerFunds
prototype 401(k) plan shall be eligible for an additional one-time payment
by the Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged
for Class A shares, or (ii) the plan assets were transferred to an
OppenheimerFunds prototype 401(k) plan, shall be eligible for an
additional one-time payment by the Distributor of 1% of the value of the
plan assets transferred, but that payment may not exceed $5,000.
<PAGE>
APPENDIX B
Special Sale Charge Arrangements for Fund Shareholders of the Fund Who
Were Shareholders of the Former Connecticut Mutual Investment Accounts,
Inc.
The initial and contingent sales charge rates and waivers for Class
A and Class B shares described elsewhere in this Prospectus are modified
as described below for those shareholders of the Fund who were
shareholders of Connecticut Mutual Investment Accounts, Inc. on March 17,
1996 ("former CMIA shareholders").
- - Prior Class A CDSC and Class A Sales Charge Waivers
-- Class A Contingent Deferred Sales Charge. Certain former CMIA
shareholders are entitled to continue to make additional purchases of
Class A shares of the Fund at net asset value without the Class A initial
sales charge, but subject to the Class A contingent deferred sales charge
that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within
one year of purchase, they will be assessed a 1% contingent deferred sales
charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such
redemptions, any shares not subject to the prior Class A CDSC will be
redeemed first).
Those former CMIA shareholders who are eligible for the prior Class
A CDSC are: (1) persons whose purchases of Class A shares of the former
CMIA funds were $500,000 prior to March 18, 1996, as a result of direct
purchases or purchases pursuant to the CMIA funds' policies on Combined
Purchases or Rights of Accumulation, who still hold those shares in any
of the Oppenheimer funds, and (2) persons whose intended purchases under
a Statement of Intention entered into prior to March 18, 1996, with the
CMIA funds' former general distributor to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to purchase
shares at net asset value without being subject to the Class A initial
sales charge.
Class A shares of the former CMIA funds that were purchased at net
asset value prior to March 18, 1996, remain subject to the prior Class A
CDSC. If any additional Class A shares are purchased by those
shareholders at net asset value pursuant to this arrangement they will be
subject to the prior Class A CDSC.
-- Class A Sales Charge Waivers. Additional Class A shares of the
Fund may be purchased without a sales charge by a person who was in one
or more of the categories described below and acquired Class A shares of
the CMIA funds prior to March 18, 1996 and still holds Class A shares of
any Oppenheimer funds: (1) any purchaser, provided the total initial
amount invested in the former CMIA funds totaled $500,000 or more,
including investments made pursuant to the Combined Purchases, Statement
of Intention and Rights of Accumulation features available at the time of
the initial purchase and such investment is still held in one or more of
the Oppenheimer funds; (2) any participant in a qualified plan, provided
that the total initial amount invested by the plan in any one or more of
the former CMIA funds totaled $500,000 or more; (3) Directors of the
former CMIA funds and members of their immediate families; (4) employee
benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C.
("CMFS"), the CMIA funds' prior distributor, and its affiliated companies;
(5) one or more members of a group of a least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; (6) any holder of a
variable annuity contract issued in New York State by Connecticut Mutual
Life Insurance Company through the Panorama Separate Account which was
beyond the applicable surrender charge period and which was used to fund
a qualified plan, if that holder exchanges the variable annuity contract
for Class A shares of the Fund; and (7) an institution acting as a
fiduciary on behalf of an individual or individuals, if such institution
was directly compensated by the individual(s) for recommending the
purchase of the shares of the CMIA funds, provided the institution had an
agreement with CMFS. Purchases of Class A shares made pursuant to (1) and
(2) above may be subject to the applicable Class A CDSC.
- - Class A and Class B Contingent Deferred Sales Charge Waivers
In addition to the waivers set forth above under the caption "How to
Buy Shares," the contingent deferred sales charge will be waived for
redemptions of Class A and Class B shares of the Fund and acquired through
the reorganization of the Connecticut Mutual Income Account Series of CMIA
with the Fund and the shares of that series were acquired prior to March
18, 1996, (ii) were acquired by exchange from another CMIA fund and the
shares of that fund were purchased prior to March 18, 1996 and (iii) were
exchanged or redeemed in the following cases:
(1) by the estate of the deceased shareholder; (2) upon the
disability of the shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, as amended (Code); (3) for retirement
distributions (or loans) to participants or beneficiaries from retirement
plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from
IRAs, deferred compensation plans created under Section 457 of the Code,
or other employee benefit plans; (4) in whole or in part, in connection
with shares sold by any state, county, or city, or any instrumentality,
department, authority, or agency thereof, that is prohibited by applicable
investment laws from paying a sales charge or commission in connection
with the purchase of shares of any registered investment management
company; (5) in connection with the former CMIA fund's right to
involuntarily redeem or liquidate a Fund; (6) in connection with automatic
redemptions of Class A shares and Class B shares in certain retirement
plan accounts pursuant to an Automatic Withdrawal Plan but limited to no
more than 12% of the original value annually; and (7) as involuntary
redemptions of shares by operation of law, or under procedures set forth
in the former CMIA fund's Articles of Incorporation, or as adopted by the
Board of Directors of the former CMIA funds.
<PAGE>
Oppenheimer Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such offer in such state.
PR0285.001.0496 *Printed on recycled paper
<PAGE>
O P P E N H E I M E R
Value Stock Fund
Prospectus dated April 1, 1996
</R.
Oppenheimer Value Stock Fund (the "Fund") is a mutual fund with the
investment objective of seeking long-term growth of capital and income
primarily through investments in stocks of well established companies.
You should carefully review the risks associated with an investment in the
Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the April 1, 1996, 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).
(logo)OppenheimerFunds.
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
16 How the Fund is Managed
18 Performance of the Fund
ABOUT YOUR ACCOUNT
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
34 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
36 How to Sell Shares
By Mail
By Telephone
38 How to Exchange Shares
40 Shareholder Account Rules and Policies
41 Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for Certain Persons
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The calculations are based on the Fund's expenses
during its last fiscal year ended December 31, 1995.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ____ for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
- --------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- --------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption sixth year and purchase(2)
proceeds) eliminated
thereafter(2)
- --------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
1. If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month in 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.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, OppenheimerFunds,
Inc. (which is referred to in this Prospectus as the "Manager"). The
rates of the Manager's fees are set forth in "How the Fund is Managed,"
below. The Fund has other regular expenses for services, such as transfer
agent fees, custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are detailed in
the Fund's Financial Statements in the Statement of Additional
Information.
Annual Fund Operating Expenses as a Percentage of Average Net Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- ----------------------------------------------------------------------
Management Fees 0.74% 0.74% 0.74%
- ----------------------------------------------------------------------
12b-1 Distribution 0.24% 1.00% 1.00%
Plan Fees
- ----------------------------------------------------------------------
Other Expenses 0.30% 0.33% 0.33%
- ----------------------------------------------------------------------
Total Fund 1.28% 2.07% 2.07%
Operating Expenses
</TABLE>
The numbers in the table above are based on the Fund's expenses in
its last fiscal year ended December 31, 1995. These amounts are shown as
a percentage of the average net assets of each class of the Fund's shares
for that year. The 12b-1 Distribution Plan Fees for Class A shares are
service fees (the maximum fee is 0.25% of average annual net assets of
that class), and for Class B and Class C shares, are the service fee (the
maximum service fee is 0.25% of average annual net assets of the class)
and the asset-based sales charge of 0.75%. These Plans are discussed in
greater detail in "How to Buy Shares." Class C shares were not publicly
offered before October 2, 1995. Therefore the Annual Fund Operating
Expenses for Class C shares are estimates based on expenses for the period
from the inception date until December 31, 1995.
The actual expenses for each class of shares in future years may be
more or less than the figures in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
Class A Shares $70 $96 $124 $203
- --------------------------------------------------------------------
Class B Shares $71 $95 $131 $201
- --------------------------------------------------------------------
Class C Shares $31 $65 $111 $240
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $70 $96 $124 $203
- --------------------------------------------------------------------
Class B Shares $21 $65 $111 $201
- --------------------------------------------------------------------
Class C Shares $21 $65 $111 $240
</TABLE>
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts Class B
shares into Class A shares after 6 years. Because of the asset-based
sales charge and the contingent deferred sales charge on Class B and Class
C shares, long-term Class B and Class C shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A shares is designed to
minimize the likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund seeks long-term
growth of capital and income primarily through investments in stocks of
well established companies.
- What Does The Fund Invest In? Under normal market conditions the
Fund primarily invests in a diversified portfolio of (i) common stocks or
preferred stocks that pay cash dividends, (ii) securities convertible into
common stocks, and (iii) other equity securities issued by companies with
a market capitalization of at least $500 million or with a history of at
least five years of operations as a public company, and which are listed
on a national securities exchange or traded in the over-the-counter
markets. The Fund will invest primarily in cash dividend-paying stocks.
The Fund may also write covered calls and use certain derivative
investments and hedging instruments to try to manage investment risks.
These investments are more fully explained in "Investment Objective and
Policies" starting on page ____.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. (which changed its name from
Oppenheimer Management Corporation effective January 5, 1996). The
Manager (including a subsidiary) manages investment company portfolios
currently having over $50 billion in assets. The Manager handles the day-
to-day business of the Fund. The Fund also has a sub-adviser, Concert
Capital Management, Inc. (the "Sub-Adviser") who is responsible for
choosing the Fund's investments. The Manager is paid a management fee by
the Fund, and the Manager, not the Fund, pays the Sub-Adviser. The Fund
has a portfolio manager, David B. Salerno, who is employed by the Sub-
Adviser and is primarily responsible for the selection of the Fund's
securities. Effective May 1, 1996, the portfolio manager will be James
W. MacAllen, a Senior Vice President of the Sub-Adviser. The Fund's Board
of Trustees, elected by shareholders, oversees the Manager. Please refer
to "How the Fund is Managed," starting on page ____ for more information
about the Manager and the Sub-Adviser and their fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in stocks are subject to changes in their value
from a number of factors such as changes in general stock market movements
or changes in value of a particular stock because of an event affecting
the issuer. These changes affect the value of the Fund's investments and
its price per share. In the OppenheimerFunds spectrum, the Fund is
generally more conservative than aggressive growth funds, but more
aggressive than money market or growth and income funds. While the Sub-
Adviser tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased for the portfolio, and
in some cases by using hedging techniques, there is no guarantee of
success in achieving the Fund's objective and your shares may be worth
more or less than their original cost when you redeem them. Please refer
to "Investment Objective and Policies" starting on page ____ for a more
complete discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
starting on page ____ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge,
starting at 5.75%, and reduced for larger purchases. Class B and Class
C shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge if redeemed within 6 years or 12
months of purchase, respectively. There is also an annual asset-based
sales charge on Class B and Class C shares. Please review "How to Buy
Shares" starting on page ___ for more details, including a discussion
about factors you and your financial advisor should consider in
determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How to Sell Shares" starting on page ____. The
Fund also offers exchange privileges to other Oppenheimer funds, described
in "How to Exchange Shares" on page ____.
- How Has The Fund Performed? The Fund measures its performance by
quoting its average annual total return and cumulative total return, which
measure historical performance. Those total returns can be compared to
the returns (over similar periods) of other funds. Of course, other funds
may have different objectives, investments, and levels of risk. The
Fund's performance can also be compared to broad market indices, which we
have done on pages ____. Please remember that past performance does not
guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended December 31, 1995 is included in the Statement of Additional
Information. Class C shares were publicly offered only during a portion
of that period, commencing October 2, 1995. The information in the table
for the fiscal periods prior to 1991 was audited by the Fund's previous
independent auditors.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992
==========================================================
==================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.16 $14.41 $14.19 $13.57
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 .31 .29 .32
Net realized and unrealized gain (loss) 3.90 .16 .98 .97
----- ----- ----- -----
Total income (loss) from investment operations 4.22 .47 1.27 1.29
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.30) (.31) (.29) (.32)
Dividends in excess of net investment income -- (.01) -- --
Distributions from net realized gain (.24) (.40) (.76) (.35)
------ ------ ------ ------
Total dividends and distributions to shareholders (.54) (.72) (1.05) (.67)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $17.84 $14.16 $14.41 $14.19
====== ====== ====== ======
==========================================================
==================================
TOTAL RETURN, AT NET ASSET VALUE(5) 30.04% 3.28% 8.97% 9.61%
==========================================================
==================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $136,270 $92,728 $90,470 $59,376
- --------------------------------------------------------------------------------------------
Average net assets (in thousands) $115,137 $90,158 $80,229 $53,485
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.98% 2.16% 1.97% 2.34%
Expenses, before voluntary reimbursement 1.28% 1.27% 1.24% 1.19%
Expenses, net of voluntary reimbursement N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 11.8% 16.3% 24.3% 12.3%
Average brokerage commission rate(8) $0.08 -- -- --
</TABLE>
. For the period from October 2, 1995 (inception of offering) to December
31, 1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. For the period from December 22, 1986 to December 31, 1986. Ratios
during this development period would not be indicative of representative
results.
4. On March 28, 1991, OppenheimerFunds Inc., became the investment advisor
to the Fund.
5. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
1991(4) 1990 1989 1988 1987 1986(3)
==========================================================
========================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .37 .40 .33 .34 .01
Net realized and unrealized gain (loss) 2.49 (.57) 1.87 1.15 (.22) (.19)
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations 2.82 (.20) 2.27 1.48 .12 (.18)
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33) (.39) (.41) (.33) (.41) --
Dividends in excess of net investment income -- -- -- -- -- --
Distributions from net realized gain (.31) (.10) (.25) (.19) (.18) --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (.64) (.49) (.66) (.52) (.59) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.57 $11.39 $12.08 $10.47 $9.51 $9.98
====== ====== ====== ====== ======
======
==========================================================
========================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 25.23% (1.53)% 21.93% 15.61% 1.10%
(1.77)%
==========================================================
========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $49,381 $40,153 $37,713 $27,434 $19,377 $20,162
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $45,581 $39,104 $33,742 $24,658 $22,322 $ --(3)
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.59% 3.22% 3.51% 3.45% 3.15% --(3)
Expenses, before voluntary reimbursement 1.31% 1.36% 1.40% 1.21% .70% --(3)
Expenses, net of voluntary reimbursement 1.26% 1.30% 1.30% 1.19% N/A --(3)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 14.5% 13.5% 14.9% 13.1% 10.8% --(3)
Average brokerage commission rate(8) -- -- -- -- -- --
<CAPTION>
CLASS B CLASS C
------------------------------ -------
PERIOD
YEAR ENDED DECEMBER 31, ENDED
1995 1994 1993(2) 1995(1)
==========================================================
====================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.09 $14.35 $14.60 $17.12
- ----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 .17 .17 .02
Net realized and unrealized gain (loss) 3.86 .19 .51 .97
------ ------ ------ ------
Total income (loss) from investment operations 4.07 .36 .68 .99
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.19) (.21) (.17) (.06)
Dividends in excess of net investment income -- (.01) -- --
Distributions from net realized gain (.24) (.40) (.76) (.24)
------ ------ ------ ------
Total dividends and distributions to shareholders (.43) (.62) (.93) (.30)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $17.73 $14.09 $14.35 $17.81
- ----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 29.03% 2.50% 4.63% 5.89%
====== ====== ====== ======
==========================================================
====================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $26,647 $10,893 $5,158 $130
- ----------------------------------------------------------------------------------------------
Average net assets (in thousands) $18,857 $7,834 $2,527 $ 57
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.19% 1.45% .97%(6) .56%(6)
Expenses, before voluntary reimbursement 2.07% 2.01% 2.14%(6) 2.37%(6)
Expenses, net of voluntary reimbursement N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 11.8% 16.3% 24.3% 11.8%
Average brokerage commission rate(8) $0.08 -- -- $0.08
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended December 31, 1995 were $34,411,475 and
$14,179,859, respectively.
8. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold. See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks long-term growth of capital and income
primarily through investments in stocks of well established companies.
Investment Policies and Strategies. In seeking its investment objective
the Fund will invest, under normal market conditions, primarily in a
diversified portfolio of (i) common stocks or preferred stocks that pay
cash dividends, (ii) securities convertible into common stocks, and (iii)
other equity securities issued by companies with a market capitalization
of at least $500 million or with a history of at least five years of
operations as a public company, and which are listed on a national
securities exchange or traded in the over-the-counter markets. The Fund
will invest primarily in cash dividend-paying stocks. To provide
liquidity or for temporary defensive purposes, the Fund may invest all or
any portion of its assets in high-quality, short-term money market
instruments.
Concert Capital Management, Inc. (the "Sub-Adviser") will seek to
invest in the securities of companies which, in its opinion, are of high
quality, offer above-average dividend growth potential and are
attractively valued in the marketplace. This would include stocks selling
below their historical price/earnings ranges relative to the Standard &
Poor's 500 Stock Index or below their historical price/book value ranges.
The Sub-Adviser will give strong consideration to securities of companies
whose current prices do not adequately reflect, in its opinion, the
ongoing business value of the enterprise.
The Fund may try to hedge against losses in the value of its
portfolio securities by using hedging strategies described below. The
Sub-Adviser may employ special investment techniques, also described
below. Additional information about the securities the Fund may invest
in, the hedging strategies the Fund may employ and the special investment
techniques may be found under the same headings in the Statement of
Additional Information.
- Investment Risks. Because of the types of companies the Fund
invests in and the investment techniques the Fund uses, some of which may
be speculative, the Fund is designed for those investors who are investing
for the long-term and who are willing to accept greater risks of loss of
their capital in the hope of achieving capital appreciation. Investing
for capital appreciation entails the risk of loss of all or part of your
principal. There is no assurance that the Fund will achieve its
objective, and when you redeem your shares, they may be worth more or less
than what you paid for them.
Because the Fund usually invests a substantial portion (and from time
to time may invest all) of its assets in stocks, the value of the Fund's
portfolio will be affected by changes in the stock markets. This market
risk will affect the Fund's net asset values per share, which will
fluctuate as the values of the Fund's portfolio securities change. Not
all stock prices change uniformly or at the same time, and other factors
can affect a particular stock's price (for example, poor earnings reports
by an issuer, loss of major customers, major litigation against an issuer,
or changes in government regulations affecting an industry). Not all of
these factors can be predicted. Changes in the overall market conditions
and prices can occur at any time.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial amount
of the stock of any one company. Also, the Fund does not concentrate its
investment in any one industry or group of industries
- Securities of Foreign Governments and Companies. The Fund may
invest in debt and equity securities issued or guaranteed by foreign
companies, and debt securities of foreign governments or their agencies.
Foreign debt securities may include government bonds, and debentures and
notes issued by foreign companies. Some of these debt securities may have
variable interest rates or "floating" interest rates that change as
prevailing levels of interest rates change. Those changes will affect the
income the Fund receives. The Fund is not restricted in the amount of its
assets it may invest in foreign countries or in which countries. These
securities are described in more detail in the Statement of Additional
Information.
- Foreign Securities Have Special Risks. There are certain risks of
holding foreign securities. The first is the risk of changes in foreign
currency values. Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of a foreign currency against
the U.S. dollar will result in a change in the U.S. dollar value of the
Fund's securities denominated in that currency. The currency rate change
will also affect its income available for distribution. Although the
Fund's investment income from foreign securities may be received in
foreign currencies, the Fund will be required to distribute its income in
U.S. dollars. Therefore, the Fund will absorb the cost of currency
fluctuations. If the Fund suffers losses on foreign currencies after it
has distributed its income during the year, the Fund may find that it has
distributed more income than was available from actual investment income.
That could result in a return of capital to shareholders.
There are other risks of foreign investing. For example, foreign
issuers are not required to use generally-accepted accounting principles.
If foreign securities are not registered for sale in the U.S. under U.S.
securities laws, the issuer does not have to comply with the disclosure
requirements of U.S. laws, which are generally more stringent than foreign
laws. The values of foreign securities investments will be affected by
other factors, including exchange control regulations or currency blockage
and possible expropriation or nationalization of assets. There may also
be changes in governmental administration or economic or monetary policy
in the U.S. or abroad that can affect foreign investing. In addition, it
is generally more difficult to obtain court judgments outside the United
States if the Fund has to sue a foreign broker or issuer. Additional
costs may be incurred because foreign broker commissions are generally
higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." While it is a policy of the Fund
generally not to engage in trading for short-term gains, portfolio changes
will be made without regard to the length of time a security has been held
or whether a sale would result in a profit or loss, if in the Sub-
Adviser's judgment, such transactions are advisable in light of the
circumstances of a particular company or within a particular industry or
in light of market, economic or financial conditions. High portfolio
turnover may affect the ability of the Fund to qualify as a "regulated
investment company" under the Internal Revenue Code for tax deductions for
dividends and capital gains distributions the Fund pays to shareholders.
Portfolio turnover affects brokerage costs, dealer markups and other
transaction costs, and results in the Fund's realization of capital gains
or losses for tax purposes. See "Financial Highlights" above, "Dividends,
Capital Gains and Taxes" below and "Brokerage Policies of the Fund" in the
Statement of Additional Information.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those investment policies. The Fund's investment policies
and techniques are not "fundamental" unless this Prospectus or the
Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Fund's Board of Trustees may
change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this prospectus.
- Derivative Investments. In general, a "Derivative investment" is
a specially designed investment. Its performance is linked to the
performance of another investment or security, such as an option, future,
index, currency or commodity. The Fund can invest in a number of
different kinds of "derivative investments." They are used in some cases
for hedging purposes and in other cases to enhance total return. In the
broadest sense, exchange-traded options and futures contracts (discussed
in "Hedging," below) may be considered "derivative investments."
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or security
on which the derivative is based might not perform the way the Manager
expected it to perform. The performance of derivative investments may
also be influenced by interest rate changes in the U.S. and abroad. All
of this can mean that the Fund may realize less principal or income from
the investment than expected. Certain derivative investments held by the
Fund may trade in the over-the counter market and may be illiquid. Please
refer to "Illiquid and Restricted Securities" for an explanation.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- 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.
Certain restricted securities, eligible for resale to qualified
institutional purchasers, are not subject to that limit.
- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions. The Fund will receive collateral for
a loan. These loans are limited to not more than 25% of the value of the
Fund's net assets and are subject to the conditions described in the
Statement of Additional Information. The Fund presently does not intend
to engage in loans of securities that will exceed 5% of the value of the
Fund's total assets in the coming year.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor of the securities under a repurchase agreement fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its
ability to do so. The Fund will not enter into a repurchase agreement that
will cause more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days because such repurchase
agreements may be illiquid. There is no limit on the amount of the Fund's
net assets that may be subject to repurchase agreements of seven days or
less.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery or to be delivered at a later date.
There may be a risk of loss to the Fund if the value of the security
changes prior to the settlement date.
- Hedging. The Fund may purchase and sell certain kinds of futures
contracts, put and call options, forward contracts, and options on futures
and broadly-based securities indices. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on the use of them, described below.
The hedging instruments the Fund may use are described below and in
greater detail in "Other Investment Techniques and Strategies" in the
Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Forward
contracts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Fund for liquidity purposes or defensive reasons.
- Futures. The Fund may buy and sell futures contracts that relate
to broadly-based securities indices (these are referred to as Stock Index
Futures) or debt securities (these are referred to as "Interest Rate
Futures").
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may purchase calls on Stock Index Futures, Interest Rate
Futures, broadly-based securities indices and foreign currencies, or to
terminate its obligation on a call the Fund previously wrote. The Fund
may write (that is, sell) covered call options. When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can purchase those puts that relate
to (1) securities the Fund owns, (2) Stock Index Futures or Interest Rate
Futures (whether or not the Fund owns that particular Future in its
portfolio), (3) broadly-based securities indices, or (4) foreign
currencies.
The Fund may write puts on securities, broadly-based securities
indices, foreign currencies, Stock Index Futures or Interest Rate Futures.
Writing puts requires the segregation of liquid assets to cover the put.
The Fund will not write a put if it would require more than 50% of its net
assets to be segregated to cover the put obligation.
The Fund may buy and sell calls if certain conditions are met. Calls
the Fund buys or sells must be listed on a domestic or foreign securities
or commodities exchange or quoted on the Automated Quotation System of the
National Association of Securities Dealers, Inc. Each call the Fund
writes must be "covered" while it is outstanding; that means the Fund must
own the securities on which the call is written or it must own other
securities that are acceptable for the escrow arrangements required for
calls. After the Fund writes a call, not more than 25% of the Fund's
total assets may be subject to calls. In the case of puts and calls on
foreign currency, they must be traded on a securities or commodities
exchange, or quoted by recognized dealers in these options. The Fund may
also write calls on Futures contracts it owns, but those calls must be
covered by securities or other liquid assets the Fund owns and segregates
to enable it to satisfy its obligations if the call is exercised. A call
or put option may not be purchased if the value of all of the Fund's put
and call options would exceed 5% of the Fund's total assets.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Sub-Adviser uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future or
option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on a
security that has increased in value, the Fund will be required to sell
the security at the call price and will not be able to realize any profit
if the security has increased in value above the call price. The use of
forward contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
To limit its exposure in foreign currency exchange contracts, the Fund
limits its exposure to the amount of its assets denominated in the foreign
currency. Risks of hedging instruments are described in greater detail
in the Statement of Additional Information.
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:
- make short sales except for sales "against the box";
- borrow money or enter into reverse repurchase agreements, except
that the Fund may borrow money from banks and enter into reverse
repurchase agreements as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of making investments),
provided that the aggregate amount of all such borrowings and commitments
under such agreements does not, at the time of borrowing or of entering
into such an agreement, exceed 10% of the Fund's total assets taken at
current market value; the Fund will not purchase additional portfolio
securities at any time that the aggregate amount of its borrowings and its
commitments under reverse repurchase agreements exceeds 5% of the Fund's
net assets (for purposes of this restriction, entering into portfolio
lending agreements shall not be deemed to constitute borrowing money);
- concentrate its investments in any particular industry except that
it may invest up to 25% of the value of its total assets in the
securities of issuers of any one industry (of the utility companies, gas,
electric, water and telephone will each be considered as a separate
industry); and
- buy securities issued or guaranteed by any one issuer (except the
U.S. Government or any of its agencies or instrumentalities) if with
respect to 75% of its total assets (1) more than 5% of the Fund's total
assets would be invested in the securities of such issuer, or (2) the Fund
would own more than 10% of that issuer's voting securities.
All of the percentage restrictions described above and elsewhere in
this Prospectus and in the Statement of Additional Information apply only
at the time the Fund purchases a security, and the Fund need not dispose
of a security merely because the size of the Fund's assets has changed or
the security has increased in value relative to the size of the Fund.
There are other fundamental policies discussed in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the "Trust") was
organized in 1982 as a multi-series Massachusetts business trust and
Oppenheimer Value Stock Fund (the "Fund") is a series of that Trust. The
Trust is an open-end, diversified management investment company, with an
unlimited number of authorized shares of beneficial interest. The Fund is
one of two series of the Trust. Each of the two series of the Trust is
a mutual fund that issues its own shares, has its own investment
portfolio, and its own assets and liabilities.
The Trust is governed by a Board of Trustees, which is responsible
under Massachusetts law for protecting the interests of shareholders. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund will not normally hold
annual meetings of its shareholders it may hold 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. Each class invests in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Shares of each class may have
separate voting rights on matters in which interests of one class are
different from interests of another class, and shares of a particular
class vote as a class on matters that affect that class alone. Shares are
freely transferrable. Voting of shares is further discussed in the
Statement of Additional Information.
The Manager and Its Affiliates. Since March 28, 1991, the Fund has been
managed by the Manager, which handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an investment advisory agreement which states the
Manager's responsibilities and its fees. 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
entered into a contract with Concert Capital Management, Inc. ("Concert
Capital"), which is controlled by Massachusetts Mutual Life Insurance
Company ("MassMutual"), to act as the Fund's Sub-Adviser. The Sub-Adviser
is responsible for choosing the Fund's investments and its duties and
responsibilities are set forth in the contract with the Manager. The
Manager, not the Fund, pays the Sub-Adviser.
The Manager has operated as an investment adviser since 1959. The
Manager (including an affiliate) currently manages investment companies,
including other Oppenheimer funds, with assets in excess of $50 billion
as of March 1, 1996, held in more than 2.8 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. The Sub-Adviser was created
by MassMutual in 1982 and is provided business services by MassMutual.
The Sub-Adviser and MassMutual advise investment companies and
institutional clients.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is David B. Salerno, a Managing Director of
the Sub-Adviser. He is responsible for the day-to-day management of the
Fund's portfolio since its inception in 1982. Mr. Salerno also serves as
a Senior Vice President of MML Series Investment Fund. Effective May 1,
1996, the Portfolio Manager will be James W. MacAllen, Senior Vice
President of the Sub-Adviser. Mr MacAllen has been associated with the
Sub-Adviser since January 1, 1996.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.75% of the first $100 million of
the Fund's average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, and 0.66% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.74% of
average annual net assets for Class A, Class B and Class C shares.
Under the Sub-Advisory Agreement, the Manager pays the Sub-Adviser
the following annual fees, which decline on additional assets as the Fund
grows: 0.40% of the first $50 million of the Fund's average annual net
assets and 0.20% of net assets in excess of $50 million.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. The Fund usually uses
brokers when buying portfolio securities. When deciding which brokers to
use, the Sub-Adviser is permitted by the sub-advisory agreement to
consider whether brokers have sold shares of the Fund or any other funds
for which the Manager or the Sub-Adviser or their affiliates serve as
investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers 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 other Oppenheimer funds
managed by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund and the other Oppenheimer funds on an "at-
cost" basis. 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
"cumulative total return" and "average annual total return" to illustrate
its performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will usually
be different, as a result of the different kinds of expenses each class
bears. This performance information may be useful to help you see how
well your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but more
detailed information about how total returns are calculated is contained
in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different types of "total returns" used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. Total
returns may also be quoted "at net asset value," without including the
sales charge, and those returns would be reduced if sales charges were
deducted. When total returns are shown for Class B and Class C shares,
they include the applicable contingent deferred sales charge. Total
returns may also be quoted "at net asset value", without including the
contingent deferred sales charge, and those returns would be reduced if
the sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1995,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's fiscal
year ended December 31, 1995, the equity markets reached all time highs.
During that period, the Manager invested a large percentage of the Fund's
assets in very strong consumer staples companies - pharmaceutical,
household products, food and beverage, and personal care products
companies. These sectors performed well over that period and the
Manager's decision to add to those already existing positions throughout
the year benefited the Fund's performance. Additionally, the securities
of Financial Services companies performed well during that period and the
Manager sold some of the Fund's holdings of regional bank stocks as their
prices hit the valuation targets set for them. The stocks of cyclical
companies which the Fund held - specifically chemical and paper and forest
products companies - had disappointing performance over that period. The
Manager reduced the Fund's holdings of those securities during the year.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in Class A,
Class B and Class C shares of the Fund held at December 31, 1995; in the
case of Class A shares, from the inception of the class on December 26,
1986, in the case of Class B shares, from the inception of the class on
May 1, 1993, and in the case of Class C shares, performance is measured
from the inception of the class on October 2, 1995.
The performance of each class of the Fund's shares is compared to the
performance of the S&P 500 Index, an unmanaged index of 500 widely-held
common stocks traded on the New York and American Stock Exchanges and the
over-the-counter market. It is widely recognized as a general measure of
stock market performance. It includes a factor for the reinvestment of
dividends but does not reflect expenses or taxes. Index performance
reflects reinvestment of dividends but does not consider the effect of
capital gains or transaction costs, and none of the data below shows the
effect of taxes. Also, the Fund's performance reflects the effect of Fund
business and operating expenses. While index comparisons may be useful
to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in any one index.
Moreover, the index performance data does not reflect any assessment of
the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Value Stock Fund (Class A) and S&P 500 Index
(Graph)
Average Annual Total Return of Class A Shares of the Fund at 12/31/95(1)
1 Year 5 Years Life
22.57% 13.62% 11.21%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Value Stock Fund (Class B) and S&P 500 Index
(Graph)
Average Annual Total Return of Class B Shares of the Fund at 12/31/95(2)
1 Year Life
24.03% 12.03%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Value Stock Fund (Class C) and S&P 500 Index
(Graph)
Average Annual Total Return of Class C Shares of the Fund at 12/31/95(3)
Life
- ----------------------------------------------------------------------
4.89%
1The inception data of the Fund (Class A shares) was 12/22/86. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 5.75% maximum initial sales charge.
2Class B shares of the Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5% and 4%
contingent deferred sales charges, respectively, for the 1-year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 4% contingent deferred sales charge.
Past Performance is not predictive of future performance.
Graphs are not drawn to same scale.
3Class C shares of the Fund were first publicly offered on 10/2/95.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of $1 million or more ($500,000 or more
for OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months of buying them, you may pay a
contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. These sales charge rates are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years of
buying them, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares. These sales charges are
described below in "Buying Class B Shares".
- 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%. These sales charges are described below 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 these factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to Class A, Class B and Class C shares, and
considered the effect of the asset-based sales charge on Class B and Class
C expenses (which will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
your investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's actual
investment returns, and the operating expenses borne by each class of
shares, and which class of shares you invest in. The factors discussed
below are not intended to be investment advice or recommendations, because
each investor's financial considerations are different. The discussion
below of the factors to consider in purchasing a particular class of
shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or
Class C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to shares you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and Class B).
If investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
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 or $1 million or more
of Class B or Class C shares, respectively, from a single investor.
- Investing for the Longer Term. If you are investing for the
longer-term, for example, for retirement, and do not expect to need access
to your money for seven years or more, Class B shares may be an
appropriate consideration, if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares
will likely be more advantageous than Class B shares or Class C shares,
as discussed above, because of the effect of the expected lower expenses
for Class A shares and the reduced initial sales charges available for
larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumed annual performance return stated above, and you
should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to or advisable for
Class B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of shares is
better for you. For example, share certificates are not available for
Class B or Class C shares and if you are considering using your shares as
collateral for a loan, that may be a factor to consider. Also,
checkwriting privileges are not available for Class B or Class C shares
or Class A shares, subject to a contingent deferred sales charge.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes, such
as the asset-based sales charges described below and in the Statement of
Additional Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class of shares than for selling another class. It is important that
investors understand that the purpose of the contingent deferred sales
charge and asset-based sales charge on Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A
shares: to compensate the Distributor for commissions it pays to dealers
and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans.
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension, profit-sharing or 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as
little as $250 (if your IRA is established under an Asset Builder Plan,
the $25 minimum applies), and subsequent investments may be as little as
$25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with
the Distributor, or directly through the Distributor, or automatically
from your bank account through an Asset Builder Plan under the
OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through 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.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the Statement
of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases
of shares of the Fund (including purchases by exchange) by a person who
was a shareholder of one of the Former Quest for Value Funds (as defined
in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as a commission. The current
sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ----------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ----------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
- ----------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
- ----------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
- ----------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
- ----------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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.
- 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:
- purchases aggregating $1 million or more, or
- purchases by an OppenheimerFunds prototype 401(k) plan 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.
Shares of any of the Oppenheimer funds that offers only one class of
shares that has no class designation are considered "Class A shares" for
this purpose. The Distributor pays dealers of record commissions on those
purchases in an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million ($500,000 for purchases by
OppenheimerFunds 401(k) prototype plans) that were not previously subject
to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
either (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 cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
contingent deferred sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of Oppenheimer funds
(other than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the
sales charge rate that applies to current purchases of Class A shares.
You can also count Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
Oppenheimer funds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The Oppenheimer funds are listed in "Reduced Sales Charges" in
the Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A shares and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the sales
charge rate that applies to your purchases of Class A shares. The total
amount of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
-employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
- dealers, brokers or registered investment 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 made
available to their clients (those clients may be charged a transaction fee
by their dealer, broker or adviser for the purchase or sales of Fund
shares) or (2) to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administrative services;
- directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons;
- accounts for which Oppenheimer Capital is the investment 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;
- any unit investment trust that has entered into an appropriate
agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund
were exchanged for Class A shares of that Fund due to the termination of
the Class B and C TRAC-2000 program on November 24, 1995; or
- qualified retirement plans that had agreed with the former Quest
for Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through DCXchange,
a sub-transfer agency mutual fund clearinghouse, provided that such
arrangements are consummated and share purchases commence by December 31,
1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor;
- shares purchased and paid for with the proceeds of shares redeemed
in the past 12 months from a mutual fund (other than a fund managed by the
Manager or any of its subsidiaries) on which an initial sales charge or
contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver;
- shares sold to unit investment trusts as an investment for
previously purchased and unexpired plans permitting additional period
purchases; or
- shares purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without sales charge as
described in the two sections above. It is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans"); or
- to return excess contributions made to Retirement Plans; or
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value; or
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below); or
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees in writing to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if the shares are
redeemed within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or 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) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its expenses
of providing distribution-related services to the Fund in connection with
the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period. The amount of the contingent deferred sales charge will
depend on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Beginning of Month in which On Redemptions in That Year
Purchase Order Was Accepted (As % of Amount Subject to Charge)
- ----------------------------------------------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
- - Distributions and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
This Plan is described below under "Distribution and Service Plans for
Class B and Class C Shares."
- - Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain
circumstances, as described below under "Waivers of Class B and Class C
Sales Charges."
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 charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. 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.
- 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. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee payments
it makes, and its financing costs of distributing and selling Class B
shares.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the
time of sale. Including the advance of the service fee, the total amount
paid by the Distributor to the dealer at the time of sale of Class C
shares is 1.00% of the purchase price. Those payments, retained by the
Distributor during the first year Class C shares are outstanding, are at
a fixed rate that is not related to the Distributor's expenses. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1995, the end of the Class
B Plan year, the Distributor had incurred unreimbursed expenses under the
Plan of $11,881,867 (equal to 3.49% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year.
- Waiver of Class B and Class C Sales Charge. The Class B and Class
C contingent deferred sales charge will not be applied to shares purchased
in certain types of transactions nor will it apply to Class B and Class
C shares redeemed in certain circumstances as described below. The reasons
for this policy are in "Reduced Sales Charges" in the Statement of
Additional Information.
Waivers for Shares Redeemed in Certain Cases. The Class B and Class
C contingent deferred sales charge will be waived for redemptions of
shares in the following cases:
- to make distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long as the
payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the
death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the account was opened;
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the disability must
have occurred after the account was established and you must provide
evidence of a determination of disability by the Social Security
Administration);
- to make returns of excess contributions to Retirement Plans;
- to make distributions from retirement plans that qualify as
"substantially equal periodic payments" under Section 72(t) of the
Internal Revenue Code, provided the distributions do not exceed 10% of the
account value annually, measured from the date the Transfer Agent receives
the request; and
- for distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order,
as defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales Charges"
in the Statement of Additional Information.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. Automatic
Withdrawal Plans are not advisable for Class B and Class C shares subject
to a contingent deferred sales charge ("CDSC") unless waivers of the CDSC
apply. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each Oppenheimer fund account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or 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 B shares on which you paid a contingent deferred sales charge when
you redeemed them. It does not apply to Class C shares. You must be sure
to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. You can sell your
shares by written directions to the Transfer Agent or by telephone. You
can also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- A redemption check is not payable to all shareholders listed on the
account statement
- A redemption check is not sent to the address of record on your
account statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or from a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for Send courier or Express Mail
requests by mail to: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your 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. Shares held in an
OppenheimerFunds retirement plan or under a share certificate may not be
redeemed by telephone.
- To redeem shares through a service representative, call
1-800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds transferred to that
bank account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone once in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please call
your dealer for more information about this procedure. Please refer to
"Special Arrangements for Repurchase of Shares from Dealers and Brokers"
in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares which are considered to be Class A shares for this purpose. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. That list can change from time
to time.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange, which is normally 4:00
P.M. but may be earlier on some days, on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely in the
Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will
be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may not be
able to complete a telephone transaction and should consider placing your
order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $1,000 for reasons other than the
fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income and pays such dividends to
shareholders quarterly. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class B or
Class C shares because expenses allocable to Class B and Class C shares
will generally be higher.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions In The Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions In Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions In Another Oppenheimer Fund Account.
You can reinvest all distributions in another Oppenheimer fund account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
APPENDIX TO PROSPECTUS OF
OPPENHEIMER VALUE STOCK FUND
Graphic material included in Prospectus of Oppenheimer Value Stock
Fund: "Comparison of Total Return of Oppenheimer Value Stock Fund with the
S&P 500 Index - Change in Value of a $10,000 Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer Value
Stock Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in each class of shares
of the Fund. In the case of Class A shares, that graph will cover each
of the Fund's fiscal years from the inception of the class (December 31,
1986) through December 31, 1995, in the case of Class B shares the graph
will cover the periods from inception of the class (May 1, 1993) through
December 31, 1995, and in the case of Class C shares the graph will cover
the period from inception of the class (October 2, 1995) through December
31, 1995. The graphs will compare such values with the same investments
over the same time periods with the S&P 500 Index. Set forth below are
the relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the
S&P Index, is set forth in the Prospectus under "Performance of the Fund -
- - Comparing the Fund's Performance to Market"
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund A S&P 500 Index
12/22/86 $9,452 $10,000
12/31/86 $9,258 $9,9366
12/31/87 $9,360 $10,458
12/31/88 $10,821 $12,189
2/31/89 $13,193 $16,045
12/31/90 $12,991 $15,546
12/31/91 $16,268 $20,272
12/31/92 $17,831 $21,815
12/31/93 $19,430 $24,009
12/31/94 $20,068 $24,324
12/31/95 $26,096 $33,352
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund B(1) S&P 500 Index
05/1/93 $10,000 $10,000
12/31/93 $10,464 $10,525
12/31/94 $10,725 $10,663
12/31/95 $13,539 $14,621
<PAGE>
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund C(2) S&P 500 Index
10/02/05 $10,000 $10,000
12/31/95 $10,489 $10,600
- -------------------
(1) Class B shares of the Fund were first publicly offered on May 1,
1993.
(2) Class C shares of the Fund were first publicly offered on October 2,
1995.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers
for Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those shareholders
of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund,
Quest for Value Opportunity Fund, Quest for Value Small Capitalization
Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995,
when OppenheimerFunds, Inc. became the investment 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
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for
Class A shares purchased by a "Qualified Retirement Plan" through a single
broker, dealer or financial institution, or by members of "Associations"
formed for any purpose other than the purchase of securities if that
Qualified Retirement Plan or that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this purpose
only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan,
and SEP/IRA or IRA plan for employees of a single employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement Plans and Associations having
50 or more eligible employees or members, there is no initial sales charge
on purchases of Class A shares, but those shares are subject to the Class
A contingent deferred sales charge described on pages ____ to ____ of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of eligible employees
in a Qualified Retirement Plan or members of an Association or the sales
charge rate that applies under the Rights of Accumulation described above
in the Prospectus. In addition, purchases by 401(k) plans that are
Qualified Retirement Plans qualify for the waiver of the Class A initial
sales charge if they qualified to purchase shares of any of the Former
Quest For Value Funds by virtue of projected contributions or investments
of $1 million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of Associations, or
as eligible employees in Qualified Retirement Plans also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Fund's Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of Former
Quest for Value Funds into those Oppenheimer funds, and which shares were
subject to a Class A contingent deferred sales charge prior to November
24, 1995 will be subject to a contingent deferred sales charge at the
following rates: if they are redeemed within 18 months of the end of the
calendar month in which they were purchased, at a rate equal to 1.0% if
the redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six
months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
- Participants in Qualified Retirement Plans that purchased shares
of any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's
Distributor will pay a commission to the dealer for purchases of Fund
shares as described above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest for Value Fund or into which
such fund merged, if those shares were purchased prior to March 6, 1995:
in connection with (i) distributions to participants or beneficiaries of
plans qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457 of the
Code, and other employee benefit plans, and returns of excess
contributions made to each type of plan, (ii) withdrawals under an
automatic withdrawal plan holding only either Class B or C shares if the
annual withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a)
of the Internal Revenue Code or retirement plans under Section 401(a),
401(k), 403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from service
or (b) following the death or disability (as defined in the Code) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by
a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but
only for Class B or C shares) where the annual withdrawals do not exceed
10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in
the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, B or C shares
of the Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares in this
Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and that were transferred to an OppenheimerFunds
prototype 401(k) plan shall be eligible for an additional one-time payment
by the Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged
for Class A shares, or (ii) the plan assets were transferred to an
OppenheimerFunds prototype 401(k) plan, shall be eligible for an
additional one-time payment by the Distributor of 1% of the value of the
plan assets transferred, but that payment may not exceed $5,000.
<PAGE>
Oppenheimer Value Stock Fund
3410 South Galena Street,
Denver, Colorado 80231
Telephone: 1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
Concert Capital Management, Inc.
100 Northfield Drive
Windsor, Connecticut 06095
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc., Concert Capital Management, Inc., or
any affiliate thereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered
hereby in any state to any person to whom it is unlawful to make such
offer in such state.
PR03265.001.496 *Printed on recycled paper
<PAGE>
OPPENHEIMER BOND FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated April 1, 1996.
This Statement of Additional Information of Oppenheimer Bond Fund is
not a Prospectus. This document contains additional information about the
Fund and supplements information in the Prospectus dated April 1, 1996.
It should be read together with the Prospectus which may be obtained by
writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O.
Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the
toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 8
Other Investment Restrictions 20
How the Fund is Managed 21
Organization and History 21
Trustees and Officers of the Fund 22
The Manager and Its Affiliates 26
Brokerage Policies of the Fund 29
Performance of the Fund 30
Distribution and Service Plans 35
About Your Account
How to Buy Shares 37
How to Sell Shares 44
How to Exchange Shares 48
Dividends, Capital Gains and Taxes 50
Additional Information About the Fund 51
Financial Information About the Fund
Independent Auditors' Report 52
Financial Statements 53
Appendix A: Description of Securities Ratings A-1
Appendix B: Industry Classification B-1
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies, and the types of securities
in which the Fund invests as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information are defined in the Prospectus.
-- Debt Securities. All debt securities are subject to two types of
risk: credit risk and interest rate risk (these are in addition to other
investment risks that may affect a particular security).
-- Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due.
Generally, higher yielding bonds are subject to credit risk to a greater
extent than higher quality bonds.
-- Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of fixed-income securities resulting solely from the inverse
relationship between price and yield of outstanding fixed-income
securities. An increase in interest rates will generally reduce the
market value of fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities with
longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities subsequent to their acquisition will not affect the interest
payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of those securities
used to compute the Fund's net asset values.
-- Commercial Paper. The Fund's commercial paper investments, in
addition to those described in the Prospectus, include the following:
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations which permit the investment of fluctuating amounts
by the Fund at varying rates of interest pursuant to direct arrangements
between the Fund, as lender, and the borrower. They permit daily changes
in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to
the full amount of the note without penalty. These notes may or may not
be backed by bank letters of credit. Because these notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on demand. The Fund
has no limitations on the type of issuer from whom these notes will be
purchased; however, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such
notes made demand simultaneously. Investments in master demand notes are
subject to the limitation on investments by the Fund in illiquid
securities, described in the Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
-- Participation Interests. The Fund may invest in participation
interests, subject to the limitation, described in "Illiquid and
Restricted Securities" in the Prospectus on investments by the Fund in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing financial institution in
the proportion that the Fund's participation interest bears to the total
principal amount of the loan. No more than 5% of the Fund's net assets
can be invested in participation interests of the same borrowers. The
issuing financial institution may have no obligation to the Fund other
than to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are primarily
dependent upon the creditworthiness of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan, and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the value of that participation interest and in
the net asset value of its shares. In the event of a failure by the
financial institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or interest.
-- Bank Obligations and Instruments Secured Thereby. The bank
obligations the Fund may invest in include time deposits, certificates of
deposit, and bankers' acceptances if they are: (i) obligations of a
domestic bank with total assets of at least $1 billion or (ii) obligations
of a foreign bank with total assets of at least U.S. $1 billion. The Fund
may also invest in instruments secured by such obligations (e.g., debt
which is guaranteed by the bank). For purposes of this section, the term
"bank" includes commercial banks, savings banks, and savings and loan
associations which may or may not be members of the Federal Deposit
Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate, whether or not subject to
withdrawal penalties. However, time deposits, other than those maturing
in seven days or less, that are subject to withdrawal penalties are
subject to the limitation on investments by the Fund in illiquid
investments, set forth in the Prospectus under "Illiquid and Restricted
Securities."
Banker's acceptances are marketable short-term credit instruments
used to finance the import, export, transfer or storage of goods. They
are deemed "accepted" when a bank guarantees their payment at maturity.
-- Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in debt obligations (which may be
dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary from time to time depending on, among other things,
the relative yields of foreign and U.S. securities, the economies of
foreign countries, the condition of such countries' financial markets, the
interest rate climate of such countries and the relationship of such
countries' currency to the U.S. dollar. The Manager will consider an
issuer's affiliation, if any, with a foreign government as one of the
factors in determining whether to purchase any particular foreign
security. These factors are judged on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status, and economic policies) as well as
technical and political data. The Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon
market conditions, those of a single country.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities exchange, or
are traded in the U.S. over-the-counter market are not considered "foreign
securities," because they are not subject to many of the special
considerations and risks (discussed below) that apply to foreign
securities traded and held abroad. If the Fund's securities are held
abroad, the countries in which such securities may be held and the sub-
custodians holding must be approved by the Fund's Board of Trustees if
required under applicable SEC rules.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of "supranational entities" include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves
and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible
risks not typically associated with investing in securities in the U.S.
The values of foreign securities will be affected by changes in currency
rates or exchange control regulations or currency blockage, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. There may be a lack
of public information about foreign issuers. Foreign countries may not
have financial reporting, accounting and auditing standards comparable to
those that apply to U.S. issuers. Costs will be incurred in connection
with conversions between various currencies. Foreign brokerage
commissions are generally higher than commissions in the U.S., and foreign
securities markets may be less liquid, more volatile and less subject to
governmental regulation than in the U.S. They may have increased delays
in settling portfolio transactions. Investments in foreign countries
could be affected by other factors not generally thought to be present in
the U.S., including expropriation or nationalization, confiscatory
taxation and potential difficulties in enforcing contractual obligations,
and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
The Fund may engage in foreign currency exchange transactions for hedging
purposes to protect against changes in future exchange rates. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
-- U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities and mortgage-backed securities and CMOs.
-- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which generally
provide for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or specified
call dates. Some mortgage-backed securities in which the Fund may invest
may be backed by the full faith and credit of the U.S. Treasury (e.g.,
direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to borrow from
the U.S. Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer itself.
Those guarantees do not extend to the value of or yield of the mortgage-
backed securities themselves or to the net asset value of the Fund's
shares. Any of these government agencies may also issue collateralized
mortgage-backed obligations ("CMOs"), discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security is not likely to rise to the extent that the value of other debt
securities rise, because of the prepayment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when available
investments offer higher or lower rates than the original investment, thus
affecting the yield of the Fund. Monthly interest payments received by
the Fund have a compounding effect which may increase the yield to the
Fund more than debt obligations that pay interest semi-annually. Because
of those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. The Fund may purchase mortgage-backed
securities at par, at a premium or at a discount. Accelerated prepayments
adversely affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not have been
fully amortized at the time the obligation is repaid. The opposite is
true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the
"interest-only" or "IO" class), while the other class will receive all of
the principal (the "principal-only" or "PO" class). Interest only
securities are extremely sensitive to interest rate changes, and
prepayments of principal on the underlying mortgage assets. An increase
in principal payments or prepayments will reduce the income available to
the IO security. In other types of CMOs, the underlying principal
payments may apply to various classes in a particular order, and therefore
the value of certain classes or "tranches" of such securities may be more
volatile than the value of the pool as a whole, and losses may be more
severe than on other classes.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during periods of
declining interest rates. As new types of mortgage-related securities are
developed and offered to investors, the Manager will, subject to the
direction of the Board of Trustees and consistent with the Fund's
investment objective and policies, consider making investments in such new
types of mortgage-related securities.
-- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments when due.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
-- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
-- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types of
mortgage pass-through certificates ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
-- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. government instrumentality,
or a private issuer, which may be a domestic or foreign corporation. Such
bonds generally are secured by an assignment to a trustee (under the
indenture pursuant to which the bonds are issued) of collateral consisting
of a pool of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through
to the holders of the CMOs as such (i.e., the character of payments of
principal and interest is not passed through, and therefore payments to
holders of CMOs attributable to interest paid and principal repaid on the
underlying mortgages do not necessarily constitute income and return of
capital, respectively, to such holders), but such payments are dedicated
to payment of interest on and repayment of principal of the CMOs. CMOs
often are issued in two or more classes with different characteristics
such as varying maturities and stated rates of interest. Because interest
and principal payments on the underlying mortgages are not passed through
to holders of CMOs, CMOs of varying maturities may be secured by the same
pool of mortgages, the payments on which are used to pay interest on each
class and to retire successive maturities in sequence. Unlike other
mortgage-backed securities (discussed above), CMOs are designed to be
retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally
will be paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayment,
there will be sufficient collateral to secure CMOs that remain
outstanding.
-- Asset-Backed Securities. The value of an asset-backed security
is affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing any
credit enhancement, and is also affected if any credit enhancement has
been exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, the Fund would
generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to
prepayments, which shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described
above for the prepayments of a pool of mortgage loans underlying mortgage-
backed securities.
Other Investment Techniques And Strategies
-- Hedging with Options and Futures Contracts. The Fund may employ
one or more types of Hedging Instruments for the purposes described in the
Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) sell Futures, (ii) purchase puts on such Futures or
securities, or (iii) write calls on securities held by it or on Futures.
When hedging to attempt to protect against the possibility that portfolio
securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase
calls on such Futures or on securities. Covered calls and puts may also
be written on debt securities to attempt to increase the Fund's income.
When hedging to protect against declines in the dollar value of a foreign
currency-denominated security, the Fund may: (a) purchase puts on that
foreign currency and on foreign currency Futures, (b) write calls on that
currency or on such Futures, or (c) enter into Forward Contracts at a
lower rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
Additional Information about the Hedging Instruments the Fund may use is
provided below. At present, the Fund does not intend to enter into
Futures, Forward Contracts and options on Futures if, after any such
purchase, the sum of margin deposits on Futures and premiums paid on
Futures options exceeds 5% of the value of the Fund's total assets. In
the future, the Fund may employ Hedging Instruments and strategies that
are not presently contemplated but which may be developed, to the extent
such investment methods are consistent with the Fund's investment
objective, legally permissible and adequately disclosed.
-- Writing Call Options. The Fund may write (i.e. sell) call options
("calls") on debt securities that are traded on U.S. and foreign
securities exchanges and over-the-counter markets, to enhance income
through the receipt of premiums from expired calls and any net profits
from closing purchase transactions. After any such sale up to 50% of the
Fund's total assets may be subject to calls. All such calls written by
the Fund must be "covered" while the call is outstanding (i.e. the Fund
must own the securities subject to the call or other securities acceptable
for applicable escrow requirements). Calls on Futures (discussed below)
must be covered by deliverable securities or by liquid assets segregated
to satisfy the Futures contract. When the Fund writes a call on a
security it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Fund has
retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
-- Writing Put Options. The Fund may write put options on debt
securities or Futures but only if such puts are covered by segregated
liquid assets. The Fund will not write puts if, as a result, more than
50% of the Fund's net assets would be required to be segregated to cover
such put obligations. In writing puts, there is the risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated
liquid assets equal to the exercise price of the put has the same economic
effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option period
to buy the underlying investment from the buyer of the put at the exercise
price, even though the value of the investment may fall below the exercise
price. If the put lapses unexercised, the Fund (as the writer of the put)
realizes a gain in the amount of the premium. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the current market value of the underlying investment and
the premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
The Trustees have adopted a non-fundamental policy that the Fund may
only purchase call options and put options with a value of up to 5% of its
net assets.
-- Purchasing Puts and Calls. The Fund may purchase calls in order
to protect against the possibility that the Fund's portfolio will not
fully participate in an anticipated rise in value of the long-term debt
securities market. When the Fund purchases a call, it pays a premium
(other than in a closing purchase transaction) and, except as to calls on
bond 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 put, it pays a premium and 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).
Purchasing either a put on Interest Rate Futures or on debt
securities it does not own permits the Fund either to resell the put or
to 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. When the Fund purchases a put on an Interest
rate Future or debt security not held by it, the put protects the Fund to
the extent that the prices of the underlying Future or debt securities
move in a similar pattern of the debt securities in the Fund's portfolio.
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.
-- Options on Foreign Currencies. 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 quoted by major recognized dealers in such
options, for the purpose of protecting against declines in the dollar
value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the dollar
value of a foreign currency in which securities to be acquired are
denominated, the increased cost of such securities may be partially offset
by purchasing calls or writing puts on that foreign currency. If a
decline in the dollar value of a foreign currency is anticipated, the
decline in value of portfolio securities denominated in that currency may
be partially offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and 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, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
-- Futures. The Fund may buy and sell Futures. No price is paid or
received upon the purchase or sale of an Interest Rate Future or a foreign
currency exchange contract ("Forward Contract"), discussed below. An
Interest Rate Future obligates the seller to deliver and the purchaser to
take a specific type of debt security at a specific future date for a
fixed price. That obligation may be satisfied by actual delivery of the
debt security or by entering into an offsetting contract. A securities
index assigns relative values to the securities included in that index and
is used as a basis for trading long-term Financial Futures contracts.
Financial Futures reflect the price movements of securities included in
the index. They differ from Interest Rate Futures in that settlement is
made in cash rather than by delivery of the underlying investment.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills with
the futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however the futures broker can
gain access to that account only under specified conditions. As the
Future is marked to market to reflect changes in its market value,
subsequent margin payments, called variation margin, will be made to or
by the futures broker on a daily basis.
At any time prior to the expiration of the Future, if the Fund elects
to close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to
be paid by or released to the Fund, and any loss or gain is realized for
tax purposes. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most cases
the obligation is fulfilled by entering into an offsetting position. All
futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
-- 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.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does
not enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund will identify to the Custodian cash or U.S. Government
securities or other liquid high-quality debt securities having a value
equal to the aggregate net amount of the Fund's exposure under forward
contracts entered into with respect to position hedges and cross hedges.
If the value of such securities declines, additional cash or securities
will be placed in the account on a daily basis so that the value of the
account will equal the amount of the Fund's obligations with respect to
such contracts. As an alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being
hedged by a forward sale contract at a price no higher than the forward
contract price, or the Fund may purchase a put option permitting the Fund
to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contract price.
Unanticipated changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under that master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation".
-- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a put or call, sells a call, or buys or sells an
underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
-- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also must
use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more exchanges or brokers. Thus, the
number of options which the Fund may write or hold may be affected by
options written or held by other entities, including other investment
companies having the same or an affiliated investment adviser. Position
limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain
other sanctions. Due to requirements under the Investment Company Act,
when the Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its custodian bank, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an amount
equal to the market value of the securities underlying such Future, less
the margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Bond Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
-- Possible Risk Factors in Hedging. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk
when hedging by selling Futures to attempt to protect against decline in
value of the Fund's portfolio securities (due to an increase in interest
rates) that the prices of such Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's securities.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close out futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
- - Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet the credit requirements set by the Trust's
Board of Trustees from time to time), for delivery on an agreed upon
future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
-- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
In connection with securities lending, the Fund might experience risks of
delay in receiving additional collateral, or risks of delay in recovery
of securities, or loss of rights in the collateral should the borrower
fail financially. 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.
-- 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 cash, U.S. Government securities
or other high grade debt obligations 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.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective, cannot be changed without the vote
of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Trust may not, on behalf of
the Fund:
-- act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed
an underwriter under applicable laws;
-- invest in oil, gas or other mineral leases, rights, royalty
contracts or exploration or development programs, real estate or real
estate mortgage loans (this restriction does not prevent the Fund
from purchasing securities secured or issued by companies investing
or dealing in real estate and by companies that are not principally
engaged in the business of buying and selling such leases, rights,
contracts or programs);
-- make loans other than by investing in obligations in which the
Fund may invest consistent with its investment objective and policies
and other than repurchase agreements and loans of portfolio
securities;
-- pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value
at the time of the pledge not exceeding 15% of the cost of the Fund's
total assets and except in connection with permitted transactions in
options, futures contracts and options on futures contracts, and
except for reverse repurchase agreements and securities lending;
-- purchase or retain securities of any issuer if, to the knowledge
of the Trust, more than 5% of such issuer's securities are
beneficially owned by officers and trustees of the Trust or officers
and directors of Massachusetts Mutual Life Insurance Company
("MassMutual") who individually beneficially own more than 1/2 of 1%
of the securities of such issuer; and
-- make loans to an officer, trustee or employee of the Trust or to
any officer, director or employee of MassMutual, or to MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily
adopted certain policies and restrictions which are observed in the
conduct of the affairs of the Fund. These represent intentions of the
Trustees based upon current circumstances. They differ from fundamental
investment policies in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not: (1) invest
for the purpose of exercising control over, or management of, any company;
(2) purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience,
if such purchase would cause more than 5% of the current value of the
Fund's assets to be invested in such companies; and (3) invest in
securities of other investment companies, except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is part of a plan of merger, consolidation, reorganization
or acquisition.
For purposes of the Fund's policy not to concentrate investments as
described in the investment restrictions in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix B to this
Statement of Additional Information. This policy is not a fundamental
policy.
How the Fund is Managed
Organization and History. The Fund is one of two series of Oppenheimer
Integrity Funds (the "Trust"). This Statement of Additional Information
may be used with the Fund's Prospectus only to offer shares of the Fund.
The Trust was established in 1982 as MassMutual Liquid Assets Trust and
changed its name to MassMutual Integrity Funds on April 15, 1988. The
Fund was reorganized from a closed-end investment company known as
MassMutual Income Investors, Inc. into a series of the Trust on April 15,
1988. On March 29, 1991, the Trust changed its name from MassMutual
Integrity Funds to Oppenheimer Integrity Funds and the Fund changed its
name from MassMutual Investment Grade Bond Fund to Oppenheimer Investment
Grade Bond Fund. Each share of the Fund represents an interest in the
Fund proportionately equal to the interest of each other share of the same
class and entitles the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund and of the Trust's other
series vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of appointment
of auditors for the Trust. Shareholders of a particular series or class
vote separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that matter are
not entitled to vote on the proposal. For example, only shareholders of
a series, such as the Fund, vote exclusively on any material amendment to
the investment advisory agreement with respect to the series. Only
shareholders of a class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect that class.
The Trustees are authorized to create new series and classes of
series. The Trustees may reclassify unissued shares of the Trust or its
series or classes into additional series or classes of shares. The
Trustees may also divide or combine the shares of a class into a greater
or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in the Fund. Shares do not have
cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Trust will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Trust valued at $25,000 or more or holding
at least 1% of the Trust's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under certain
circumstances, the risk of a Trust shareholder incurring financial loss
on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. Each Trustee is also a trustee, director or
managing general partner of the Trust, Oppenheimer Total Return Fund,
Inc., Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund,
Oppenheimer International Bond Fund, Oppenheimer Cash Reserves,
Oppenheimer Tax-Exempt Fund, Oppenheimer Limited-Term Government Fund, The
New York Tax-Exempt Income Fund, Inc., Oppenheimer Champion Income Fund,
Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund, Oppenheimer Variable Account
Funds, Daily Cash Accumulation Fund, Inc., Centennial America Fund, L.P.,
Centennial Money Market Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial Tax Exempt Trust and Centennial
California Tax Exempt Trust, (collectively, the "Denver-based Oppenheimer
funds") except for Mr. Fossel and Ms. Macaskill who are Trustees,
Directors or Managing General Partners of all Denver-based Oppenheimer
funds except Oppenheimer Integrity Funds and Oppenheimer Strategic Income
Fund. Ms. Macaskill is President and Mr. Swain is Chairman of each of the
Denver-based Oppenheimer funds. As of March 6, 1996, the Trustees and
officers of the Fund as a group owned of record or beneficially less than
1% of each class of the Fund's outstanding shares, and less than 1% of the
outstanding shares of the Trust. The foregoing does not include shares
held of record by an employee benefit plan for employees of the Manager
(for which two of the officers listed below Ms. Macaskill and Mr. Donohue,
are trustees) other than the shares beneficially owned under that plan by
the officers of the Fund listed below.
Robert G. Avis, Trustee; Age: 64
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: 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Raymond J. Kalinowski, Trustee; Age: 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.: formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age: 74
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age: 74
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President; Age: 47
President, Chief Executive Officer and a Director of the Manager; Chairman
and a Director of SSI, President and a Director of OAC and HarbourView;
and a Director of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; formerly an Executive Vice President
of the Manager.
Ned M. Steel, Trustee; Age: 80
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee; Age: 62
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; formerly President and director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President and Secretary; Age: 45
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"); President and a
director of Centennial; an officer of other Oppenheimer funds; formerly
Senior Vice President and Associate General Counsel of the Manager and the
Distributor; formerly a Partner in, Kraft & McManimon (a law firm); an
officer of First Investors Corporation (a broker-dealer) and First
Investors Management Company, Inc. (broker-dealer and investment adviser);
and a director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age:
59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
David P. Negri, Vice President and Portfolio Manager; Age: 41
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer funds.
David Rosenberg, Vice President and Portfolio Manager; Age 37
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer funds;
formerly Vice President and Senior Portfolio Manager for Delaware
Investment Advisors.
Robert G. Zack, Assistant Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other Oppenheimer funds; formerly a Fund Controller of the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to
which he was an International Mutual Fund Supervisor for Brown Brothers
Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager. They and the Trustees of the Fund who are affiliated
with the Manager (Mr. Swain, who is both an officer and Trustee) receives
no salary or fee from the Fund. The Trustees of the Fund (excluding Mr.
Swain) received the total amounts shown below (i) from the Fund, during
its fiscal year ended December 31, 1995, and (ii) from all of the Denver-
based Oppenheimer funds (including the Fund) listed in the first paragraph
of this section, for services in the positions shown and from Oppenheimer
Strategic Investment Grade Bond Fund and Oppenheimer Short-Term Income
Fund, which ceased operation following the acquisition of their assets by
certain other Oppenheimer funds):
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund OppenheimerFunds1
<S> <C> <C>
Robert G. Avis $105 $53,000
Trustee
William A. Baker $144 $73,255
Audit and Review Committee
Chairman and Trustee
Charles Conrad, Jr. $127 $64,309
Audit and Review Committee
Member and Trustee
C. Howard Kast $128 $65,000
Trustee
Raymond J. Kalinowski $128 $65,000
Trustee
Robert M. Kirchner $135 $68,292
Audit and Review Committee
Member and Trustee
Ned M. Steel $105 $53,000
Trustee
</TABLE>
_____________
1 For the 1995 calendar year.
-- Major Shareholders. As of March 6, 1996, the only entities that
owned of record or were known by the Fund to own beneficially 5% or more
of any class of the Fund's outstanding shares was (i) MML Reinsurance
(Bermuda) LTD, c/o Investment Services, 1295 State Street, Springfield,
MA 01111-0001, which owned 825,144.176 Class A shares (approximately 5.47%
of the Fund's Class A shares then outstanding); (ii) RPSS TR IRA FBO
Shirely Einhorn, 10662 SW 79th Terrace, Miami, FL 33173-2912, who owned
24,607.768 Class C shares (approximately 9.28% of the Fund's Class C
shares then outstanding); (iii) Oppenheimer & Co., Inc., P.O. Box 3484,
Church Street Station, New York, NY 10008-8484 who owned 16,554.132 Class
C shares (approximately 6.23% of the Fund's Class C shares then
outstanding); (iv) David B. Landers, PC PSP, 3364 E. Slauson Avenue,
Vernon, CA 90058-3915, who owned 13,534.984 (approximately 5.09% of the
Fund's Class C shares then outstanding); (v) Merrill Lynch Fenner & Smith,
4800 Deer Lake Drive E FL3, Jacksonville, FL 32246-6484 who owned 17,145
Class C shares (approximately 6.45% of the Fund's Class C shares then
outstanding); (vi) Merchants & Farmers Bank, 401(k) Plan, P.O. Box 189,
Millport, AL 355-0189, who owned 15,711.805 Class C shares (approximately
5.91% of the Fund's Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company ("MassMutual"). OAC is also
owned in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Trust, and one of whom (Mr. James C.
Swain) serve as Trustees of the Trust.
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.
-- The Investment Advisory Agreement. Under the investment advisory
agreement dated July 10, 1995 between the Trust on behalf of the Fund and
the Manager, the Fund pays a management fee to the Manager at the annual
rate of: .75% of the first $200 million of average annual net assets; .72%
of the next $200 million; .69% of the next $200 million; .66% of the next
$200 million; .60% of the next $200 million; and .50% of average annual
net assets in excess of $1 billion. Under the prior investment advisory
agreement between the Trust on behalf of the Fund and the Manager, the
Fund paid a management fee to the Manager at the annual rate of: .50% of
the first $100 million of average annual net assets; .45% of the next $200
million; .40% of the next $200 million; and .35% of average annual net
assets in excess of $500 million. The investment advisory agreement, dated
July 10, 1995, between the Trust on behalf of the Fund and the Manager
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy
materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment 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. The advisory agreement is subject to annual approval by the
Board of Trustees, who may terminate the advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has undertaken that
the total expenses of the Fund in any fiscal year (including the
management fee, but excluding taxes, interest, brokerage fees,
distribution plan payments, and extraordinary expenses, such as litigation
costs) shall not exceed (and the Manager undertakes to reduce the Fund's
management fee in the amount by which such expenses shall exceed) the most
stringent applicable state "blue sky" expense limitation requirement for
qualification of sale of the Fund's shares. At present, that limitation
is imposed by California and limits expenses (with specified exclusions)
to 2.5% of the first $30 million of the Fund's average annual net assets,
2.0% of the next $70 million of average net assets and 1.5% of average net
assets in excess of $100 million. The Manager reserves the right to
change or eliminate this expense limitation at any time. The payment of
the management fee at the end of any month will be reduced so that at no
time will there be any accrued but unpaid liability under the above
expense limitation.
Prior to July 10, 1995, MassMutual served as investment sub-adviser (the
"Sub-Adviser") to the Fund pursuant to a sub-advisory agreement between
the Manager and MassMutual dated March 28, 1991. Under the sub-advisory
agreement, MassMutual was responsible for managing the Fund's portfolio
of securities and making investment decisions with respect to the Fund's
investments, subject to the Fund's investment objective, policies and
restrictions. The Sub-Adviser's fee was paid by the Manager. The sub-
advisory agreement was subject to the same renewal, termination and
standard of care provisions as the investment advisory agreement. On July
10, 1995, the Fund's shareholders approved a new investment advisory
agreement with the Manager, at the fee rate set forth in the Prospectus,
under which the Manager performs the investment decision-making functions
previously performed by the Sub-Adviser. The sub-advisory agreement
terminated effective July 10, 1995 after shareholders approved the
investment advisory agreement with the Manager.
For the fiscal years ended December 31, 1993, 1994 and for the period
from January 1, 1995 through July 9, 1995, the advisory fees paid to the
Manager were $555,430, $522,205 and $820,507, respectively, of which
$380,790, $362,287 and $201,877, respectively, was paid by the Manager to
the Sub-Adviser.
-- The Distributor. Under the General Distributor's Agreement between
the Trust and the Distributor, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's
Class A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales (other
than those paid under the Class A, Class B and Class C Distribution and
Service Plans), including advertising and the cost of printing and mailing
prospectuses (other than those furnished to existing shareholders), are
borne by the Distributor. During the Fund's fiscal years ended December
31, 1993, 1994 and 1995, the aggregate amount of sales charges on sales
of the Fund's Class A shares was $269,639, $143,088 and $166,065,
respectively, of which the Distributor and on an affiliate, MassMutual
Investor Services, Inc. ("MMLISI") retained in the aggregate $163,271,
$67,090 and $59,442 in those respective years. For the fiscal year ended
December 31, 1995, the Distributor advanced $134,235 to broker-dealers on
the sales of the Funds' Class B shares, $14,745 of which went to MMLISI.
In addition, the Distributor collected $33,311 from contingent deferred
sales charges assessed on Class B shares. During the Fund's fiscal period
July 11, 1995 through December 31, 1995, the contingent deferred sales
charges collected on the Fund's Class C shares totalled $29. For
additional information about distribution of the Fund's shares, payment
made by the Fund to the Distributor, and expenses connected with such
activities, refer to "Distribution and Service Plans," below.
- -- The Transfer Agent. OppenheimerFunds Services, an operating division
of the Manager which is 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 Agreements. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions of the Fund. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers ("brokers"),
including "affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding or base its selection on "posted" rates,
but is expected to be aware of the current rates of eligible brokers and
to minimize the commissions paid to the extent consistent with the
provisions of the advisory agreement and the interests and policies of the
Fund as established by the Trust's Board of Trustees. Purchases of
securities from underwriters include a commission or concession 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 and dealers which provide brokerage and/or research services for
the Fund and/or the other accounts over which it or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Most purchases made by
the Fund are principal transactions at net prices, and the Fund incurs
little or no brokerage costs. During the fiscal year ended December 31,
1993 and 1994, no brokerage commissions were paid by the Fund. During the
fiscal year ended December 31, 1995, $3,742 in brokerage commissions were
paid by the Fund for research services.
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 upon recommendations from the Manager's
portfolio managers. In certain instances portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above. In
either case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
trades 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.
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. Most purchases from dealers include a
spread between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broadens the scope and
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 Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from
time to time the "standardized yield," "dividend yield," "average annual
total return", "total return," "cumulative total return," "total return
at net asset value" and "cumulative total return at net asset value" of
an investment in a class of shares of the Fund may be advertised. An
explanation of how yields and total returns are calculated for each class
and the components of those calculations is set forth below.
The Fund's advertisement 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 on its shares. 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 a particular class.
-- Standardized Yields.
-- Yield. The Fund's "yield" (referred to as "standardized yield") for
a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds (other than money market
funds) that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended December 31, 1995, the standardized yields for the
Fund's Class A, Class B and Class C shares were 6.14%, 5.69% and 5.70%,
respectively.
-- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the dividends paid on shares of a class from
net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class)
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum
offering price is the net asset value per share, without considering the
effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations may
also be made using the Class A net asset value (instead of its maximum
offering price) at the end of the period. The dividend yields on Class A
shares for distribution made on December 29, 1995 covering the 31-day
period ended December 31, 1995, were 6.69% and 7.03% when calculated at
maximum offering price and at net asset value, respectively. The dividend
yield on Class B shares for the 30-day period ended December 31, 1995, was
6.27% when calculated at net asset value. The dividend yield on Class C
shares for the 30-day period ended December 31, 1995 was 6.30% when
calculated at net asset value.
-- Total Return Information.
-- Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over
an entire period of years. Its calculation uses some of the same factors
as average annual total return, but it does not average the rate of return
on an annual basis. Cumulative total return is determined as follows:
ERV - P
-------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
applicable contingent deferred sales charge (of 5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% for
the fifth year, 1.0% in the sixth year and none thereafter), is applied,
as described in the Prospectus. For Class C shares, the payment of the
1% contingent deferred sales charge for shares redeemed within 12 months
of purchase is applied, as described in the Prospectus. 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 for the
one year period ended December 31, 1995 and for the period from April 15,
1988 (the date the Fund became an open-end Fund) to December 31, 1995,
were 11.38% and 8.05%, respectively. The cumulative "total return" on
Class A shares for the latter period was 81.69%. For the fiscal period
from May 1, 1993 (inception of the class), through December 31, 1994, the
average annual total return and the cumulative total return on an
investment in Class B shares of the Fund were 4.40% and 12.16%,
respectively. For the period from July 11, 1995 through December 31, 1995
the average annual total return and the cumulative total return on an
investment in Class C shares of the Fund were 5.94% and 2.76%,
respectively.
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A, Class B and
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 sales charges) and takes into consideration the reinvestment
of dividends and capital gains distributions. The cumulative total
returns at net asset value on the Fund's Class A shares for the fiscal
year ended December 31, 1993, and for the period from April 15, 1988 to
December 31, 1995 were 16.94% and 90.75%, respectively. The cumulative
total return at net asset value on the Fund's Class B shares for the
fiscal year-ended December 31, 1995 and for the period from May 1, 1993
through December 31, 1995 were 16.06% and 15.13%, respectively. For the
period from July 11, 1995 through December 31, 1995 the cumulative total
return on an investment in Class C shares of the Fund was 3.76%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B and Class C shares. However,
when comparing total return of an investment in Class A, Class B or Class
C shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments.
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.
For periods ending December 31, 1995, the performance of the Fund's
classes has been ranked against (i) all other funds, excluding money
market funds, and (ii) all other general bond funds. The Lipper
performance rankings are based on total return that includes the
reinvestment of capital gains distributions and income dividends but does
not take sales charges or taxes into consideration.
For periods ending December 31, 1995 the Fund's performance may also be
compared to the performance of the Lipper General Bond Fund Index, which
is a net asset value weighted index of general bond funds compiled by
Lipper. It is calculated with adjustments for income dividends and
capital gains distributions as of the ex-dividend date.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the performance of
its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly, in broad investment categories (equity,
taxable bond, municipal bond and hybrid), based on risk-adjusted
investment return. Investment return measures a fund's or Class's three,
five and ten-year average annual total returns (when available). Risk and
return are combined to produce star rankings reflecting performance
relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). The current ranking is a
weighted average of the 3, 5 and 10 year rankings (if available).
Morningstar ranks the Class A, Class B and Class C shares of the Fund in
relation to other taxable bond funds. Rankings are subject to change.
The total return on an investment in the Fund's Class A, Class B or
Class C shares may be compared with the performance for the same period
of one or more of the following indices: the Consumer Price Index, the
Salomon Brothers World Government Bond Fund Index, the Salomon Brothers
High Grade Corporate Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Lehman Brothers Aggregate Bond Index, and the J.P. Morgan
Government Bond Index. The Consumer Price Index is generally considered
to be a measure of inflation. The Salomon Brothers World Government Bond
Index generally represents the performance of government debt securities
of various markets throughout the world, including the United States. The
Salomon Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, and the Lehman
Brothers Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities. The Lehman Brothers Aggregate Bond Index
generally represents the performance of the general fixed-rate investment
grade debt market. The J.P. Morgan Government Bond Index generally
represents the performance of government bonds issued by various countries
including the United States. Each index includes a factor for the
reinvestment of interest 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 shares 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 OppenheimerFunds, other than performance rankings
of the OppenheimerFunds themselves. Those ratings or rankings of
shareholder/investor services by third parties may compare the
OppenheimerFunds' services to those of other mutual fund families selected
by the rating or ranking services and may be based upon the opinions of
the rating or ranking service itself, based on its research or judgment,
or based upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, and Distribution
and Service Plans for Class B and Class C shares under Rule 12b-1 of the
Investment Company Act, pursuant to which the Fund will make payments to
the Distributor in connection with the 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, 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. (For
the Distribution and Service Plan for the Class C shares, that vote was
cast by the Manager as the sole initial holder of Class C shares of the
Fund).
In addition, under the Plans, the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in
the case of the Manager, may include profits from the advisory fee it
receives from the Fund) to make payments to brokers, dealers or other
financial institutions (each is referred to as a "Recipient" under the
Plans) for distribution and administrative services they perform. 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. None of the Plans 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 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 the
amount to be paid by Class A shareholders under the Class A Plan. Such
approval must be by a "majority" of the Class A and Class B shares (as
defined in the Investment Company Act), voting separately by class. All
material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall provide
separate written reports to the Trust's Board of Trustees at least
quarterly stating generally the amounts of all payments made pursuant to
each Plan and the purpose for which the payments were made. The Class B
and Class C reports also include a description of the services rendered
in connection with the distribution of Class B and Class C shares. The
Class A reports include the identity of each Recipient that received any
such payment. Those reports, including the allocations on which they are
based, 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 Trust who are not "interested persons" of the Trust 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. Initially, the Board of Trustees has set the fees
at the maximum rate and set no minimum amount.
For the fiscal year ended December 31, 1995, payments under the Class A
Plan totaled $287,716, all of which was paid by the Distributor to
Recipients, including $142,856 paid to MMLISI.
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 Plans allows the service fee payments to be paid
by the Distributor to Recipients in advance for the first year Class B and
Class C shares are outstanding, and thereafter on a quarterly basis, as
described in the Prospectus. The services rendered by Recipients in
connection with personal services and the maintenance of Class B and Class
C shareholder accounts may include but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
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. The
advance payment is based on the net asset value of the Class B and Class
C shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B or Class C shares
are redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor. Service fee payments made
under the Class B Plan during the fiscal year ended December 31, 1995
totalled $127,308, of which $2,033 OFDI paid to an affiliate, and $106,790
was retained by the Distributor. Service fee payments made under the Class
C Plan during the period from July 11, 1995 through December 31, 1995
totalled $4,560, of which $1,848 was retained by the Distributor.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charge and the service fee on Class B shares,
or to pay Recipients the service fee on a quarterly basis without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class B or Class C Plan by the
Board. Initially, the Board has set no minimum holding period. All
payments under the Class B and Class C Plans are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and service fees. The Distributor anticipates that it will take
a number of years for it to recoup (from the Fund's payments to the
Distributor under the Class B Plan and recoveries of the contingent
deferred sales charge collected on redeemed Class B shares) the Class B
sales commissions paid to authorized brokers or dealers.
Asset-based sales charge payments are designed to permit an investor to
purchase shares of the Fund without paying a front-end sales load and at
the same time permit the Distributor to compensate Recipients in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor retains the asset-based sales charge on Class B shares. As
to Class C shares, the Distributor retains the asset-based sales charge
during the first year shares are outstanding, and pays the asset-based
sales charge as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Under the Class B and Class C Plans, the
asset-based sales charge is paid to compensate the Distributor for its
services, described below, to the Fund.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more 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) and state "blue sky" registration fees and certain other
distribution expenses.
Other distribution assistance rendered by the Distributor and Recipients
under the Class B and Class C Plans may include, but shall not be limited
to, the following: distributing sales literature and prospectuses other
than those furnished to current Class B or Class C shareholders, and
providing such other information and services in connection with the
distribution of Class B or Class C shares as the Distributor or the Fund
may reasonably request. The Class B and Class C Plans further provide
that such other distribution assistance may include distribution
assistance and administrative support services rendered in connection with
Class B or Class C shares acquired (i) by purchase, (ii) in exchange for
shares of another investment company for which the Distributor serves as
distributor or sub-distributor, or (iii) pursuant to a plan of
reorganization to which the Fund is a party.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor normally will not
accept (i) any order for $500,000 or more of Class B shares or (ii) any
order for $1 million 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 Class B and Class C
shares will be reduced by additional expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Class B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution and
Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day
that the Exchange is open, by dividing the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding.
The Exchange normally closes at 4:00 P.M., New York time, but may close
earlier on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. Trading in debt securities and foreign securities may occur at
times when the New York Stock Exchange is closed, including weekends and
holidays, or after the close of the Exchange on a regular business day.
The Fund may invest a substantial portion of its assets in foreign
securities primarily listed on foreign exchanges or in foreign over-the-
counter markets that may trade on Saturdays or customary U.S. business
holidays on which the Exchange is closed. Because the Fund's net asset
value will not be calculated on those days, the Fund's net asset value per
share may be significantly affected on such days when shareholders may not
purchase or redeem shares.
The 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 U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued at
the last sale price, or at the mean between "bid" and "asked" prices
determined by a pricing service approved by the Board of Trustees or by
the Manager; (iv) long-term debt securities having a remaining maturity
in excess of 60 days are valued at the mean between the "bid" and "asked"
prices determined by a portfolio pricing service approved by the Fund's
Board of Trustees or obtained from active market makers in the security
on the basis of reasonable inquiry; (v) debt instruments having a maturity
of more than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued, which have a remaining
maturity of 60 days or less are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's
Board of Trustees or obtained from active market makers in the security
on the basis of reasonable inquiry; (vi) money market-type debt securities
having a maturity of less than one year when issued that having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
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 foreign markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the
Manager, under procedures established by the Board of Trustees, determines
that the particular event would materially affect the Fund's net asset
value, in which case an adjustment would be made, if necessary. Foreign
securities priced in a foreign currency as well as foreign currency have
their value converted to U.S. dollars at the closing price in the London
foreign exchange market as provided by a reliable bank, dealer or pricing
service.
In the case of U.S. Government Securities, mortgage-backed securities,
foreign government securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Trust's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ as
applicable, as determined by a pricing service approved by the Board of
Trustees or by the Manager, or, if there are no sales that day, in
accordance with (i), above. Forward currency contracts are valued at the
closing price in the London foreign exchange market as provided by a
reliable bank, dealer or pricing service. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale
of the underlying investment is reduced by the amount of premium paid by
the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received after the close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business day. The
proceeds of ACH transfers are normally received by the Fund 3 days after
the transfers are initiated. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from delays in
ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain circumstances described in
the Prospectus because the Distributor or dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
-- The 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 Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund,Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Small Cap Value Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent (referred to as a "Letter") is
an investor's statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund (and
other Oppenheimer funds) during a 13-month period (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up
to 90 days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other Oppenheimer funds) that applies under the Right of Accumulation
to current purchases of Class A shares. Each purchase of Class A shares
under the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
Oppenheimer funds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the Letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual purchases. If total eligible purchases during the
Letter of Intent period exceed the intended purchase amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record
and/or the investor to advise the Distributor about the Letter in placing
any purchase orders for the investor during the Letter of Intent period.
All of such purchases must be made through the Distributor.
-- Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount be held in escrow by the Transfer
Agent. For example, if the intended purchase amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000
purchase). Any dividends and capital gains distributions on the escrowed
shares will be credited to the investor's account.
2. If the 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 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," 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 "Shareholder Account Rules and Policies," in the Prospectus.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves
to use those accounts for monthly automatic purchases of shares of up to
four other OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
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.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Trust may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case, the Fund
may pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Value Per Share" and that valuation will be
made as of the time the redemption price is determined.
-- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than
$1,000 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares
that you purchased subject to an initial sales charge, or the Class A
contingent deferred sales charge when you redeemed them or (ii) Class B
shares that were subject to the Class B contingent deferred sales charge
when you redeemed them, without sales charge. This privilege does not
apply to Class C shares. The reinvestment may be made without sales
charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for such privilege at the time of reinvestment. This
privilege is not available for Class C shares. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment will
not alter any capital gains tax payable on that gain. If there has been
a capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment.
Under the Internal Revenue Code, if the redemption proceeds of Fund shares
on which a sales charge was paid are reinvested in shares of the Fund or
another of the OppenheimerFunds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the
shares acquired by the reinvestment of the redemption proceeds. The Fund
may amend, suspend or cease offering this reinvestment privilege at any
time as to shares redeemed after the date of such amendment, suspension
or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class A, Class B or Class
C contingent deferred sales charge will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans,
or pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How to Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must: (i) state the
reason for the distribution; (ii) state the owner's awareness of tax
penalties if the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption requirements.
Participants (other than self-employed persons maintaining a plan account
in their own name) in OppenheimerFunds-sponsored prototype pension,
profit-sharing or 401(k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. 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 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. 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 that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
or 12 months, respectively, because of the imposition of the Class B or
Class C 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 Sales Charges" and
"Waivers of 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 and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the receipt of payment on the date selected cannot
be guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
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 shares, but certain other Oppenheimer funds do not
presently offer either both of Class B or Class C shares. A list showing
which funds offer which class can be obtained by calling the Distributor
at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds 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 OppenheimerFunds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the OppenheimerFunds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange
of Class A shares of other OppenheimerFunds purchased subject to a Class
A contingent deferred sales charge are redeemed within 18 months of the
end of the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years
of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of
the exchanged Class C shares.
When Class A, Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class A, Class B or Class C
contingent deferred sales charge will be followed in determining the order
in which the shares are exchanged. Shareholders should take into account
the effect of any exchange on the applicability and rate of any contingent
deferred sales charge that might be imposed in the subsequent redemption
of remaining shares. Shareholders owning shares of more than one class
must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain, open an account in, and acknowledge
receipt of a prospectus for, the fund to which the exchange is to be made.
For full or partial exchanges of an account made by telephone, any special
account features such as Asset Builder Plans, Automatic Withdrawal Plans
and retirement plan contributions will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone lines
are busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, in order to enable the investor to earn a return
on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the nature of the investments held by the
Fund in its portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C," above. Dividends are calculated in the same manner, at the same time
and on the same day for shares of each class. However, dividends on Class
B and Class C shares are expected to be lower as a result of the asset-
based sales charge on Class B and Class C shares, and Class B and Class
C dividends will also differ in amount as a consequence of any difference
in net asset value between Class A, Class B and Class C shares.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Trust's Board and the Manager might determine in
a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds 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
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from shares of other OppenheimerFunds may be invested in
shares of this Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager has represented to the
Fund that the banking relationships between the Manager and the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice
of the Fund to deal with the Custodian in a manner uninfluenced by any
banking relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Those uninsured
balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Bond Fund (formerly
Oppenheimer Investment Grade Bond Fund) as of December 31, 1995, the
related statement of operations for the year then ended, the statements
of changes in net assets for the years ended December 31, 1995 and 1994,
and the financial highlights for the period January 1, 1991 to December
31, 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based
on our audits. The financial highlights (except for total return) for the
period February 1, 1985 to December 31, 1990 were audited by other
auditors whose report dated February 4, 1991, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995 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
Bond Fund at December 31, 1995, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ----------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1996
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS December 31, 1995
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
==========================================================
==========================================================
================
CERTIFICATES OF DEPOSIT - 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank CD, 13%, 5/6/96(2)CLP $ 49,956,445 $ 122,853
-----------------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Bank Negara CD, Zero Coupon,
15.914%, 6/17/96(2)(3)IDR 500,000,000 201,253
-------------
Total Certificates of Deposit (Cost $337,372) 324,106
==========================================================
==========================================================
================
ASSET-BACKED SECURITIES - 2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO LOAN - 2.2%
-----------------------------------------------------------------------------------------------------------------------------
Daimler-Benz Vehicle Trust, Series 1994-A, Cl. A, 5.95%,
12/15/00 440,645 441,373
-----------------------------------------------------------------------------------------------------------------------------
Ford Credit Grantor Trust, Series 1994-B, Cl. A, 7.30%,
10/15/99 959,109 977,390
-----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Grantor Trust, Series
1992-E, Cl. A, 4.75%, 8/15/97 192,999 192,154
-----------------------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Grantor Trust, Series 1994-A,
Cl. A, 6.45%, 9/15/99 1,289,223 1,300,091
-----------------------------------------------------------------------------------------------------------------------------
World Omni Automobile Lease Securitization Trust,
Series 1994-A, Cl. A, 6.45%, 9/25/00 1,705,242 1,716,958
-------------
Total Asset-Backed Securities (Cost $4,581,131) 4,627,966
==========================================================
==========================================================
================
MORTGAGE-BACKED OBLIGATIONS - 29.6%
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY - 22.7%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 12.7%
----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
Certificates of Participation, 9%, 3/1/17 684,842 727,563
Certificates of Participation, Series 17-039, 13.50%,
11/1/10 75,372 89,209
Certificates of Participation, Series 17-094, 12.50%,
4/1/14 40,781 47,205
Collateralized Mtg. Obligation Gtd. Multiclass Certificates
of Participation, Series 1322, Cl. G, 7.50%, 2/15/07 2,000,000 2,088,740
Collateralized Mtg. Obligations, Series 1548, Cl. C, 7%,
4/15/21 4,000,000 4,022,480
Multiclass Gtd. Mtg. Participation Certificates, Series
1460, Cl. H, 7%, 5/15/07 1,500,000 1,554,375
----------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11%, 7/1/16 6,832,876 7,751,045
Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17 884,543 920,624
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1993-175, Cl. PL, 5%, 10/25/02 2,000,000 1,980,000
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1993-191, Cl. PD, 5.40%, 3/25/04 1,500,000 1,486,395
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl.
2, 12.095%, 9/1/23(4) 23,117,327 6,330,174
-------------
26,997,810
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED - 10.0%
----------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
6%, 1/15/26(5) 5,000,000 5,053,125
6%, 7/20/25 1,984,195 2,005,278
7%, 1/15/26(5) 5,000,000 5,059,400
10%, 11/15/09 328,943 361,015
10.50%, 12/15/17-7/15/19 418,560 468,527
12%, 1/15/99-5/15/14 66,291 70,409
12.75%, 6/15/15 43,595 50,461
8%, 6/15/05-7/15/25 7,202,212 7,527,961
9%, 2/15/09-6/15/09 567,867 608,463
-------------
21,204,639
</TABLE>
6 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PRIVATE - 6.9%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL - 3.4%
----------------------------------------------------------------------------------------------------------------------------
CMC Securities Corp. I, Collateralized Mtg. Obligation,
Series 1993-D, Cl. D-3, 10%, 7/25/23(6) $ 711,456 $ 765,482
----------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp., Sub. Collateralized Mtg.
Obligations, Series X-Q13B, Cl. 3B1, 8.75%, 11/25/24 1,442,350 1,449,112
----------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-C1, Cl. 2-D,
8.70%, 9/25/25(6) 1,000,000 1,078,125
----------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-C1, Cl. 2-E,
8.70%, 9/25/25(6) 1,000,000 1,069,687
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M6, Cl. B4, 7.477%, 6/25/21(7) 75,761 75,738
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1992-CHF, Cl. E, 8.25%, 12/25/20 2,004,994 1,967,401
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1993-C1, Cl. B, 8.75%, 5/25/24 700,000 729,312
-------------
7,134,857
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY - 2.2%
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M5, Cl. A, 9%, 3/25/17 733,176 776,251
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,603,594
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1995-C1, Cl. D, 6.90%, 2/25/27 2,500,000 2,387,500
-------------
4,767,345
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER - 0.9%
----------------------------------------------------------------------------------------------------------------------------
JHM Mtg. Acceptance Corp., 8.96% Collateralized Mtg.
Obligation Bonds, Series E, Cl. 5, 4/1/19 1,790,105 1,913,175
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Residential Funding Corp., Mtg. Pass-Through
Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23 774,963 800,150
-------------
Total Mortgage-Backed Obligations (Cost $62,473,955) 62,817,976
==========================================================
==========================================================
================
U.S. GOVERNMENT OBLIGATIONS - 20.4%
- ------------------------------------------------------------------------------------------------------------------------------------
TREASURY - 20.4%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
11.625%, 11/15/02 5,000,000 6,743,750
8.75%, 5/15/20 6,750,000 9,036,562
8.75%, 8/15/20 3,050,000 4,092,719
8.875%, 8/15/17 13,500,000 18,090,000
----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.75%, 8/15/00 550,000 625,109
8.875%, 11/15/97 4,335,000 4,615,418
-------------
Total U.S. Government Obligations (Cost $40,331,251) 43,203,558
</TABLE>
7 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
==========================================================
==========================================================
================
FOREIGN GOVERNMENT OBLIGATIONS - 0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development
Bonds, 12.50%, 7/25/97NZD $ 800,000 $ 556,998
----------------------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds, 10%, 7/15/97NZD 390,000 262,030
----------------------------------------------------------------------------------------------------------------------------
Norwegian Government Bonds, 5.75%, 11/30/04NOK 540,000 81,686
----------------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01AUD 1,045,000 778,537
-------------
Total Foreign Government Obligations (Cost $1,565,840) 1,679,251
==========================================================
==========================================================
================
CORPORATE BONDS AND NOTES - 50.6%
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY - 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.8%
----------------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 900,000 1,024,144
----------------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 602,239
-------------
1,626,383
- ------------------------------------------------------------------------------------------------------------------------------------
METALS/MINING - 1.8%
----------------------------------------------------------------------------------------------------------------------------
AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,138,882
----------------------------------------------------------------------------------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,107,358
----------------------------------------------------------------------------------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,663,795
-------------
3,910,035
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Crown Paper Co., 11% Sr. Sub. Nts., 9/1/05 750,000 660,000
----------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,784,147
----------------------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts.,
2/1/02 500,000 477,500
----------------------------------------------------------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber Collateralized
Nts., 7/20/15 454,847 462,280
----------------------------------------------------------------------------------------------------------------------------
Union Camp Corp., 10% Debs., 5/1/19 100,000 116,911
-------------
3,500,838
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED - 6.2%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Tag-Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 550,000 552,063
----------------------------------------------------------------------------------------------------------------------------
Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,067,115
-------------
1,619,178
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 1.8%
----------------------------------------------------------------------------------------------------------------------------
American Brands, Inc., 7.875% Debs., 1/15/23 2,000,000 2,253,562
----------------------------------------------------------------------------------------------------------------------------
ConAgra, Inc., 7.40% Sub. Nts., 9/15/04 250,000 264,433
----------------------------------------------------------------------------------------------------------------------------
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50% Sr. Sub.
Disc. Nts., 11/1/02(8) 500,000 471,250
----------------------------------------------------------------------------------------------------------------------------
Pulsar Internacional SA de CV, 11.80% Nts., 9/19/96(9) 750,000 755,625
-------------
3,744,870
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 2.5%
----------------------------------------------------------------------------------------------------------------------------
Grace (W.R.) & Co., 7.25% Medium-Term Nts., 7/15/97 2,000,000 2,040,198
----------------------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 500,000 536,250
----------------------------------------------------------------------------------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 500,000 494,950
----------------------------------------------------------------------------------------------------------------------------
R.P. Scherer Corp., 6.75% Sr. Nts., 2/1/04 500,000 475,812
----------------------------------------------------------------------------------------------------------------------------
Service Corp. International, 7% Sr. Nts., 6/1/15 1,000,000 1,073,020
----------------------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts.,
8/15/04(8) 649,000 626,285
-------------
5,246,515
</TABLE>
8 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
HOTEL/GAMING - 0.6%
----------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 $ 750,000 $ 785,625
----------------------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07(6) 500,000 502,500
-------------
1,288,125
- ------------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99 835,000 803,688
- ------------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 505,204
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Coastal Corp., 11.75% Sr. Debs., 6/15/06 500,000 531,653
----------------------------------------------------------------------------------------------------------------------------
Enron Corp., 8.10% Nts., 12/15/96 1,500,000 1,536,089
----------------------------------------------------------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 100,000 113,618
----------------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19 3,000,000 3,584,202
----------------------------------------------------------------------------------------------------------------------------
Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 275,000 321,762
----------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 10% Debs., 3/15/08 100,000 124,414
----------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 7.875% Nts., 10/1/02 250,000 272,987
----------------------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 1,500,000 2,061,675
----------------------------------------------------------------------------------------------------------------------------
United Meridian Corp., 10.375% Gtd. Sr. Sub. Nts.,
10/15/05 500,000 531,250
----------------------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 150,000 151,875
-------------
9,229,525
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 12.6%
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Banco Ganadero SA, Zero Coupon Sr. Unsub. Unsec.
Nts., 9.931%, 6/15/96(3)(6) 250,000 239,520
----------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 200,000 204,724
----------------------------------------------------------------------------------------------------------------------------
Chemical New York Corp., 9.75% Sub. Capital Nts.,
6/15/99 300,000 337,112
----------------------------------------------------------------------------------------------------------------------------
First Chicago Corp., 9% Sub. Nts., 6/15/99 100,000 110,118
----------------------------------------------------------------------------------------------------------------------------
First Chicago NBD Bancorp, 7.25% Sub. Debs., 8/15/04 250,000 267,041
----------------------------------------------------------------------------------------------------------------------------
National Westminster Bank PLC, 9.375% Gtd. Capital
Nts., 11/15/03 70,000 83,913
----------------------------------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group (The) PLC, 10.125% Sub.
Gtd. Capital Nts., 3/1/04 500,000 621,195
----------------------------------------------------------------------------------------------------------------------------
Westpac Banking Corp., 9.125% Sub. Debs., 8/15/01 1,500,000 1,711,150
-------------
3,574,773
</TABLE>
9 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 7.3%
----------------------------------------------------------------------------------------------------------------------------
American Car Line Co., 8.25% Equipment Trust
Certificates, Series 1993-A, 4/15/08 $ 246,000 $ 258,608
----------------------------------------------------------------------------------------------------------------------------
Beneficial Corp., 12.875% Debs., 8/1/13 20,000 24,313
----------------------------------------------------------------------------------------------------------------------------
BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12 1,500,000 1,780,785
----------------------------------------------------------------------------------------------------------------------------
Enterprise Rent-A-Car USA Finance Co., 7.875% Nts.,
3/15/98(6) 1,500,000 1,554,709
----------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.90% Medium-Term Nts., 11/6/97 2,000,000 2,080,364
----------------------------------------------------------------------------------------------------------------------------
GPA Holland BV, 9.75% Medium-Term Nts., Series B,
6/10/96(6) 500,000 500,000
----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 300,000 318,942
----------------------------------------------------------------------------------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 2,082,104
----------------------------------------------------------------------------------------------------------------------------
Midland American Capital Corp., 12.75% Gtd. Nts.,
11/15/03 205,000 241,118
----------------------------------------------------------------------------------------------------------------------------
NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 1,759,866
----------------------------------------------------------------------------------------------------------------------------
PaineWebber Group, Inc., 7% Sr. Nts., 3/1/00 160,000 163,909
----------------------------------------------------------------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,500,000 1,583,350
----------------------------------------------------------------------------------------------------------------------------
Ryder System, Inc., 8.75% Debs., Series J, 3/15/17 1,600,000 1,703,704
----------------------------------------------------------------------------------------------------------------------------
Source One Mortgage Services Corp., 9% Debs., 6/1/12 1,250,000 1,485,481
-------------
15,537,253
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 3.6%
----------------------------------------------------------------------------------------------------------------------------
Aetna Life & Casualty Co., 8% Debs., 1/15/17 1,000,000 1,060,133
----------------------------------------------------------------------------------------------------------------------------
Capital Holding Corp., 8.75% Debs., 1/15/17 1,200,000 1,272,654
----------------------------------------------------------------------------------------------------------------------------
CNA Financial Corp., 7.25% Debs., 11/15/23 2,000,000 1,990,074
----------------------------------------------------------------------------------------------------------------------------
Torchmark Corp., 7.875% Nts., 5/15/23 3,000,000 3,243,750
-------------
7,566,611
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED - 0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 0.5%
----------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr.
Sec. Nts., Series B, 4/1/02 1,125,000 1,153,125
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 7.3%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/COMPUTERS - 3.2%
----------------------------------------------------------------------------------------------------------------------------
Boeing Co., 7.50% Debs., 8/15/42 2,000,000 2,320,236
----------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.75% Debs., 5/21/07 1,000,000 1,216,910
----------------------------------------------------------------------------------------------------------------------------
McDonnell Douglas Corp., 9.25% Nts., 4/1/02 1,500,000 1,738,060
----------------------------------------------------------------------------------------------------------------------------
Rolls-Royce Capital, Inc., 7.125% Gtd. Unsec. Unsub.
Nts., 7/29/03 1,000,000 1,046,250
----------------------------------------------------------------------------------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 500,000 516,250
-------------
6,837,706
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - 2.1%
----------------------------------------------------------------------------------------------------------------------------
Chrysler Corp., 10.40% Nts., 8/1/99 1,000,000 1,069,464
----------------------------------------------------------------------------------------------------------------------------
Chrysler Corp., 10.95% Debs., 8/1/17 200,000 224,527
----------------------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp., 11.25% Sr. Nts.,
10/1/02 500,000 482,500
----------------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 2,312,126
----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.50% Nts., 12/15/01 100,000 96,549
----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.75% Nts., 4/15/97 300,000 305,708
-------------
4,490,874
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 2.0%
----------------------------------------------------------------------------------------------------------------------------
Caterpillar, Inc., 9.75% Debs., 6/1/19 1,750,000 2,035,827
----------------------------------------------------------------------------------------------------------------------------
Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 1,125,063
----------------------------------------------------------------------------------------------------------------------------
Westinghouse Electric Corp., 8.375% Nts., 6/15/02 1,000,000 1,022,800
-------------
4,183,690
</TABLE>
10 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 4.9%
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING - 0.6%
----------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts.,
10/1/02(6) $ 750,000 $ 757,500
----------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., Zero Coupon Sr. Sec.
Disc. Nts., 12.982%, 11/15/99(3) 750,000 468,750
-------------
1,226,250
- ------------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION - 1.9%
----------------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority
Debs., 12/1/07 1,000,000 1,067,500
----------------------------------------------------------------------------------------------------------------------------
Tele-Communications, Inc., 5.28% Medium-Term Nts.,
8/20/96 1,000,000 996,207
----------------------------------------------------------------------------------------------------------------------------
TeleWest PLC, 0%/11% Sr. Disc. Debs., 10/1/07(8) 1,280,000 776,000
----------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,176,779
-------------
4,016,486
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.15% Debs., 2/1/23 3,100,000 3,534,961
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Valassis Communications, Inc., 9.55% Sr. Nts., 12/1/03 1,500,000 1,543,258
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER - 0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES - 0.3%
----------------------------------------------------------------------------------------------------------------------------
Textron, Inc., 9.55% Medium-Term Nts., 3/19/01 500,000 579,296
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT STORES - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Sears Canada Inc., 11.70% Debs., 7/10/00CAD 500,000 426,186
- ------------------------------------------------------------------------------------------------------------------------------------
DRUG STORES - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Hook-SupeRx, Inc., 10.125% Sr. Nts., 6/1/02 400,000 438,128
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING - 0.4%
----------------------------------------------------------------------------------------------------------------------------
May Department Stores Cos., 10.625% Debs., 11/1/10 405,000 564,550
----------------------------------------------------------------------------------------------------------------------------
May Department Stores Cos., 9.875% Debs., 6/1/17 250,000 265,491
-------------
830,041
- ------------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 500,000 435,000
----------------------------------------------------------------------------------------------------------------------------
Penn Traffic Co., 10.25% Sr. Nts., 2/15/02 500,000 478,750
-------------
913,750
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION - 1.3%
----------------------------------------------------------------------------------------------------------------------------
American Airlines, Inc., 9.73% Pass-Through Certificates,
Series 1991-C2, 9/29/14 1,000,000 1,118,750
----------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 1,000,000 1,025,000
----------------------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., 10.375% Debs., 2/1/11 550,000 707,854
-------------
2,851,604
- ------------------------------------------------------------------------------------------------------------------------------------
RAILROADS - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Canadian Pacific Ltd., 9.45% Debs., 8/1/21 1,000,000 1,304,000
----------------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 113,888
-------------
1,417,888
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.9%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.0%
----------------------------------------------------------------------------------------------------------------------------
Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 226,315
----------------------------------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds,
3/1/22 250,000 284,110
----------------------------------------------------------------------------------------------------------------------------
Tenaga Nasional Berhad, 7.875% Nts., 6/15/04(6) 1,000,000 1,106,039
----------------------------------------------------------------------------------------------------------------------------
Union Gas Ltd., 13% Debs., 6/30/03CAD 572,000 474,450
-------------
2,090,914
</TABLE>
11 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.9%
----------------------------------------------------------------------------------------------------------------------------
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 $ 1,000,000 $ 1,012,500
----------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 11.44%, 8/15/00(3) 500,000 301,250
----------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., Units (each unit consists
of eight 0%/13.875% sr. disc. nts., 12/15/05 and one
0%/13.875% cv. sr. sub. disc. nt., 12/15/05)(6)(8)(10) 900,000 470,000
----------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(8) 1,250,000 1,068,750
----------------------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc., 0%/13.50% Sr. Disc. Nts.,
9/15/05(6)(8) 600,000 346,500
----------------------------------------------------------------------------------------------------------------------------
New York Telephone Co., 9.375% Debs., 7/15/31 2,500,000 2,976,547
----------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 0%/11.50% Sr. Disc. Nts.,
9/1/03(8) 1,000,000 618,750
----------------------------------------------------------------------------------------------------------------------------
Pacific Bell, 8.50% Debs., 8/15/31 2,000,000 2,234,214
----------------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts.,
11/15/01(8) 1,000,000 880,000
----------------------------------------------------------------------------------------------------------------------------
Southern New England Telephone Co., 8.70% Medium-
Term Nts., 8/15/31 2,000,000 2,203,806
----------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts.,
2/1/04 500,000 497,500
-------------
12,609,817
-------------
Total Corporate Bonds and Notes (Cost $100,700,984) 107,296,972
UNITS
==========================================================
==========================================================
================
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts.,
Exp. 8/03 500 11,250
----------------------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(6) 1,980 7,920
-------------
Total Rights, Warrants and Certificates (Cost $0) 19,170
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $209,990,533) 103.7%
219,968,999
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (3.7) (7,751,705)
--------------- -------------
NET ASSETS 100.0% $212,217,294
===============
=============
<FN>
1. Face amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
AUD - Australian Dollar IDR - Indonesian Rupiah
CAD - Canadian Dollar NOK - Norwegian Krone
CLP - Chilean Peso NZD - New Zealand Dollar
2. Indexed instrument for which the principal amount and/or interest due
at maturity is affected by the relative value of a foreign currency.
3. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
4. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
5. When-issued security to be delivered and settled after December 31,
1995.
6. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Board of Trustees. These securities amount to $8,950,045 or 4.22% of the
Fund's net assets, at December 31, 1995.
7. Represents the current interest rate for a variable rate security.
8. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
9. Identifies issues considered to be illiquid - See Note 6 of Notes
to Financial Statements.
10. 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.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
12 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<S> <C> <C>
==========================================================
==========================================================
==============
ASSETS Investments, at value (cost $209,990,533) - see accompanying statement $219,968,999
--------------------------------------------------------------------------------------------------------
Receivables:
Interest and principal paydowns 3,449,576
Shares of beneficial interest sold 502,558
Receivable from OppenheimerFunds, Inc. 20,522
--------------------------------------------------------------------------------------------------------
Other 25,430
------------
Total assets 223,967,085
==========================================================
==========================================================
==============
LIABILITIES Bank overdraft 306,908
--------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 10,088,020
Dividends 610,049
Shares of beneficial interest redeemed 545,312
Distribution and service plan fees 110,630
Transfer and shareholder servicing agent fees 9,767
Other 79,105
-------------
Total liabilities 11,749,791
==========================================================
==========================================================
==============
NET ASSETS $212,217,294
-------------
-------------
==========================================================
==========================================================
==============
COMPOSITION OF Paid-in capital $206,251,590
NET ASSETS --------------------------------------------------------------------------------------------------------
Undistributed net investment income 116,937
--------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (4,129,345)
--------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 9,978,112
-------------
Net assets $212,217,294
-------------
-------------
==========================================================
==========================================================
==============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $169,059,333 and 15,399,839 shares of beneficial interest outstanding) $10.98
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $11.53
--------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $39,187,315 and 3,570,470 shares of beneficial interest outstanding) $10.98
--------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $3,970,646 and 361,451 shares of beneficial interest outstanding) $10.99
See accompanying Notes to Financial Statements.
</TABLE>
13 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1995
<S> <C> <C>
==========================================================
==========================================================
==============
INVESTMENT INCOME Interest (net of foreign withholding taxes of $13,483) $10,089,605
==========================================================
==========================================================
==============
EXPENSES Management fees - Note 4 820,507
--------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 287,716
Class B 127,308
Class C 4,560
--------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 247,878
--------------------------------------------------------------------------------------------------------
Shareholder reports 147,863
--------------------------------------------------------------------------------------------------------
Legal and auditing fees 38,082
--------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 22,344
Class B 10,705
Class C 1,358
--------------------------------------------------------------------------------------------------------
Custodian fees and expenses 32,880
--------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 872
--------------------------------------------------------------------------------------------------------
Other 21,787
------------
Total expenses 1,763,860
------------
Less reimbursement of expenses by OppenheimerFunds, Inc. - Note 4 (20,522)
------------
Net expenses 1,743,338
==========================================================
==========================================================
==============
NET INVESTMENT INCOME 8,346,267
==========================================================
==========================================================
==============
REALIZED AND Net realized gain (loss) on:
UNREALIZED GAIN (LOSS) Investments 566,180
Closing of futures contracts - Note 8 (931,937)
Foreign currency transactions 64,980
------------
Net realized loss (300,777)
--------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 12,202,101
Translation of assets and liabilities denominated in foreign currencies (136,201)
------------
Net change 12,065,900
------------
Net realized and unrealized gain 11,765,123
==========================================================
==========================================================
==============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$20,111,390
------------
------------
See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
1995 1994
<S> <C> <C> <C>
==========================================================
==========================================================
==============
OPERATIONS Net investment income $ 8,346,267 $ 6,537,608
--------------------------------------------------------------------------------------------------------
Net realized loss (300,777) (2,274,518)
--------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 12,065,900 (8,559,673)
----------------------------------
Net increase (decrease) in net assets resulting
from operations 20,111,390 (4,296,583)
==========================================================
==========================================================
==============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS Class A (7,564,945) (6,381,575)
TO SHAREHOLDERS Class B (751,223) (156,032)
Class C (29,746) --
--------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (298,880)
Class B -- (7,308)
==========================================================
==========================================================
==============
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS beneficial interest transactions - Note 2:
Class A 61,827,603 (3,255,547)
Class B 34,622,947 1,918,288
Class C 3,910,520 --
==========================================================
==========================================================
==============
NET ASSETS Total increase (decrease) 112,126,546 (12,477,637)
--------------------------------------------------------------------------------------------------------
Beginning of period 100,090,748 112,568,385
----------------------------------
End of period [including undistributed (overdistributed)
net investment income of $116,937 and
$(204,894), respectively] $212,217,294 $100,090,748
----------------------------------
----------------------------------
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991(4)
<S> <C> <C> <C> <C> <C>
==========================================================
===========================================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.12 $10.74 $10.80 $9.86
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .69 .65 .69 .75 .82
Net realized and unrealized gain (loss) .96 (1.08) .40 (.05) .90
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.65 (.43) 1.09 .70 1.72
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.68) (.65) (.71) (.76) (.78)
Dividends in excess of net investment
income -- (.03) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.68) (.68) (.71) (.76) (.78)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.12 $10.74 $10.80
==========================================================
=============
==========================================================
===========================================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.94% (3.87)% 10.30% 6.77% 18.28%
==========================================================
===========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $169,059 $96,640 $110,759 $106,290 $90,623
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $116,940 $102,168 $111,702 $98,672 $86,471
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.47% 6.25% 6.20% 7.00% 8.02%
Expenses, before voluntary reimbursement
by the Manager 1.27% 1.06% 1.06% 1.10% 1.23%
Expenses, net of voluntary reimbursement
by the Manager 1.26% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 116.4% 97.1%
<FN>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
4. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
ELEVEN
MONTHS
ENDED
DEC. 31, YEAR ENDED JANUARY 31,
1990 1989 1988(3) 1988(3) 1987(3) 1986(3)
<S> <C> <C> <C> <C> <C> <C>
==========================================================
==========================================================
================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.29 $10.12 $10.55 $11.30 $11.16 $10.91
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .88 .92 .93 1.09 1.16 1.22
Net realized and unrealized gain (loss) (.43) .19 (.36) (.55) .22 .35
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .45 1.11 .57 .54 1.38 1.57
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.88) (.94) (1.00) (1.29) (1.24) (1.32)
Dividends in excess of net investment
income -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (.94) (1.00) (1.29) (1.24) (1.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.86 $10.29 $10.12 $10.55 $11.30 $11.16
==========================================================
==============================
==========================================================
==========================================================
================
TOTAL RETURN, AT NET ASSET VALUE (5) 4.74% 11.31% 4.48% N/A N/A
N/A
==========================================================
==========================================================
================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $87,021 $96,380 $102,293 $118,568 $125,513 $121,979
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $90,065 $100,891 $111,264 $118,724 $123,045 $118,253
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.85% 8.85% 8.75% 10.28% 10.45% 11.26%
Expenses, before voluntary reimbursement
by the Manager 1.26% 1.14% 1.05% 0.98% 0.93% 0.97%
Expenses, net of voluntary reimbursement
1.24% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 80.4% 41.3% 45.0% 19.5% 59.8% 36.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ -------------
PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993(2) 1995(1)
<S> <C> <C> <C> <C>
==========================================================
===============================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.11 $11.10 $10.89
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .63 .58 .40 .28
Net realized and unrealized gain (loss) .94 (1.08) .03 .10
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.57 (.50) .43 .38
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.60) (.57) (.42) (.28)
Dividends in excess of net investment
income -- (.03) -- --
- ---------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.60) (.60) (.42) (.28)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.11 $10.99
==========================================================
===
==========================================================
===============================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.06% (4.53)% 3.91% 3.76%
==========================================================
===============================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $39,187 $3,451 $1,809 $3,971
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $12,823 $2,747 $922 $979
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.84% 5.53% 4.80%(6) 6.32%(6)
Expenses, before voluntary reimbursement
by the Manager 2.12% 1.78% 1.90%(6) 2.25%(6)
Expenses, net of voluntary reimbursement
by the Manager 2.08% N/A N/A 1.96%(6)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 175.4%
<FN>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1995 were $233,752,932 and $211,825,884, respectively.
</FN>
</TABLE>
17 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
=======================================================================
=========
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Bond Fund (the Fund), formerly named Oppenheimer Investment
Grade Bond Fund, is a separate fund of Oppenheimer Integrity Funds, a
diversified, open end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek a high level of current income by investing mainly
in debt instruments. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager). The Fund offers Class A , Class B and Class C shares.
Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All three classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a
summary of significant accounting policies consistently followed by the
Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values
based on the closing bid or asked price or the last sale price on the
prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board
of Trustees. Such securities which cannot be valued by the approved
portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Trustees
to determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the transaction
date. During this period, such securities do not earn interest, are
subject to market fluctuation and may increase or decrease in value prior
to their delivery. The Fund maintains, in a segregated account with its
custodian, assets with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or forward
commitment basis may increase the volatility of the Fund's net asset value
to the extent the Fund makes such purchases while remaining substantially
fully invested. As of December 31, 1995, the Fund had entered into
outstanding when-issued or forward commitments of $10,088,020.
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Fund may enter into mortgage "dollar-rolls"
in which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar
(same type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a sale and a
new purchase transaction.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain
on investments not offset by loss carryovers, to shareholders. Therefore,
no federal income or excise tax provision is required. At December 31,
1995, the Fund had available for federal income tax purposes an unused
capital loss carryover of approximately $6,446,000, which expires between
1997 and 2003.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in
market values of securities held and reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
- -----------------------------------------------------------------------
- ---------
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 paydown gains and losses and the recognition
of certain foreign currency gains (losses) as ordinary income (loss) for
tax purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
During the year ended December 31, 1995, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the year ended December 31, 1995, amounts have been reclassified to
reflect a decrease in paid-in capital of $363,225, an increase in
undistributed net investment income of $321,478, and a decrease in
accumulated net realized loss on investments of $41,747.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Discount on securities
purchased is amortized over the life of the respective securities, in
accordance with federal income tax requirements. Realized gains and losses
on investments and unrealized appreciation and depreciation are determined
on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995(1) YEAR ENDED DECEMBER
31, 1994
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Class A:
Sold 3,592,604 $ 37,958,201 1,071,379 $ 11,256,317
Dividends reinvested 401,453 4,283,086 323,100 3,353,309
Issued in connection with
the acquisition of:
Oppenheimer Strategic Investment
Grade Bond Fund - Note 7 2,101,654 22,529,733 -- --
Quest Investment Quality Income
Fund - Note 7 3,900,357 42,201,864 -- --
Redeemed (4,249,502) (45,145,281) (1,704,508) (17,865,173)
------------- ------------- ------------- -------------
Net increase (decrease) 5,746,566 $ 61,827,603 (310,029) $ (3,255,547)
============= =============
============= =============
---------------------------------------------------------------------------------------------------------
Class B:
Sold 1,038,290 $ 11,014,073 293,817 $ 3,089,618
Dividends reinvested 45,815 494,471 11,974 123,504
Issued in connection with
the acquisition of:
Oppenheimer Strategic Investment
Grade Bond Fund - Note 7 1,474,533 15,806,991 -- --
Quest Investment Quality Income
Fund - Note 7 1,236,995 13,384,283 -- --
Redeemed (569,823) (6,076,871) (123,969) (1,294,834)
------------- ------------- ------------- -------------
Net increase 3,225,810 $ 34,622,947 181,822 $ 1,918,288
============= =============
============= ============
---------------------------------------------------------------------------------------------------------
Class C:
Sold 47,725 $ 516,952 -- $ --
Dividends reinvested 1,625 17,809 -- --
Issued in connection with
the acquisition of
Quest Investment Quality
Income Fund - Note 7 362,821 3,929,348 -- --
Redeemed (50,720) (553,589) -- --
------------- ------------- ------------- ------------
Net increase 361,451 $ 3,910,520 -- $ --
============= =============
============= ============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and
for the period from July 11, 1995 (inception of offering) to December 31,
1995 for Class C shares.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1995, net unrealized appreciation on investments of
$9,978,466 was composed of gross appreciation of $11,552,223, and gross
depreciation of $1,573,757.
=======================================================================
=========
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. At a meeting held on July 10, 1995,
shareholders of Oppenheimer Bond Fund approved a new investment advisory
agreement. Subsequent to July 10, management fees are as follows: .75% of
the first $200 million of the Fund's average annual net assets, .72% of
the next $200 million, .69% of the next $200 million, .66% of the next
$200 million, .60% of the next $200 million, and .50% of aggregate net
assets over $1 billion. Prior to July 10, 1995, management fees were as
follows: .50% on the first $100 million of average annual net assets with
a reduction of .05% on each $200 million thereafter, to .35% on net assets
in excess of $500 million. The Manager has agreed to reimburse the Fund
if aggregate expenses (with specified exceptions) exceed the most
stringent state regulatory limit on Fund expenses.
The Manager has agreed to reimburse the Fund for SEC fees incurred in
connection with the acquisition of Quest Investment Quality Income Fund.
For the year ended December 31, 1995, commissions (sales charges paid by
investors) on sales of Class A shares totaled $166,065, of which $59,442
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 $167,546 and $5,007, of
which $14,745 was paid to an affiliated broker/dealer. During the year
ended December 31, 1995, OFDI received contingent deferred sales charges
of $33,311 upon redemption of Class B shares as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OFS's total costs of providing such
services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to compensate OFDI for costs incurred in connection with
the personal service and maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers, banks and other
institutions. In addition, Class B and Class C shares are subject to an
asset-based sales charge of .75% of net assets annually, to compensate
OFDI for sales commissions paid from its own resources at the time of sale
and associated financing costs. In the event of termination or
discontinuance of the Class B or Class C plan, the Board of Trustees may
allow the Fund to continue payment of the asset-based sales charge to OFDI
for distribution expenses incurred on Class B or Class C shares sold prior
to termination or discontinuance of the plan. At December 31, 1995, OFDI
had incurred unreimbursed expenses of $1,004,267 for Class B and $21,412
for Class C. During the year ended December 31, 1995, OFDI paid $142,856
and $2,033, respectively, to an affiliated broker/dealer as compensation
for Class A and Class B personal service and maintenance expenses, and
retained $106,790 and $1,848, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as
financing costs.
=======================================================================
=========
5. DEFERRED TRUSTEE COMPENSATION
A former trustee elected to defer receipt of fees earned. These deferred
fees earned interest at a rate determined by the current Board of Trustees
at the beginning of each calendar year, compounded each quarter-end. From
January 1, 1995 through May 10, 1995, the Fund was incurring interest at
a rate of 7.89% per annum. The final payment was made on May 10, 1995.
=======================================================================
=========
6. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1995, investments in securities included issues that are
illiquid or restricted. The 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. The
Fund intends to invest no more than 10% of its net assets (determined at
the time of purchase) in illiquid or restricted securities. The aggregate
value of these securities subject to this limitation at December 31, 1995
was $755,625 which represents .36% of the Fund's net assets. Information
concerning these securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER
COST UNIT AS OF
SECURITY ACQUISITION DATE PER UNIT DECEMBER
31, 1995
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Pulsar Internacional SA de CV, 11.80%
Nts., 9/19/96 9/14/95 $100.00 $100.75
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain
unregistered securities are determined to be liquid and are not included
within the 10% limitation specified above.
=======================================================================
=========
7. ACQUISITION OF STRATEGIC INVESTMENT GRADE AND QUEST INVESTMENT QUALITY
INCOME FUND
On September 22, 1995, the Fund acquired all the net assets of Oppenheimer
Strategic Investment Grade Bond Fund, pursuant to an Agreement and Plan
of Reorganization approved by the Oppenheimer Strategic Investment Grade
Bond Fund shareholders on September 20, 1995. The Fund issued 2,101,654
and 1,474,533 shares of beneficial interest for Class A and Class B,
respectively, valued at $22,529,733 and $15,806,991 in exchange for the
net assets, resulting in combined Class A net assets of $125,283,258 and
Class B net assets of $24,206,043 on September 22, 1995. The net assets
acquired included net unrealized appreciation of $772,151. The exchange
qualifies as a tax-free reorganization for federal income tax purposes.
On November 24, 1995, the Fund acquired all the net assets of Quest
Investment Quality Income Fund, pursuant to an Agreement and Plan of
Reorganization approved by the Quest Investment Quality Income Fund
shareholders on November 16, 1995. The Fund issued 3,900,357, 1,236,995
and 362,821 shares of beneficial interest for Class A, Class B and Class
C, respectively, valued at $42,201,864, $13,384,283 and $3,929,348 in
exchange for the net assets, resulting in combined Class A net assets of
$168,776,907, Class B net assets of $38,281,909 and Class C net assets of
$4,265,500 on November 24, 1995. The net assets acquired included net
unrealized appreciation of $2,983,610. The exchange qualifies as a
tax-free reorganization for federal income tax purposes.
=======================================================================
=========
8. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to
or protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed
rate portfolio securities. The Fund may also purchase futures contracts
to gain exposure to changes in interest rates as it may be more efficient
or cost effective than actually buying fixed income securities. The Fund
will segregate assets to cover its commitments under futures contracts.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the
value of the underlying securities.
<PAGE>
Appendix A: Description of Securities Ratings
Description of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") commercial paper, note and
bond ratings:
Commercial Paper Ratings
Standard & Poor's commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. The "A-l" and "A-2" categories are described as follows:
"A" - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree
of safety.
"A-l" - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics will be noted
with a plus (+) sign designation.
"A-2" - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated "A-l."
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers. The two highest
designations are as follows:
Issuers (or supporting institutions) rated Prime-1 (or P-1) have a
superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will normally be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Standard & Poor's ratings for Municipal Notes due in three years or less
are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest.
Bond Ratings
Standard & Poor's describes its ratings for corporate bonds as follows:
AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in a small
degree.
A: Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for
bonds rated "A."
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.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Moody's describes its corporate bond ratings as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." 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, such
changes as can be visualized 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 in
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 in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and may 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 as 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 in fact have
speculative characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa: Bonds rated "Caa" are of poor standing and may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked
shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
<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
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
OPPENHEIMER VALUE STOCK FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated April 1, 1996.
This Statement of Additional Information of Oppenheimer Value Stock
Fund is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated April
1, 1996. It should be read together with the Prospectus which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the
Transfer Agent at the toll-free number shown above.
Contents Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 5
Other Investment Restrictions 16
How the Fund is Managed 17
Organization and History 17
Trustees and Officers of the Fund 19
The Manager and Its Affiliates 23
Brokerage Policies of the Fund 25
Performance of the Fund 27
Distribution and Service Plans 29
About Your Account
How to Buy Shares 32
How to Sell Shares 39
How to Exchange Shares 43
Dividends, Capital Gains and Taxes 44
Additional Information About the Fund 45
Financial Information About the Fund
Independent Auditors' Report 47
Financial Statements 48
Appendix A: Industry Classifications A-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
have in the Prospectus.
-- Equity Securities
-- Preferred Stocks. Preferred stocks, unlike common stocks, offer
a stated dividend rate payable from the corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative,
participating, or auction rate. If interest rates rise, the fixed
dividend on preferred stocks may be less attractive, causing the price of
preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity.
Those can be a negative feature when interest rates decline. Dividends
on some preferred stock may be "cumulative," requiring all or a portion
of prior unpaid dividends to be paid. Preferred stock also generally has
a preference over common stock on the distribution of a corporation's
assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases. The rights of preferred
stocks on distribution of a corporation's assets in the event of a
liquidation are generally subordinate to the rights associated with a
corporation's debt securities.
-- Convertible Securities. While convertible securities are a form
of debt security, in many cases their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as
"equity equivalents." As a result, the rating assigned to the security
has less impact on the Manager's investment decision with respect to
convertible securities than in the case of non-convertible debt
securities. To determine whether convertible securities should be
regarded as "equity equivalents," the Manager examines the following
factors: (1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common stock of
the issuer, (2) whether the issuer of the convertible securities has
restated its earnings per share of common stock on a fully diluted basis
(considering the effect of converting the convertible securities), and (3)
the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
-- Debt Securities
-- U.S. Government Securities. The U.S. government obligations in
which the Fund may invest in for defensive reasons include U.S. Treasury
bills, notes and bonds which are direct obligations of the U.S. government
and debt obligations issued, assumed, guaranteed or sponsored by agencies
or instrumentalities established under the authority of an Act of
Congress, or obligations secured by such securities.
-- Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as a percentage of the prime rate of a bank or the 91-day U.S. Treasury
bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
-- Short-Term Money Market Securities. The high-quality, short-term
money market instruments the Fund may invest in to provide liquidity or
for temporary defensive purposes include U.S. government obligations;
commercial paper which at the date of the investment is rated A-1 or A-2
by Standard & Poor's Corporation ("Standard & Poor's") or P-1 or P-2 by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, is issued by
companies having an outstanding debt issue currently rated at least A by
Standard & Poor's or Moody's; short-term obligations of corporate issuers
which at the date of investment are rated AAA or AA by Standard & Poor's
or Aaa or Aa by Moody's; bank participation certificates, provided that
at the date of investment each of the underlying loans is made to an
issuer of securities rated at least A-2, AA or SP-2 by Standard & Poor's
or P-2 or Aa by Moody's, and also provided that the underlying loans have
a remaining maturity of one year or less; and certificates of deposit and
bankers' acceptances of banks and savings and loan associations. The Fund
may also purchase short-term money market instruments which ratings are
substantially similar to the Moody's and Standard & Poor's ratings and are
from another NRSRO.
-- Warrants. The Fund may invest up to 5% of the value of its
assets in warrants in an effort to build a position in the underlying
common stocks and, of such 5%, no more than 2% may be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. A warrant typically gives the holder the right to purchase
underlying stock at a specified price for a designated period of time.
Warrants may be a relatively volatile investment. The holder of a warrant
takes the risk that the market price of the underlying stock may never
equal or exceed the exercise price of the warrant. A warrant will expire
without value if it is not exercised or sold during its exercise period.
-- Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in equity or debt securities (which may
be dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed
by foreign corporations, certain supranational entities (described below)
and foreign governments or their agencies or instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary from time to time depending on, among other things,
the relative yields of foreign and U.S. securities, the economies of
foreign countries, the condition of such countries' financial markets, the
interest rate climate of such countries and the relationship of such
countries' currency to the U.S. dollar. The Sub-Adviser will consider an
issuer's affiliation, if any, with a foreign government as one of the
factors in determining whether to purchase any particular foreign
security. These factors are judged on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status, and economic policies) as well as
technical and political data. The Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon
market conditions, those of a single country.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
Securities of foreign issuers that are represented by American
depository receipts (known as "ADRs"), or that are listed on a U.S.
securities exchange, or are traded in the U.S. over-the-counter market are
not considered "foreign securities," because they are not subject to many
of the special considerations and risks (discussed below) that apply to
foreign securities traded and held abroad. If the Fund's securities are
held abroad, the countries in which such securities may be held and the
sub-custodians holding must be approved by the Fund's Board of Trustees
if required under applicable SEC rules.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of "supranational entities" include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves
and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible
risks not typically associated with investing in securities in the U.S.
The values of foreign securities will be affected by changes in currency
rates or exchange control regulations or currency blockage, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. There may be a lack of
public information about foreign issuers. Foreign countries may not have
financial reporting, accounting and auditing standards comparable to those
that apply to U.S. issuers. Costs will be incurred in connection with
conversions between various currencies. Foreign brokerage commissions are
generally higher than commissions in the U.S., and foreign securities
markets may be less liquid, more volatile and less subject to governmental
regulation than in the U.S. They may have increased delays in settling
portfolio transactions. Investments in foreign countries could be
affected by other factors not generally thought to be present in the U.S.,
including expropriation or nationalization, confiscatory taxation and
potential difficulties in enforcing contractual obligations, and could be
subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
The Fund may engage in foreign currency exchange transactions for hedging
purposes to protect against changes in future exchange rates. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments may also be affected unfavorably
by changes in currency exchange control regulations. Although the Fund
will invest only in securities denominated in foreign currencies that at
the time of investment do not have significant government-imposed
restrictions on conversion into U.S. dollars, there can be no assurance
against subsequent imposition of currency controls. In addition, the
values of foreign securities will fluctuate in response to a variety of
factors, including changes in U.S. and foreign interest rates.
Other Investment Techniques and Strategies
-- Hedging with Options and Futures Contracts. The Fund may employ
one or more types of Hedging Instruments for the purposes described in the
Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) purchase Futures or (ii) purchase calls on such Futures
or securities. Normally, the Fund would then purchase the equity
securities and terminate the hedging position. When hedging to protect
against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) purchase puts on that foreign currency or on
foreign currency Futures, (b) write calls on that currency or on such
Futures, or (c) enter into Forward Contracts at a lower rate than the spot
("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
At present, the Fund does not intend to enter into Futures, Forward
Contracts and options on Futures if, after any such purchase, the sum of
margin deposits on Futures and premiums paid on Futures options exceeds
5% of the value of the Fund's total assets. In the future, the Fund may
employ Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, legally
permissible and adequately disclosed. Additional Information about the
Hedging Instruments the Fund may use is provided below.
-- Writing Call Options. The Fund may write (that is, sell) call
options ("calls"). All calls written by the Fund must be "covered" while
the call is outstanding (that means, the Fund must own the securities
subject to the call or other securities acceptable for applicable escrow
requirements). Calls on Futures (discussed below) must be covered by
deliverable securities or by liquid assets segregated to satisfy the
Futures contract.
When the Fund writes a call on an investment it receives a premium
and agrees to sell the callable investment to a purchaser of a
corresponding call during the call period (usually not more than 9 months)
at a fixed exercise price (which may differ from the market price of the
underlying investment), regardless of market price changes during the call
period. The Fund has retained the risk of loss should the price of the
underlying security decline during the call period, which may be offset
to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call the Fund has written is more or less than the price of the call the
Fund has subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Those profits are considered short-
term capital gains for Federal income tax purposes, and when distributed
by the Fund are taxable as ordinary income. If the Fund could not effect
a closing purchase transaction due to lack of a market, it would have to
hold the callable investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of deliverable securities or liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice require the Fund to deliver a futures contract;
it would simply put the Fund in a short futures position, which is
permitted by the Fund's hedging policies.
-- Writing Put Options. A put option on an investment gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium less transaction costs. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities or on foreign currencies, to
secure its obligation to pay for the underlying security, the Fund will
deposit in escrow liquid assets with a value equal to or greater than the
exercise price of the underlying securities. The Fund therefore foregoes
the opportunity of investing the segregated assets or writing calls
against those assets. As long as the obligation of the Fund as the put
writer continues, it may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring the Fund to take
delivery of the underlying security against payment of the exercise price.
The Fund has no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any
time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier
time at which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once the
Fund has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
-- Purchasing Calls and Puts. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in the securities market. When the
Fund purchases a call (other than in a closing purchase transaction), it
pays a premium and, except as to calls on stock indices, has the right to
buy the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. When
the Fund purchases a call on an index, it pays a premium, but settlement
is in cash rather than by delivery of the underlying investment to the
Fund. In purchasing a call, the Fund benefits only if the call is sold
at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the
transaction costs and the premium paid and the call is exercised. If the
call is not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment.
The Fund may purchase put options ("puts") which relate to
securities, foreign currencies or Futures. When the Fund purchases a put,
it pays a premium and, except as to puts on stock indices, has the right
to sell the underlying investment to a seller of a corresponding put on
the same investment during the put period at a fixed exercise price.
Buying a put on an investment the Fund owns enables the Fund to protect
itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If
the market price of the underlying investment is equal to or above the
exercise price and as a result the put is not exercised or resold, the put
will become worthless at its expiration date, and the Fund will lose its
premium payment and the right to sell the underlying investment. The put
may, however, be sold prior to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an
index or a put on a Stock Index Future not held by the Fund, permits the
Fund either to resell the put or buy the underlying investment and sell
it at the exercise price. The resale price of the put will vary inversely
with the price of the underlying investment. If the market price of the
underlying investment is above the exercise price and as a result the put
is not exercised, the put will become worthless on its expiration date.
In the event of a decline in the stock market, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its loss on
its portfolio securities. When the Fund purchases a put on an index, or
on a Future not held by it, the put protects the Fund to the extent that
the index moves in a similar pattern to the securities held. In the case
of a put on an index or Future, settlement is in cash rather than by
delivery by the Fund of the underlying investment.
Puts and calls on broadly-based stock indices or Stock Index Futures
are similar to puts and calls on securities or futures contracts except
that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the stock market
generally) rather than on price movements in individual securities or
futures contracts. When the Fund buys a call on an index or Future, it
pays a premium. During the call period, upon exercise of a call by the
Fund, a seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of the
index or Future upon which the call is based is greater than the exercise
price of the call. That cash payment is equal to the difference between
the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier") which determines the total dollar
value for each point of difference. When the Fund buys a put on an index
or Future, it pays a premium and has the right during the put period to
require a seller of a corresponding put, upon the Fund's exercise of its
put, to deliver to the Fund an amount of cash to settle the put if the
closing level of the index or Future upon which the put is based is less
than the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
-- Stock Index Futures and Interest Rate Futures. The Fund may buy
and sell futures contracts relating either to broadly-based stock indices
("Stock Index Futures") or to debt securities ("Interest Rate Futures").
A Stock Index Future obligates the seller to deliver (and the purchaser
to take) cash to settle the futures transaction, or to enter into an
offsetting contract. No physical delivery of the underlying stocks in the
index is made. Generally, contracts are closed out with offsetting
transactions prior to the expiration date of the contract. An Interest
Rate Future obligates the seller to deliver and the purchaser to take a
specific type of debt security or cash to settle the futures transaction,
or to enter into an offsetting contract. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment in cash or U.S. Treasury bills with the futures commission
merchant (the "futures broker"). The initial margin will be deposited
with the Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account only
under certain specified conditions. As the Future is marked to market
(that is, the value on the Fund's books is changed to reflect changes in
its market value) subsequent margin payments, called variation margin,
will be paid to or by the futures broker on a daily basis.
At any time prior to expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a
final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized. Although Stock Index Futures and Interest Rate Futures by their
terms call for settlement by the delivery of cash and of debt securities,
respectively, in most cases the obligation is fulfilled without such
delivery by entering into an offsetting transaction. All futures
transactions are effected through a clearinghouse associated with the
exchange on which the contracts are traded.
-- Options on Foreign Currencies. The Fund intends to write and
purchase calls and puts on foreign currencies. A call written on a
foreign currency by the Fund is "covered" if the Fund owns the underlying
foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other foreign
currency held in its portfolio. Normally this will be effected by the
sale of a security denominated in the relevant currency at a price higher
or lower than the original acquisition price of the security. This will
result in a loss or gain in addition to that resulting from the currency
option position. The Fund will not engage in writing options on foreign
currencies unless the Fund has sufficient liquid assets denominated in the
same currency as the option or in a currency that, in the judgment of the
Manager, will experience substantially similar movements against the U.S.
dollar as the option currency.
-- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain
that would otherwise result from a change in the relationship between the
U.S. dollar and a foreign currency. To attempt to limit its exposure to
loss under Forward Contracts in a particular foreign currency, the Fund
limits its use of these contracts to the amount of its net assets
denominated in that currency or denominated in a closely-correlated
foreign currency. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to
procedures and regulations applicable to other Futures. The Fund may also
enter into a forward contract to sell a foreign currency denominated in
a currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a greater
correlation between the foreign currency of the forward contract and the
foreign currency of the underlying investment than between the U.S. dollar
and the foreign currency of the underlying investment. This technique is
referred to as "cross hedging." The success of cross hedging is dependent
on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the
U.S. dollar. To the extent that the correlation is not identical, the
Fund may experience losses or gains on both the underlying security and
the cross currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does
not enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities denominated in that currency.
The Fund, however, in order to avoid excess transactions and transaction
costs, may maintain a net exposure to Forward Contracts in excess of the
value of the Fund's portfolio securities denominated in that currency
provided the excess amount is "covered" by liquid, high grade debt
securities, denominated in either that foreign currency or U.S. dollars,
at least equal at all times to the amount of such excess. As an
alternative, the Fund may purchase a call option permitting the Fund to
purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the Forward Contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the Forward Contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required from the Fund for such
transactions. OCC will release the securities on the expiration of the
option or upon the Fund's entering into a closing transaction. An option
position may be closed out only on a market which provides secondary
trading for options of the same series, and there is no assurance that a
liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a put or call, sells a call, or buys or sells an
underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
-- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also
must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by each of the option exchanges governing the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more exchanges or brokers. Thus, the
number of options which the Fund may write or hold may be affected by
options written or held by other entities, including other investment
companies having the same advisor as the Fund, or an advisor that is an
affiliate of the Fund's advisor. Position limits also apply to Futures.
An exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its custodian bank, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of equity securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
-- Risks or Hedging with Futures and Options. An option position may
be closed out only on a market that provides secondary training for
options at the same series, and there is no assurance that a liquid market
exist for any particular option. In addition to the risks with respect
to options discussed in the Prospectus and above, there is a risk in using
short hedging by selling Futures to attempt to protect against decline in
value of the Fund's portfolio securities (due to an increase in interest
rates) that the prices of such Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's securities.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close out futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the portfolio securities being hedged and movements in the price
of the hedging instruments, the Fund may use hedging instruments in a
greater dollar amount than the dollar amount of portfolio securities being
hedged if the historical volatility of the prices of such portfolio
securities being hedged is more than the historical volatility of the
applicable index. It is also possible that if the Fund has used hedging
instruments in a short hedge, the market may advance and the value of the
securities held in the Fund's portfolio may decline. If that occurred,
the Fund would lose money on the hedging instruments and also experience
a decline in value in its portfolio securities. However, while this could
occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are
based.
-- lliquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet the credit requirements set by the Trust's
Board of Trustees from time to time), for delivery on an agreed upon
future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the Sub-
Adviser will impose creditworthiness requirements to confirm that the
vendor is financially sound. Additionally, the Sub-Adviser will
continuously monitor the collateral's value.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. 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 cash, U.S. Government securities
or other high grade debt obligations 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 Sub-Adviser will affect the value of such securities and
may cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
-- Short Sales Against-the-Box. In a short sale, while the short
position is open, the Fund must own an equal amount of the securities sold
short, or by virtue of ownership of other securities have the right,
without payment of further consideration, to obtain an equal amount of the
securities sold short. Short sales against-the-box may be made to defer,
for Federal income tax purposes, recognition of gain or loss on the sale
of securities "in-the-box" until the short position is closed out. They
may also be used to protect a gain on the security "in-the-box" when the
Fund does not want to sell it and recognize a capital gain.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares. Under these additional restrictions, the Trust may
not, on behalf of the Fund:
-- act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed an
underwriter under applicable laws;
-- invest in oil, gas or other mineral leases, rights, royalty
contracts or exploration or development programs, real estate or real
estate mortgage loans (this restriction does not prevent the Fund from
purchasing securities secured or issued by companies investing or dealing
in real estate and by companies that are not principally engaged in the
business of buying and selling such leases, rights, contracts or
programs);
-- make loans other than by investing in obligations in which the
Fund may invest consistent with its investment objective and policies and
other than repurchase agreements and loans of portfolio securities;
-- pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value at
the time of the pledge not exceeding 15% of the cost of the Fund's total
assets and except in connection with permitted transactions in options,
futures contracts and options on futures contracts, and except for reverse
repurchase agreements and securities lending;
-- purchase or retain securities of any issuer if, to the knowledge
of the Trust, more than 5% of such issuer's securities are beneficially
owned by officers and trustees of the Trust or officers and directors of
Massachusetts Mutual Life Insurance Company ("MassMutual") who
individually beneficially own more than 1/2 of 1% of the securities of
such issuer; and
-- make loans to an officer, trustee or employee of the Trust or to
any officer, director or employee of MassMutual, or to MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily
adopted certain policies and restrictions which are observed in the
conduct of the affairs of the Fund. These represent intentions of the
Trustees based upon current circumstances. They differ from fundamental
investment policies in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not:
-- invest for the purpose of exercising control over, or management
of, any company;
-- purchase any security of a company which (including any
predecessor, controlling person, general partner and guarantor) has a
record of less than three years of continuous operations or relevant
business experience , if such purchase would cause more than 5% of the
current value of the Fund's assets to be invested in such companies;
-- invest in securities of other investment companies, except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition;
-- invest more than 5% of its net assets in warrants;
-- invest more than 2% of its net assets in warrants not listed on
the New York Stock Exchange or the American Stock Exchange; and
-- invest in real estate limited partnerships.
For purposes of the Fund's policy not to concentrate investments as
described in the investment restrictions in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix A to this
Statement of Additional Information. This policy is not a fundamental
policy.
How the Fund is Managed
Organization and History. Oppenheimer Value Stock Fund (referred to as
the "Fund") is one of two series of Oppenheimer Integrity Funds (the
"Trust"). This Statement of Additional Information may be used with the
Fund's Prospectus only to offer shares of the Fund. The Trust was
established in 1982 as MassMutual Liquid Assets Trust and changed its name
to MassMutual Integrity Funds on April 15, 1988. The Fund was established
as a separate Massachusetts business trust known as MassMutual Equity
Investors Trust in 1986, and was reorganized as a series of the Trust on
April 15, 1988. On March 29, 1991, the Trust changed its name from
MassMutual Integrity Funds to Oppenheimer Integrity Funds and the Fund
changed its name from MassMutual Value Stock Fund to Oppenheimer Value
Stock Fund.
Each share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the same
class and entitle the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund and of the Trust's other
series vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of appointment
of auditors for the Trust. Shareholders of a particular series or class
vote separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that matter are
not entitled to vote on the proposal. For example, only shareholders of
a series, such as the Fund, vote exclusively on any material amendment to
the investment advisory agreement with respect to the series. Only
shareholders of a class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that
class.
The Trustees are authorized to create new series and classes of
series. The Trustees may reclassify unissued shares of the Trust or its
series or classes into additional series or classes of shares. The
Trustees may also divide or combine the shares of a class into a greater
or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in the Fund. Shares do not have
cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Trust will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Trust valued at $25,000 or more or holding
at least 1% of the Trust's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder and Trustee liability for the Trust's obligations, and
provides for indemnification and reimbursement of expenses out of its
property for any shareholder held personally liable for its obligations.
The Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under certain
circumstances, the risk of a Trust shareholder incurring financial loss
on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund
The Trust's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. Each
Trustee is also a trustee, director or managing general partner of
Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-
Exempt Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-
Exempt Income Fund, Inc., Oppenheimer Champion Income Fund, Oppenheimer
International Bond Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Income Fund, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Variable Account Funds, Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (collectively,
the "Denver-based Oppenheimer funds") except Mr. Fossel and Ms. Macaskill
who are Trustees, Directors or Managing General Partners of all the
Denver-based Oppenheimer funds except Oppenheimer Integrity Funds and
Oppenheimer Strategic Income Fund. Ms. Macaskill is President and Mr.
Swain is Chairman of each of the Denver-based Oppenheimer funds. As of
March 6, 1996, the Trustees and officers of the Fund as a group owned of
record or beneficially less than 1% of each class of the Fund's
outstanding shares. The foregoing does not include shares held of record
by an employee benefit plan for employees of the Manager (for which one
of the officers listed below, Mr. Donohue, is a trustee) other than the
shares beneficially owned under that plan by the officers of the Fund
listed above:
Robert G. Avis, Trustee; Age: 64
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: 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Raymond J. Kalinowski, Trustee; Age: 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.: formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age: 74
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age: 74
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 80
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee; Age: 62
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; formerly President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Bridget A. Macaskill, President; Age: 47
President, CEO and a Director of OppenheimerFund, Inc. ("OFI") (the
"Manager"); Chairman and a Director of SSI, Vice President and a Director
of OAC, HarbourView and a Director of Oppenheimer Partnership Holdings,
Inc., a holding company subsidiary of the Manager; formerly an Executive
Vice President of the Manager.
Andrew J. Donohue, Vice President and Secretary; Age: 45
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"); President and a
director of Centennial; an officer of other Oppenheimer funds; formerly
Senior Vice President and Associate General Counsel of the Manager and the
Distributor; formerly a Partner in, Kraft & McManimon (a law firm) prior
to which he was an officer of First Investors Corporation (a broker-
dealer) and First Investors Management Company, Inc. (broker-dealer and
investment adviser); and a director and an officer of First Investors
Family of Funds and First Investors Life Insurance Company.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age:
59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
James W. MacAllen, Portfolio Manager; Age: 52
Senior Vice President of Concert Capital and David L. Babson and Company
("Babson"); formerly associated with Hagler, Mastrovita & Hewitt;
President and Chief Investment Officer of Wilmington Capital Management;
and Senior Vice President and head of the Securities Investment Division
of MassMutual.
David B. Salerno, Vice President and Portfolio Manager; Age: 53
100 Northfield Drive, Windsor, Connecticut 06095
Managing Director of the Sub-Adviser; Senior Vice President of MML Series
Investment Fund.
Robert G. Zack, Assistant Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other Oppenheimer funds; formerly a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to
which he was an International Mutual Fund Supervisor for Brown Brothers
Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager. They and the Trustees of the Fund who are affiliated
with the Manager (Mr. Swain, who is both officer and Trustee) receive no
salary or fee from the Fund. The Trustees of the Fund (excluding Mr.
Swain) received the total amounts shown below from the Fund, during its
fiscal year ended December 31, 1995, and from all 21 of the Denver-based
Oppenheimer funds (including the Fund) listed in the first paragraph of
this section, for services in the positions shown (and from Oppenheimer
Strategic Investment Grade Bond Fund and Oppenheimer Strategic Short-Term
Income Fund, which ceased operation following the acquisition of their
assets by certain other Oppenheimer funds):
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $598 $53,000.00
Trustee
William A. Baker $826 $73,255.00
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr. $725 $64,309.00
Audit and Review
Committee Member
and Trustee
Raymond J. Kalinowski $733 $65,000.00
Trustee
C. Howard Kast $733 $65,000.00
Trustee
Robert M. Kirchner $770 $68,292.00
Audit and Review
Committee Member
and Trustee
Ned M. Steel $599 $53,000.00
Trustee
________________
1 For the 1995 calendar year.
Major Shareholders. As of March 6, 1996, the only entities that owned of
record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares was (i) MML Securities Corp., 1350
Main Street, Springfield, MA 01103-1627, which owned 2,268,825.570 Class
A shares (approximately 29.62% of the Fund's Class A shares then
outstanding); (ii) MassMutual Life Insurance Company, c/o Investment
Services Dept., 1295 State Street, Springfield, MA 01111-0001, which owned
559,086.875 Class A shares (approximately 7.30% of the Fund's Class A
shares then outstanding); (iii) PaineWebber for the Benefit of Kentucky
Land Title Agency, Inc. Profit Sharing Plan, 2362 Grandview Drive, Fort
Mitchell, KY 41017-1633 who owned 4,884.949 Class C shares (approximately
18.17% of the Fund's Class C shares then outstanding); (iv) RPSS TR IRA,
86 Tunapuna Lane, Coronado, CA 92118-3501, who owned 1,356.464 Class C
shares (approximately 5.04% of the Fund's Class C shares then
outstanding); (v) RPSS TR IRA, FBO Alice M. Rayl, 112 Wiest Creek Drive,
Niagara Falls, NY 14304, who owned 1,794.623 Class C shares (approximately
6.67% of the Fund's Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and one of whom (Mr. James C. Swain) serves
as Trustees of the Fund.
The Manager and the Fund have a Code of Ethic, as does the Sub-Adviser.
The Codes are designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with
or take advantage of the Fund's portfolio transactions. Compliance with
the Codes of Ethics is carefully monitored and strictly enforced.
-- The Investment Advisory Agreement. The investment advisory
agreement, dated as of March 28, 1991, between the Trust on behalf of the
Fund and the Manager requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment and to provide
and supervise the activities of all administrative and clerical personnel
required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment advisor or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn. The advisory agreement is subject to annual approval by the
Board of Trustees, who may terminate the advisory agreement on sixty days'
notice approved by a majority of the Trustees.
Prior to April 23, 1993, MassMutual served as the Fund's investment
sub-adviser under a prior sub-advisory agreement (the "Prior Sub-Advisory
Agreement"). The Manager paid MassMutual a sub-advisory fee under the
Prior Sub-Advisory Agreement at the following annual rates: 0.40% of the
Fund's first $100 million of average annual net assets, 0.30% of the next
$200 million, 0.25% of the next $200 million and 0.20% of average annual
net assets in excess of $500 million.
On April 23, 1993, the Fund's shareholders approved a new sub-advisory
agreement (the "sub-advisory agreement") with the Sub-Adviser. The sub-
advisory fees paid under the sub-advisory agreement are stated in the
Prospectus. In connection with approval of the sub-advisory agreement by
the Trust's Board of Trustees and shareholders, MassMutual also
represented that there will be no substantive change in the sub-advisory
relationship other than the restructuring of investment advisory duties
between MassMutual and the Sub-Adviser pursuant to MassMutual's internal
reorganization of its investment advisory services for equity assets.
MassMutual also agreed to guarantee the performance of the Sub-Adviser
under the sub-advisory agreement. That guarantee provides that it will
terminate as to the Sub-Adviser's performance and the discharge of its
responsibilities after such termination if for three consecutive 12 month
fiscal year ends the Sub-Adviser has total stockholders equity of at least
$200,000 according to its annual audited financial statements delivered
to the Fund. The Sub-Adviser met the foregoing requirement as of the end
of its December 31, 1995 fiscal year end.
Under the sub-advisory agreement, the Sub-Adviser is responsible for
managing the Fund's portfolio of securities and making investment
decisions with respect to the Fund's investments subject to the Fund's
investment policies established by the Board of Trustees of the Trust, and
in accordance with the Fund's investment objective, policies and
restrictions, set forth in the Prospectus and this Additional Statement.
The sub-advisory agreement has the same provisions as to renewal,
termination and the standard of care as the investment advisory agreement,
and both advisory agreements are subject to annual approval by the
Trustees, who may terminate either advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The advisory agreements contain no expense limitation. However,
independently of the advisory and sub-advisory agreements, the Manager has
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee, but excluding taxes, interest, brokerage
fees, distribution plan payments, and extraordinary expenses, such as
litigation costs) shall not exceed (and the Manager undertakes to reduce
the Fund's management fee in the amount by which such expenses shall
exceed) the most stringent applicable state "blue sky" expense limitation
requirement for qualification of sale of the Fund's shares. At present,
that limitation is imposed by California and limits expenses (with
specified exclusions) to 2.5% of the first $30 million of the Fund's
average annual net assets, 2.0% of the next $70 million of average net
assets and 1.5% of average net assets in excess of $100 million. The
Manager reserves the right to change or eliminate this expense limitation
at any time.
The payment of the management fee at the end of any month will be
reduced so that at no time will there be any accrued but unpaid liability
under the above expense limitation.
For the fiscal years ended December 31, 1993, 1994 and 1995 the
advisory fees paid to the Manager were $614,932, $738,121 and $993,692,
respectively, of which $264,792, $295,983 and $364,728, respectively, was
paid by the Manager to the Sub-Adviser.
-- The Distributor. Under the General Distributor's Agreement between
the Trust and the Distributor, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's
Class A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales (other
than those paid under the Class A Service Plan and the Class B and Class
C Distribution and Service Plans), including advertising and the cost of
printing and mailing prospectuses (other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal
years ended December 31, 1993, 1994 and 1995, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $296,555, $204,620
and $318,952, respectively, of which the Distributor and Massachusetts
Mutual Life Investors Services, Inc. ("MMLISI") retained in the aggregate
$232,226, $135,102 and $193,431 in those respective years. For the year
ending December 31, 1995, the Distributor advanced $299,002 to broker-
dealers on the sales of the Funds' Class B shares, $68,751 of which went
to MMLISI. In addition, the Distributor collected $62,751 from contingent
deferred sales charges assessed on Class B shares. During the Fund's
fiscal period October 2, 1995 through December 31, 1995, the Distributor
advanced $690 to broker-dealers on the sales of the Funds' Class C shares,
$60 of which went to MMLISI. For additional information about
distributing of the Fund's shares, payment made by the Fund to the
Distributor, and expenses connected with such activities, refer to
"Distribution and Service Plans," below.
-- The Transfer Agent. OppenheimerFunds Services, the Fund's transfer
agent, is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Sub-Advisory Agreement. One of the duties of
the Sub-Adviser under the sub-advisory agreement is to arrange the
portfolio transactions of the Fund. In doing so, the Sub-Adviser is
authorized by the sub-advisory agreement to employ broker-dealers
("brokers"), including "affiliated" brokers, as that term is defined in
the Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution
at the most favorable price obtainable) of such transactions. The Manager
need not seek competitive commission bidding or base its selection on
"posted" rates, but is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent
consistent with the provisions of the advisory agreement and the interests
and policies of the Fund as established by the Trust's Board of Trustees.
Purchases of securities from underwriters include a commission or
concession by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price.
Under the sub-advisory agreement, the Sub-Adviser is authorized to
select brokers which provide brokerage and/or research services for the
Fund and/or the other accounts over which it or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Sub-Adviser that the commission is fair and
reasonable in relation to the services provided.
Description of Brokerage Practices Followed by the Manager and Sub-
Adviser. Subject to the provisions of the sub-advisory agreement, the
procedures and rules described above, allocations of brokerage are
generally made by the Sub-Adviser's portfolio traders based upon
recommendations by the Sub-Adviser's portfolio manager. In certain
instances portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the sub-advisory agreement
and the procedures and rules described above. In either case, brokerage
is allocated under the supervision of the Manager's executive officers and
the Sub-Adviser. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market and otherwise only if it appears
likely that a better price or execution can be obtained. When the Fund
engages in an option transaction, ordinarily the same broker will be used
for the purchase or sale of the option and any transactions in the
securities to which the option relates. Option commissions may be
relatively higher than those which would apply to direct purchases and
sales of portfolio securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless the Sub-Adviser determines
that a better price or execution can be obtained by using a broker.
Purchases of these securities from underwriters include a commission or
concession paid by the issuer to the underwriter. Purchases from dealers
include a spread between the bid and asked prices. The Fund seeks to
obtain prompt execution of these orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Sub-Adviser and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Sub-Adviser in a
non-research capacity (such as bookkeeping or other administrative
functions), then only the percentage or component that provides assistance
to the Sub-Adviser in the investment decision-making process may be paid
for in commission dollars. The Board of Trustees has permitted the
Manager and Sub-Adviser to use concessions on fixed price offerings to
obtain research in the same manner as is permitted in agency transactions.
The Board has also permitted the Manager and Sub-Adviser to use stated
commissions on secondary fixed-income agency trades to obtain research
where the broker has represented to Manager and Sub-Adviser that: (i) the
trade is not from or for the broker's own inventory, (ii) the trade was
executed by the broker on an agency basis as the stated commission, and
(iii) the trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Adviser by making available
additional views for consideration and comparisons, and enabling the Sub-
Adviser to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board,
including the independent Trustees of the Trust (those Trustees of the
Trust who are not "interested persons," as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the Distribution Plans described below) or in any agreements
relating to those Plans, annually reviews information furnished by the
Sub-Adviser as to the commissions paid to brokers furnishing such services
so that the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
Pursuant to the sub-advisory agreement, the Sub-Adviser is authorized,
in arranging the purchase and sale of the Fund's portfolio securities, to
employ or deal with such members of the securities exchanges, brokers or
dealers as may in the its best judgement implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (that is, prompt
and reliable execution at the most favorable security price obtainable)
of the Fund's portfolio transactions. The Sub-Adviser shall select
broker-dealers to effect the Fund's portfolio transactions on the basis
of its estimate of their ability to obtain best execution of particular
and related portfolio transactions. The abilities of a broker-dealer to
obtain best execution of particular portfolio transaction(s) will be
judged by the Sub-Adviser on the basis of all relevant factors and
considerations.
Securities held by the Fund may also be held by Sub-Adviser in its
investment accounts and by other investment companies for which it acts
as investment adviser. If the same security is purchased or sold for the
Fund and such investment accounts or companies at or about the same time,
such purchases or sales normally will be combined, to the extent
practicable, and will be allocated as nearly as practicable on a pro rata
basis in proportion to the amounts to be purchased and sold. The main
factors to be considered will be the investment objectives of the
respective portfolios, the relative size of portfolio holdings of the same
or comparable security, availability of cash for investment by the various
portfolios and the size of their respective investment commitments. It
is believed that the ability of the Fund to participate in larger volume
transactions will, in most cases, produce better execution for the Fund.
In some cases, however, this procedure could have a detrimental effect on
the price and amount of a security available to the Fund or the price at
which a security may be sold. It is the opinion of the Trust's management
that such execution advantage and the desirability of retaining the Sub-
Adviser in that capacity outweigh the disadvantages, if any, which might
result from this procedure.
Paul Hallingby, Jr. is a director of MassMutual and a General Partner
of Bear Stearns & Co., Inc. ("Bear Stearns"). For its fiscal years ended
December 31, 1993, 1994 and 1995, the Fund paid brokerage fees to Bear
Stearns of $4,239, $3,546 and $4,254, respectively. For the fiscal year
ended December 31, 1995, the Fund placed 5.85% of its transactions
involving payment of commissions with Bear Stearns, for which it was paid
6.86% of the Fund's aggregate brokerage fees for that period.
During the fiscal years ended December 31, 1993, 1994 and 1995, total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $51,707,
$18,630 and $62,009, respectively. During the fiscal year ended December
31, 1995, no brokerage commissions were paid to dealers for research
services (including special research, statistical information and
execution).
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return", "total return," "cumulative total
return," "total return at net asset value" and "cumulative total return
at net asset value" of an investment in a class of the Fund may be
advertised. An explanation of how total returns are calculated for each
class and the components of those calculations is set forth below.
The Fund's advertisement of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5 and
10-year periods (or the life of the class, if less) ending as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its total returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's
shares may be worth more or less than their original cost. Total returns
for any given past period are not a prediction or representation by the
Fund of future rates of return on its shares. The total returns of Class
A, Class B and Class C shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its operating expenses
allocated to a particular class.
-- Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over
an entire period of years. Its calculation uses some of the same factors
as average annual total return, but it does not average the rate of return
on an annual basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
applicable contingent deferred sales charge (of 5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% for
the fifth year, 1.0% in the sixth year and none thereafter), is applied,
as described in the Prospectus. For Class C shares, the payment of 1.0%
contingent deferred sales charge is applied to the investment result for
the one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are reinvested
to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period. The "average annual
total returns" on an investment in Class A shares of the Fund for the one
and five-year periods ended December 31, 1995 and for the period from
December 22, 1986 (the date the Fund became an open-end Fund) to December
31, 1995, were 22.57%, 13.62% and 11.21%, respectively. The cumulative
"total return" on Class A shares for the latter period was 160.97%. For
the fiscal period from May 1, 1993, through December 31, 1995, the average
annual total returns and the cumulative total returns on an investment in
Class B shares of the Fund were 24.03% and 35.39%, respectively. For the
period from October 2, 1995 through December 31, 1995, the cumulative
total return on an investment in Class C shares of the Fund was 4.89%.
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The cumulative "total return
at net asset value" on the Fund's Class A shares for the fiscal year ended
December 31, 1995, and for the period from December 22, 1986 to December
31, 1995 were 30.04% and 176.88%, respectively. The cumulative total
return at net asset value on the Fund's Class B shares for the fiscal year
ended December 31, 1995, and for the fiscal period from May 1, 1993
through December 31, 1995 were 29.03% and 38.39%. The cumulative total
return at net asset value on the Fund's Class C shares for the period from
October 2, 1995 through December 31, 1995 was 5.89%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However,
when comparing total return of an investment in Class A, Class B or Class
C shares of the Fund, with the return on other investment alternatives,
investors should understand that the Fund is an equity fund seeking long-
term growth of capital and income and its return may fluctuate more than
that on certificates of deposit, savings accounts, U.S. Treasury bills and
other fixed-income investments that may be insured or guaranteed.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other equity funds. The
Lipper performance rankings are based on total return that includes the
reinvestment of capital gains distributions and income dividends but does
not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks various mutual
funds, including the Fund, based on risk-adjusted investment return.
Investment return measures a fund's three, five and ten-year average
annual total returns (when available). Risk and return are combined to
produce star rankings reflecting performance relative to the average fund
in a fund's category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average" (next
35%), two stars is "below average" (next 22.5%) and one star is "lowest"
(bottom 10%). Morningstar ranks the Fund in relation to other equity
funds. The current ranking is a weighted average of the 3, 5 and 10-year
rankings (if available). Rankings are subject to change.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
The performance of the Fund's Class A, Class B or Class C shares may
also be compared in publications to averages, performance rankings or
other benchmarks prepared by recognized mutual fund statistical services.
The total return on an investment in the Fund's Class A, Class B or Class
C shares may be compared with performance for the same period of one or
more of the following indices: the Standard & Poor's 500 Index ("S & P
500") or the Dow-Jones Industrial Average ("Dow"), which are widely-
recognized indices of U.S. stock market performance. Such indices consist
of unmanaged groups of common stocks. Each index includes a factor for
the reinvestment of dividends but does not reflect expenses or taxes. The
performance of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market indices
or to other investments for which reliable performance data is available,
and (ii) to averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.
Distribution and Service Plans
The Fund has adopted a Service Plan for its Class A shares and
Distribution and Service Plans for its Class B and Class C shares under
Rule 12b-1 of the investment Company Act pursuant to which the Fund will
make payments to the Distributor in connection with the servicing and/or
distribution of the shares of each class, as described in the Prospectus.
Each Plan has been approved by the vote of (i) the Board of Trustees of
the Fund, including a majority of the Independent Trustees, as required
by the Rule, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution
and Service Plan for Class C shares, that required shareholder vote was
cast by the Manager as the sole shareholder of Class C shares at that
time.
The Class A and Class B Plans are "reimbursement-type" Plans, which
means that they provide for the reimbursement of the distributor's actual
expenses incurred in connection with the service/and or distribution of
the Fund's shares of those classes. The Class C Plan is a "compensation-
type" plan, which means that it provides for the compensation of the
distributor for the service and distribution of the Fund's shares of that
class.
Each plan provides for the payment of a Service Fee which the
Distributor may pay to brokers, dealers and other persons or entities
("Recipients") for providing personal services and account maintenance
services to accounts and shareholders that hold shares of the Fund. The
Service Fee is described more fully below under Class A Plan. The Class
B and Class C Plans also provide for the payment of an asset-based sales
charge of up to 0.75% of the average annual net assets of Class B and
Class C shares, respectively. Asset-based sales charge payments are
designed to permit an investor to purchase Class B or Class C shares of
the Fund without the payment of a front-end sales load and at the same
time permit the Distributor to compensate Recipients in connection with
the sale of those shares. The asset-based sales charges are described
more fully below under Class B Plan and Class C Plan.
Under each Plan, the Manager and the Distributor, in their sole
discretion, may from time to time use their own resources, at no cost to
the Fund, to make payments to Recipients for distribution and
administrative services they perform. In the case of the Manager, those
payments may be made from profits from the advisory fee it receives from
the Fund. The Distributor and the Manager may in their sole discretion
increase or decrease the amount of these payments. Under each Plan, the
Fund's Board of Trustees may change the amount paid to a Recipient, but
may not permit payment of an amount in excess of the maximum payment set
forth above. The Board may establish minimum assets levels to be held by
a Recipient, and may also establish a minimum holding period for
Recipients in each case to entitle a Recipient to receive any payments
under a Plan. The Board of Trustees has established the payment level at
the maximum provided for in each Plan and has not set any minimum holding
periods or minimum asset levels.
All payments under the Class B and Class C Plans are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and Service Fees.
While the plans are in effect, the Treasurer of the Fund must
provide separate written reports to the Fund's Board of Trustees at least
quarterly describing the amount of payments made pursuant to each Plan and
the purposes for which the payments were made. The Class B report also
must include the Distributor's distribution costs for the quarter, and
such costs for previous quarters that have been carried forward. The
Class A and Class B reports also must include the identity of each
Recipient that received any payment. These reports are subject to the
review and approval of the Independent Trustees.
A Plan may be terminated at any time by the vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined by the Investment Company Act) of the outstanding voting
securities of that Class. No amendment to a Plan which increases
materially the amount to be paid under the Plan may be made unless the
amendment is approved by the shareholders of the class affected by the
amendment. All material amendments must be approved by the Board of
Trustees. Unless terminated earlier, each Plan continues in effect from
year to year but only so long as its continuance is specifically approved
at least annually by the Fund's Board of Trustees and its Independent
Trustees by a vote cast in person at a meeting called for the purpose of
voting on such continuance. For the fiscal year ended December 31, 1995,
payments under the Plan for Class A shares totaled $277,512, all of which
was paid by the Distributor to Recipients including $117,070 that was paid
to an affiliate of the Distributor. Payments made under the Class B Plan
during the fiscal year ended December 31, 1995 totalled $188,186, of which
$162,645 was retained by the Distributor and $6,039 paid to an affiliate
of with the Distributor. For the fiscal period of October 2, 1995 through
December 31, 1995, payments under the Class C Plan totaled $138, all of
which was retained by the Distributor, except $1 paid to an affiliate of
the Distributor.
Class A Plan
The Class A Plan provides for the payment of a Service Fee, not to
exceed 0.25% of the average annual net assets of the class, for personal
services and the maintenance of accounts holding Class A shares.
Class B Plan
The Class B Plan provides for the payment of a Service Fee of up to
0.25% of the annual net assets of that class. This Service Fee is
virtually identical to the Service Fee described in Class A Plan above.
The Class B Plan allows the Service Fee payments made by the Distributor
to be paid to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis based on the average
daily net asset value of shares held in accounts at Recipients or by their
customers, as described in the Prospectus. Although the Class B Plan does
not require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients in this
manner. An exchange of shares does not entitle a Recipient to an advance
Service Fee payment. If shares are redeemed during the first year they
are outstanding, the Recipient is obligated to repay to the Distributor
a pro rata portion of the advance payment for those shares.
The Class B Plan also provides for the payment of an asset-based sales
charge of up to 0.75% of the annual net assets of the Class B shares. The
asset-based sales charge paid to the Distributor under the Class B Plan
is intended to allow the Distributor to recoup the cost of sales
commission paid to authorized Recipients at the time of sale, plus
financing costs.
The Class B Plan provides that the Distributor may use the asset-based
sales charge to recover its distribution expenses in connection with the
distribution of Class B shares which include sales commissions and Service
Fees paid to Recipients, financing costs with respect to distribution
payments, compensation and expenses of personnel employed by the
Distributor to support distribution of Class B shares, and the costs of
sales literature, advertising and prospectuses (other than those furnished
to current shareholders) and state "blue sky" expenses.
The Distributor's actual Class B distribution expenses for any given
year may exceed the aggregate of payments received under the Class B Plan
and from recoveries of contingent deferred sales charges. The Distributor
anticipates that it will take a number of years for it to recoup its Class
B distribution expenses. The Class B Plan allows such expenses to be
carried forward and paid in future years. The Class B shares will be
charged only for interest expenses, carrying charges or other financing
costs that are directly related to the carry forward of actual
distribution expenses.
Class C Plan
The Class C Plan provides for the payment of a Service Fee of up to
0.25% of the annual net assets of each class. This Service Fee is
virtually identical to the Service Fee described in Class A Plan above.
The Class C Plan allows the Service Fee payments made by the Distributor
to be paid to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis based on the average
daily net asset value of shares held in accounts at Recipients or by their
customers, as described in the Prospectus. Although the Class C Plan does
not require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients in this
manner. An exchange of shares does not entitle a Recipient to an advance
Service Fee payment. If shares are redeemed during the first year they
are outstanding, the Recipient is obligated to repay to the Distributor
a pro rata portion of the advance payment for those shares.
The Class C Plan also provides for the payment of an asset-based sales
charge of 0.75% of the annual net assets of the Class B shares. The Class
C Plan provides for the Distributor to be compensated at a flat rate,
whether the Distributor's distribution expenses are more or less that the
amount paid by the Fund.
The Distributor's services to the Class C shareholders of the Fund
include paying sales commissions and Service Fee payments to Recipients,
providing personnel to support distribution of shares, and bearing other
costs of distribution including the costs of sales literature, advertising
and prospectuses (other than those furnished to current shareholders) and
state "blue sky" expenses.
The Class C asset-based sales charge paid during the first year is
retained by the Distributor and thereafter paid to the Recipient as an
ongoing commission on Class C shares that have been outstanding for a year
or more.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than another. The Distributor normally will not
accept (i) any order for $500,000 or more of Class B shares or (ii) any
order for $1 million of Class C shares, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally
it will be more advantageous for that investor to purchase Class A shares
of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by additional expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Class B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution and
Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the
"Exchange") on each day that the Exchange is open, by dividing the Fund's
net assets attributable to a class by the number of shares of that class
that are outstanding. The Exchange normally closes at 4:00 P.M., New York
time, but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states that
it will close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It
may also close on other days. Trading in debt securities and foreign
securities may occur at times when the Exchange is closed, including
weekends and holidays, or after the close of the Exchange on a regular
business day. The Fund may invest a substantial portion of its assets in
foreign securities primarily listed on foreign exchanges or in foreign
over-the-counter markets that may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed. Because the Fund's net
asset value will not be calculated on those days, the Fund's net asset
value per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Trust's securities generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sale prices of
the preceding trading day or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Trust's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued as
in (i) above, if available, or at the mean between "bid" and "asked"
prices obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a remaining
maturity in excess of 60 days are valued at the mean between the "bid" and
"asked" prices determined by a portfolio pricing service approved by the
Trust's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having
a maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have
a remaining maturity of 60 days or less are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the
Trust's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (vi) money market-type debt
securities having a maturity of less than one year when issued that having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
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 stock markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees, the Manager,
and/or the Sub-Adviser, under procedures established by the Board of
Trustees, determines that the particular event would materially affect the
Fund's net asset value, in which case an adjustment would be made, if
necessary. Foreign currency will be valued as close to the time fixed for
the valuation date as is reasonably practicable. The values of securities
denominated in foreign currency will be converted to U.S. dollars at the
prevailing rates of exchange in the London foreign exchange market at the
time of valuation, as provided by a reliable bank, dealer or pricing
service.
In the case of U.S. Government Securities, mortgage-backed securities,
foreign government securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Trust's Board of Trustees has authorized the Manager and/or the Sub-
Adviser to employ a pricing service to price U.S. Government Securities,
mortgage-backed securities, foreign government securities and corporate
bonds. The Trustees will monitor the accuracy of such pricing services
by comparing prices used for portfolio evaluation to actual sales prices
of selected securities.
Calls, puts and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ,
as applicable, as determined by a pricing service approved by the Board
of Trustees or by the Manager, or if there are no sales that day, in
accordance with (i) above. Forward currency contracts are valued at the
closing price on the London foreign exchange market as provided by a
reliable bank, dealer or pricing service. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction. If
the Fund exercises a put it holds, the amount the Fund receives on its
sale of the underlying investment is reduced by the amount of premium paid
by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain circumstances described in
the Prospectus because the Distributor or dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
-- The 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 Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax- Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except Money Market Funds. Under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge.
-- Letters of Intent. A Letter of Intent (referred to as a "Letter")
is an investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares of the Fund (and
other Oppenheimer funds) during a 13-month period (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up
to 90 days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other Oppenheimer funds) that applies under the Right of Accumulation
to current purchases of Class A shares. Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the Letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual purchases. If total eligible purchases during the
Letter of Intent period exceed the intended purchase amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value 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 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
OppenheimerFunds that were acquired subject to a contingent deferred sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "Shareholder Account Rules and Policies," 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.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Trust's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of these shares is less than $1,000 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of the shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or the Board may set requirements for the
shareholder to increase the investment, and set other terms and conditions
so that the shares would not be involuntarily redeemed.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Trust may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Value Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares
that you purchased subject to an initial sales charge, or the Class A
contingent deferred sales charge when you redeemed them or (ii) Class B
shares that were subject to the Class B contingent deferred sales charge
when you redeemed them, without sales charge. The privilege does not
apply to Class C shares. The reinvestment may be made without sales charge
only in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described below, at the
net asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for such
privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a capital
loss on the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which
a sales charge was paid are reinvested in shares of the Fund or another
of the Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the
loss or increase the gain recognized from the redemption. However, in that
case the sales charge would be added to the basis of the shares acquired
by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to
shares redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class A, Class B or Class
C contingent deferred sales charge will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans
or pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How to Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must: (i) state the
reason for the distribution; (ii) state the owner's awareness of tax
penalties if the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption requirements.
Participants (other than self-employed persons maintaining a plan account
in their own name) in OppenheimerFunds-sponsored prototype pension,
profit-sharing or 401(k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed
by a broker-dealer under this procedure, payment will be made within three
business days after the shares have been redeemed upon the Distributor's
receipt the required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the redemption
document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. 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 that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
or 12 months, respectively, because of the imposition of the Class B or
Class C 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 Sales Charges" and
"Waivers of 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 and in the provisions of the OppenheimerFunds Application relating
to such Plans, as well as the Prospectus. These provisions may be amended
from time to time by the Fund and/or the Distributor. When adopted, such
amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who
executed the Plan authorization and application submitted to the Transfer
Agent. The Transfer Agent and the Fund shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the receipt of payment on the date selected cannot
be guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent
to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
Oppenheimer funds that have a single class without a class designation are
deemed "Class A" shares for this purpose. All of the Oppenheimer funds
offer Class A shares, but certain other Oppenheimer funds do not presently
offer either or both of Class B or Class C shares. A list showing which
funds offer which class can be obtained by calling the Distributor at 1-
800-525-7048.
Class A shares of OppenheimerFunds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund
purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds subject to a contingent deferred sales charge). Shares of this Fund
acquired by reinvestment of dividends or distributions from any other of
the Oppenheimer funds or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
However, shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months
prior to that purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege. No contingent deferred
sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares acquired by exchange
if they are redeemed within 6 years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge
is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
When Class A, Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class A, Class B or Class C
contingent deferred sales charge will be followed in determining the order
in which the shares are exchanged. Shareholders should take into account
the effect of any exchange on the applicability and rate of any contingent
deferred sales charge that might be imposed in the subsequent redemption
of remaining shares. Shareholders owning shares of more than one class
must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or 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 have an
existing account in, or obtain, open an account in, and acknowledge
receipt of a prospectus for, the fund to which the exchange is to be made.
For full or partial exchanges of an account made by telephone, any special
account features such as Asset Builder Plans, Automatic Withdrawal Plans
and retirement plan contributions will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone lines
are busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains And Taxes
Dividends and Distributions. Dividends, distributions and the proceeds
of the redemption of Fund shares represented by checks returned to the
Transfer Agent by the Postal Service as undeliverable will be invested in
shares of Oppenheimer Money Market Fund, Inc., as promptly as possible
after the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the nature of the investments held by the
Fund in its portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C," above. Dividends are calculated in the same manner, at the same time
and on the same day for shares of each class. However, dividends on Class
B and Class C shares are expected to be lower as a result of the asset-
based sales charge on Class B and Class C shares, and Class B and Class
C dividends will also differ in amount as a consequence of any difference
in net asset value between Class A, Class B and Class C shares.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1
through December 31 of that year and 98% of its capital gains realized in
the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Trust's Board and Manager might determine in a
particular year that it would be in the best interest of shareholders for
the Fund not to make such distributions at the required levels and to pay
the excise tax on the undistributed amounts. That would reduce the amount
of income or capital gains available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other Oppenheimer funds 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
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from shares of other Oppenheimer funds may be invested in
shares of the Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager has represented to the
Fund that the banking relationships between the Manager and the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice
of the Fund to deal with the Custodian in a manner uninfluenced by any
banking relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Those uninsured
balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Value Stock Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Value Stock Fund
as of December 31, 1995, the related statement of operations for the year
then ended, the statements of changes in net assets for the years ended
December 31, 1995 and 1994, and the financial highlights for the period
January 1, 1991 to December 31, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period December 22, 1986 to December 31, 1990 were audited by other
auditors whose report dated February 4, 1991, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995 by correspondence
with the custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the financial
position of Oppenheimer Value Stock Fund at December 31, 1995, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
- ---------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1996
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1995
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================
============================================================
<S> <C> <C>
SHORT-TERM NOTES--5.3%
Barnett Banks, Inc., 6.10%, 1/5/96 $2,000,000 $1,998,644
- ----------------------------------------------------------------------------------------------------------------------
Cooperative Association of Tractor Dealers, Inc., 5.64%, 1/16/96 1,000,000 997,617
- ----------------------------------------------------------------------------------------------------------------------
FINOVA Capital Corp., 6.10%, 1/25/96 1,625,000 1,618,392
- ----------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 6%, 1/3/96 2,000,000 1,999,333
- ----------------------------------------------------------------------------------------------------------------------
Sheffield Receivables Corp., 5.95%, 1/12/96 2,000,000 1,996,364
------------
Total Short-Term Notes (Cost $8,610,350) 8,610,350
SHARES
==========================================================
============================================================
COMMON STOCKS--90.0%
==========================================================
============================================================
BASIC MATERIALS--7.5%
==========================================================
============================================================
CHEMICALS--4.0%
Du Pont (E.I.) De Nemours & Co. 21,500 1,502,312
- ----------------------------------------------------------------------------------------------------------------------
Eastman Chemical Co. 30,000 1,878,750
- ----------------------------------------------------------------------------------------------------------------------
Lubrizol Corp. (The) 31,000 864,125
- ----------------------------------------------------------------------------------------------------------------------
Nalco Chemical Co. 43,500 1,310,437
- ----------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 13,800 888,375
------------
6,443,999
==========================================================
============================================================
METALS--0.3%
Reynolds Metals Co. 7,500 424,687
==========================================================
============================================================
PAPER--3.2%
Temple-Inland, Inc. 35,500 1,566,437
- ----------------------------------------------------------------------------------------------------------------------
Westvaco Corp. 42,300 1,173,825
- ----------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 58,800 2,543,100
------------
5,283,362
==========================================================
============================================================
CONSUMER CYCLICALS--12.8%
==========================================================
============================================================
AUTOS & HOUSING--5.4%
Ford Motor Co. 62,000 1,798,000
- ----------------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 55,000 2,255,000
- ----------------------------------------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. 60,000 2,722,500
- ----------------------------------------------------------------------------------------------------------------------
Stanley Works (The) 40,000 2,060,000
------------
8,835,500
==========================================================
============================================================
LEISURE & ENTERTAINMENT--1.1%
Eastman Kodak Co. 28,000 1,876,000
==========================================================
============================================================
MEDIA--3.1%
Dun & Bradstreet Corp. 39,500 2,557,625
- ----------------------------------------------------------------------------------------------------------------------
McGraw-Hill, Inc. 28,500 2,483,062
------------
5,040,687
==========================================================
============================================================
RETAIL: GENERAL--3.2%
May Department Stores Co. 46,500 1,964,625
- ----------------------------------------------------------------------------------------------------------------------
Penney (J.C.) Co., Inc. 11,500 547,687
- ----------------------------------------------------------------------------------------------------------------------
Sears, Roebuck & Co. 31,000 1,209,000
- ----------------------------------------------------------------------------------------------------------------------
VF Corp. 27,500 1,450,625
-----------
5,171,937
</TABLE>
5 Oppenheimer Value Stock Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
==========================================================
============================================================
<S> <C> <C>
CONSUMER NON-CYCLICALS--19.2%
==========================================================
============================================================
BEVERAGES--1.9%
Brown-Forman Corp., Cl. B 40,500 $1,478,250
- ----------------------------------------------------------------------------------------------------------------------
PepsiCo, Inc. 28,000 1,564,500
------------
3,042,750
==========================================================
============================================================
FOOD--4.3%
Albertson's, Inc. 60,100 1,975,787
- ----------------------------------------------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 45,039 810,702
- ----------------------------------------------------------------------------------------------------------------------
CPC International, Inc. 37,000 2,539,125
- ----------------------------------------------------------------------------------------------------------------------
Pioneer Hi-Bred International, Inc. 29,500 1,640,937
------------
6,966,551
==========================================================
============================================================
HEALTHCARE/DRUGS--8.0%
Bristol-Myers Squibb Co. 66,000 5,667,750
- ----------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 75,000 4,725,000
- ----------------------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 45,500 2,491,125
------------
12,883,875
==========================================================
============================================================
HEALTHCARE/SUPPLIES &
SERVICES--1.4%
Becton, Dickinson & Co. 31,000 2,325,000
==========================================================
============================================================
HOUSEHOLD GOODS--2.1%
Clorox Co. (The) 20,500 1,468,312
- ----------------------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 24,500 2,027,375
-----------
3,495,687
==========================================================
============================================================
TOBACCO--1.5%
American Brands, Inc. 56,500 2,521,312
==========================================================
============================================================
ENERGY--8.3%
==========================================================
============================================================
ENERGY SERVICES
& PRODUCERS--1.3%
Kerr-McGee Corp. 32,000 2,032,000
==========================================================
============================================================
OIL-INTEGRATED--7.0%
Amoco Corp. 49,500 3,557,813
- ----------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co. 23,000 2,547,250
- ----------------------------------------------------------------------------------------------------------------------
Chevron Corp. 45,000 2,362,500
- ----------------------------------------------------------------------------------------------------------------------
Mobil Corp. 25,000 2,800,000
- ----------------------------------------------------------------------------------------------------------------------
Union Pacific Resources Group, Inc. 7,900 200,463
------------
11,468,026
</TABLE>
6 Oppenheimer Value Stock Fund
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
==========================================================
============================================================
<S> <C> <C>
FINANCIAL--12.0%
==========================================================
============================================================
BANKS--6.0%
Bank of New York Co., Inc. (The) 55,000 $2,681,250
- ----------------------------------------------------------------------------------------------------------------------
Comerica, Inc. 55,000 2,206,875
- ----------------------------------------------------------------------------------------------------------------------
CoreStates Financial Corp. 52,000 1,969,500
- ----------------------------------------------------------------------------------------------------------------------
Norwest Corp. 36,500 1,204,500
- ----------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 36,240 1,657,980
------------
9,720,105
==========================================================
============================================================
DIVERSIFIED FINANCIAL--1.2%
American Express Co. 50,000 2,068,750
==========================================================
============================================================
INSURANCE--4.8%
Allstate Corp. 23,748 976,637
- ----------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 26,325 1,224,113
- ----------------------------------------------------------------------------------------------------------------------
MBIA, Inc. 20,000 1,500,000
- ----------------------------------------------------------------------------------------------------------------------
Safeco Corp. 96,000 3,312,000
- ----------------------------------------------------------------------------------------------------------------------
Unitrin, Inc. 17,500 840,000
-----------
7,852,750
==========================================================
============================================================
INDUSTRIAL--15.3%
==========================================================
============================================================
ELECTRICAL EQUIPMENT--7.8%
AMP, Inc. 74,000 2,839,750
- ----------------------------------------------------------------------------------------------------------------------
General Electric Co. 58,500 4,212,000
- ----------------------------------------------------------------------------------------------------------------------
Grainger (W.W.), Inc. 29,600 1,961,000
- ----------------------------------------------------------------------------------------------------------------------
Honeywell, Inc. 35,000 1,701,875
- ----------------------------------------------------------------------------------------------------------------------
Hubbell, Inc., Cl. B 30,997 2,038,053
------------
12,752,678
==========================================================
============================================================
INDUSTRIAL SERVICES--1.2%
Donnelley (R.R.) & Sons Co. 48,000 1,890,000
==========================================================
============================================================
MANUFACTURING--4.8%
Dover Corp. 41,500 1,530,313
- ----------------------------------------------------------------------------------------------------------------------
General Signal Corp. 33,500 1,084,563
- ----------------------------------------------------------------------------------------------------------------------
Harsco Corp. 23,000 1,336,875
- ----------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 42,500 2,815,625
- ----------------------------------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 30,400 1,041,200
-----------
7,808,576
==========================================================
============================================================
TRANSPORTATION--1.5%
Norfolk Southern Corp. 31,000 2,460,625
==========================================================
============================================================
TECHNOLOGY--11.6%
==========================================================
============================================================
AEROSPACE/DEFENSE--2.2%
Boeing Co. 26,500 2,076,938
- ----------------------------------------------------------------------------------------------------------------------
TRW, Inc. 19,500 1,511,250
-----------
3,588,188
</TABLE>
7 Oppenheimer Value Stock Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
==========================================================
============================================================
<S> <C> <C>
COMPUTER HARDWARE--3.8%
International Business Machines Corp. 15,500 $1,422,125
- ----------------------------------------------------------------------------------------------------------------------
Pitney Bowes, Inc. 54,500 2,561,500
- ----------------------------------------------------------------------------------------------------------------------
Xerox Corp. 16,000 2,192,000
--------------
6,175,625
==========================================================
============================================================
ELECTRONICS--2.5%
Hewlett-Packard Co. 49,000 4,103,750
==========================================================
============================================================
TELECOMMUNICATIONS-
TECHNOLOGY--3.1%
AT&T Corp. 52,500 3,399,375
- ----------------------------------------------------------------------------------------------------------------------
Frontier Corp. 54,000 1,620,000
--------------
5,019,375
==========================================================
============================================================
UTILITIES--3.3%
==========================================================
============================================================
ELECTRIC UTILITIES--1.8%
Niagara Mohawk Power Corp. 56,500 543,813
- ----------------------------------------------------------------------------------------------------------------------
NIPSCO Industries, Inc. 25,500 975,375
- ----------------------------------------------------------------------------------------------------------------------
SCANA Corp. 48,500 1,388,313
--------------
2,907,501
==========================================================
============================================================
TELEPHONE UTILITIES--1.5%
Ameritech Corp. 23,000 1,357,000
- ----------------------------------------------------------------------------------------------------------------------
Southern New England Telecommunications Corp. 30,000 1,192,500
--------------
2,549,500
--------------
Total Common Stocks (Cost $102,460,243) 146,708,796
<CAPTION>
FACE
AMOUNT
==========================================================
============================================================
<S> <C> <C>
REPURCHASE AGREEMENT--5.5%
Repurchase agreement with PaineWebber, Inc., 5.90%, dated
12/29/95, to be repurchased at $9,005,900 on 1/2/96, collateralized
by U.S. Treasury Nts., 6.875%, 8/31/99, with a value of $3,216,000,
and U.S. Treasury Bonds, 7.125%--7.625%, 11/15/22--2/15/23, with a value
of $6,059,557 (Cost $9,000,000) $9,000,000 9,000,000
==========================================================
============================================================
TOTAL INVESTMENTS, AT VALUE (COST $120,070,593) 100.8% 164,319,146
==========================================================
============================================================
LIABILITIES IN EXCESS OF OTHER ASSETS (0.8) (1,272,823)
------------- --------------
Net Assets 100.0% $163,046,323
=============
==============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Value Stock Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<TABLE>
==========================================================
============================================================
<S> <C>
ASSETS
Investments, at value (cost $120,070,593)--see accompanying statement $164,319,146
- ----------------------------------------------------------------------------------------------------------------------
Cash 94,359
- ----------------------------------------------------------------------------------------------------------------------
Receivables:
Interest and dividends 300,927
Shares of beneficial interest sold 191,424
Investments sold 76,451
- ----------------------------------------------------------------------------------------------------------------------
Other 10,460
-------------
Total assets 164,992,767
==========================================================
============================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 1,353,597
Shares of beneficial interest redeemed 350,610
Distribution and service plan fees 95,270
Shareholder reports 85,479
Dividends 11,398
Transfer and shareholder servicing agent fees 8,980
Other 41,110
-----------
Total liabilities 1,946,444
==========================================================
============================================================
NET ASSETS $163,046,323
==============
==========================================================
============================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $118,803,665
- ----------------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (16,697)
- ----------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 10,802
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 44,248,553
--------------
Net assets $163,046,323
==============
==========================================================
============================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $136,269,532 and 7,639,176 shares of beneficial interest outstanding) $17.84
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $18.93
- ----------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $26,646,974 and 1,502,706 shares of beneficial interest outstanding) $17.73
- ----------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $129,817 and 7,290 shares of beneficial interest outstanding) $17.81
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Value Stock Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended December 31, 1995
<TABLE>
==========================================================
============================================================
<S> <C>
INVESTMENT INCOME
Dividends $3,496,974
- ----------------------------------------------------------------------------------------------------------------------
Interest 875,491
------------
Total income 4,372,465
==========================================================
============================================================
EXPENSES
Management fees--Note 4 993,692
- ----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 277,512
Class B 188,186
Class C 138
- ----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 194,174
- ----------------------------------------------------------------------------------------------------------------------
Shareholder reports 147,019
- ----------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 17,041
Class B 5,969
Class C 46
- ----------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 15,972
- ----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 15,883
- ----------------------------------------------------------------------------------------------------------------------
Insurance expenses 6,265
- ----------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 4,984
- ----------------------------------------------------------------------------------------------------------------------
Other 1,569
-----------
Total expenses 1,868,450
==========================================================
============================================================
NET INVESTMENT INCOME 2,504,015
==========================================================
============================================================
REALIZED AND
UNREALIZED GAIN
Net realized gain on investments 2,126,048
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 29,893,727
------------
Net realized and unrealized gain 32,019,775
==========================================================
============================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $34,523,790
=============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Value Stock Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
==========================================================
============================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 2,504,015 $ 2,055,994
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain 2,126,048 2,820,946
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 29,893,727 (1,764,415)
------------ -----------
Net increase in net assets resulting from operations 34,523,790 3,112,525
==========================================================
============================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,195,920) (1,921,684)
Class B (239,821) (130,461)
Class C (429) --
- ----------------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (74,310)
Class B -- (5,047)
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (1,793,905) (2,490,365)
Class B (351,137) (290,318)
Class C (1,561) --
==========================================================
============================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from
beneficial interest transactions--Note 2
Class A 17,673,851 3,834,762
Class B 11,681,792 5,957,338
Class C 129,003 --
==========================================================
============================================================
NET ASSETS
Total increase 59,425,663 7,992,440
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 103,620,660 95,628,220
----------- -------------
End of period (including overdistributed net investment
income of $16,697 and $79,874, respectively) $163,046,323 $103,620,660
============ ==============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Value Stock Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992
==========================================================
==================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.16 $14.41 $14.19 $13.57
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 .31 .29 .32
Net realized and unrealized gain (loss) 3.90 .16 .98 .97
----- ----- ----- -----
Total income (loss) from investment operations 4.22 .47 1.27 1.29
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.30) (.31) (.29) (.32)
Dividends in excess of net investment income -- (.01) -- --
Distributions from net realized gain (.24) (.40) (.76) (.35)
------ ------ ------ ------
Total dividends and distributions to shareholders (.54) (.72) (1.05) (.67)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $17.84 $14.16 $14.41 $14.19
====== ====== ====== ======
==========================================================
==================================
TOTAL RETURN, AT NET ASSET VALUE(5) 30.04% 3.28% 8.97% 9.61%
==========================================================
==================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $136,270 $92,728 $90,470 $59,376
- --------------------------------------------------------------------------------------------
Average net assets (in thousands) $115,137 $90,158 $80,229 $53,485
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.98% 2.16% 1.97% 2.34%
Expenses, before voluntary reimbursement 1.28% 1.27% 1.24% 1.19%
Expenses, net of voluntary reimbursement N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 11.8% 16.3% 24.3% 12.3%
Average brokerage commission rate(8) $0.08 -- -- --
</TABLE>
1. For the period from October 2, 1995 (inception of offering) to December
31, 1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. For the period from December 22, 1986 to December 31, 1986. Ratios
during this development period would not be indicative of representative
results.
4. On March 28, 1991, OppenheimerFunds Inc., became the investment advisor
to the Fund.
5. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
<PAGE>
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
1991(4) 1990 1989 1988 1987 1986(3)
==========================================================
========================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .37 .40 .33 .34 .01
Net realized and unrealized gain (loss) 2.49 (.57) 1.87 1.15 (.22) (.19)
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations 2.82 (.20) 2.27 1.48 .12 (.18)
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33) (.39) (.41) (.33) (.41) --
Dividends in excess of net investment income -- -- -- -- -- --
Distributions from net realized gain (.31) (.10) (.25) (.19) (.18) --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (.64) (.49) (.66) (.52) (.59) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.57 $11.39 $12.08 $10.47 $9.51 $9.98
====== ====== ====== ====== ======
======
==========================================================
========================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 25.23% (1.53)% 21.93% 15.61% 1.10%
(1.77)%
==========================================================
========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $49,381 $40,153 $37,713 $27,434 $19,377 $20,162
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $45,581 $39,104 $33,742 $24,658 $22,322 $ --(3)
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.59% 3.22% 3.51% 3.45% 3.15% --(3)
Expenses, before voluntary reimbursement 1.31% 1.36% 1.40% 1.21% .70% --(3)
Expenses, net of voluntary reimbursement 1.26% 1.30% 1.30% 1.19% N/A --(3)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 14.5% 13.5% 14.9% 13.1% 10.8% --(3)
Average brokerage commission rate(8) -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ -------
PERIOD
YEAR ENDED DECEMBER 31, ENDED
1995 1994 1993(2) 1995(1)
==========================================================
====================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.09 $14.35 $14.60 $17.12
- ----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 .17 .17 .02
Net realized and unrealized gain (loss) 3.86 .19 .51 .97
------ ------ ------ ------
Total income (loss) from investment operations 4.07 .36 .68 .99
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.19) (.21) (.17) (.06)
Dividends in excess of net investment income -- (.01) -- --
Distributions from net realized gain (.24) (.40) (.76) (.24)
------ ------ ------ ------
Total dividends and distributions to shareholders (.43) (.62) (.93) (.30)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $17.73 $14.09 $14.35 $17.81
- ----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 29.03% 2.50% 4.63% 5.89%
====== ====== ====== ======
==========================================================
====================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $26,647 $10,893 $5,158 $130
- ----------------------------------------------------------------------------------------------
Average net assets (in thousands) $18,857 $7,834 $2,527 $ 57
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.19% 1.45% .97%(6) .56%(6)
Expenses, before voluntary reimbursement 2.07% 2.01% 2.14%(6) 2.37%(6)
Expenses, net of voluntary reimbursement N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 11.8% 16.3% 24.3% 11.8%
Average brokerage commission rate(8) $0.08 -- -- $0.08
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1995 were
$34,411,475 and $14,179,859, respectively.
8. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold. See accompanying Notes to Financial Statements.
Oppenheimer Value Stock Fund (the Fund) is a separate fund of Oppenheimer
Integrity Funds, a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek long-term growth of capital and
income primarily through investments in stocks of well established
companies. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares
may be subject to a contingent deferred sales charge. All three classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive voting
rights with respect to matters affecting a single class. Class B shares
will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- -----------------------------------------------------------------------
- ---------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values
based on the closing bid or asked price or the last sale price on the
prior trading day. Long-term and short-term non-money market debt
securities are valued by a portfolio pricing service approved by the Board
of Trustees. Such securities which cannot be valued by the approved
portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Trustees
to determine fair value in good faith. Short-term money market type debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
- -----------------------------------------------------------------------
- ---------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian's vault, all securities held as
collateral for repurchase agreements. The market value of the underlying
securities is required to be at least 102% of the resale price at the time
of purchase. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- -----------------------------------------------------------------------
- ---------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
- -----------------------------------------------------------------------
- ---------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain
on investments not offset by loss carryovers, to shareholders. Therefore,
no federal income or excise tax provision is required.
- -----------------------------------------------------------------------
- ---------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
- -----------------------------------------------------------------------
- ---------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
14 Oppenheimer Value Stock Fund
<PAGE> 15
=======================================================================
=========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
During the year ended December 31, 1995, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the year ended December 31, 1995, amounts have been reclassified to
reflect an increase in paid-in capital of $4,668. Overdistributed net
investment income was increased by the same amount.
- -----------------------------------------------------------------------
- ---------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
- -----------------------------------------------------------------------
- ---------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995(1) YEAR ENDED DECEMBER 31, 1994
------------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,806,348 $29,186,663 1,880,960 $27,360,226
Dividends and distributions reinvested 228,838 3,907,434 311,720 4,414,279
Redeemed (944,270) (15,420,246) (1,924,358) (27,939,743)
--------- ----------- ----------- ------------
Net increase 1,090,916 $17,673,851 268,322 $ 3,834,762
========= =========== ===========
============
- ---------------------------------------------------------------------------------------------------------
Class B:
Sold 982,843 $15,746,572 499,617 $ 7,201,783
Dividends and distributions reinvested 32,137 551,627 28,292 397,953
Redeemed (285,236) (4,616,407) (114,417) (1,642,398)
--------- ----------- ---------- ------------
Net increase 729,744 $11,681,792 413,492 $ 5,957,338
========= =========== ==========
============
- --------------------------------------------------------------------------------------------------------
Class C:
Sold 7,236 $ 128,066 -- $ --
Dividends and distributions reinvested 112 1,972 -- --
Redeemed (58) (1,035) -- --
--------- ----------- ---------- ----------
Net increase 7,290 $ 129,003 -- $ --
========= =========== ==========
==========
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and
for the period from October 2, 1995 to December 31, 1995 for Class C
shares.
=======================================================================
=========
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1995, net unrealized appreciation on investments of
$44,248,553 was composed of gross appreciation of $45,249,638, and gross
depreciation of $1,001,085.
15 Oppenheimer Value Stock Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
=======================================================================
=========
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 .75% on the
first $100 million of average annual net assets with a reduction of .03%
on each $200 million thereafter, to .66% on net assets in excess of $500
million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent state
regulatory limit on Fund expenses.
For the year ended December 31, 1995, commissions (sales charges
paid by investors) on sales of Class A shares totaled $318,952, of which
$193,431 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 $299,002 and $690, of
which $68,751 and $60, respectively, was paid to an affiliated
broker/dealer. During the year ended December 31, 1995, OFDI received
contingent deferred sales charges of $62,273 upon redemption of Class B
shares as reimbursement for sales commissions advanced by OFDI at the time
of sale of such shares.
OppenheimerFunds Services, a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OppenheimerFunds Services' total costs
of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25%
of its net assets annually to compensate OFDI for costs incurred in
connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and
other institutions.
In addition, Class B and Class C shares are subject to an asset-based
sales charge of .75% of net assets annually, to compensate OFDI for sales
commissions paid from its own resources at the time of sale and associated
financing costs. In the event of termination or discontinuance of the
Class B or Class C plan, the Board of Trustees may allow the Fund to
continue payment of the asset-based sales charge to OFDI for distribution
expenses incurred on Class B or Class C shares sold prior to termination
or discontinuance of the plan. At December 31, 1995, OFDI had incurred
unreimbursed expenses of $725,534 for Class B and $14,331 for Class C.
During the year ended December 31, 1995, OFDI paid $177,070 and $6,039,
respectively, to an affiliated broker/dealer as compensation for Class A
and Class B personal service and maintenance expenses, and retained
$162,645 and $116, respectively, as compensation for Class B and Class C
sales commissions and service fee advances, as well as financing costs.
=======================================================================
=========
5. DEFERRED TRUSTEE
COMPENSATION
A former trustee elected to defer receipt of fees earned. These deferred
fees earned interest at a rate determined by the current Board of Trustees
at the beginning of each calendar year, compounded each quarter-end. From
January 1, 1995 through May 10, 1995, the Fund was incurring interest at
a rate of 7.89% per annum. The final payment was made on May 10, 1995.
Appendix A: Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
Concert Capital Management, Inc.
125 High Street
Boston, Massachusetts 02110
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
1. Financial Highlights (See Parts A and B, Prospectus and
Statement of Additional Information): Filed herewith.
2. Independent Auditors' Reports (See Part B, Statement of
Additional Information): Filed herewith.
3. Statements of Investments (See Part B, Statement of Additional
Information): Filed herewith.
4. Statements of Assets and Liabilities (See Part B, Statement
of Additional Information): Filed herewith.
5. Statements of Operations (See Part B, Statement of Additional
Information): Filed herewith.
6. Statements of Changes in Net Assets (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 June 26,
1995: Filed with Registrant's Post-Effective Amendment No. 25, 7/10/95,
and incorporated herein by reference.
2. Registrant's By-Laws dated 6/25/91: Filed with Registrant's
Post-Effective Amendment No. 16, 5/1/92, and refiled pursuant to Item 102
of Regulation S-T with Registrant's Post-Effective Amendment No. 23,
4/28/95, and incorporated herein by reference.
3. Not applicable.
4. (i) Specimen Class A Share Certificate for Oppenheimer
Value Stock Fund: Filed with Registrant's Post-Effective Amendment No. 20,
4/29/94, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate for Oppenheimer
Value Stock Fund: Filed with Registrant's Post-Effective Amendment No. 20,
4/29/94, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate for Oppenheimer
Value Stock Fund: Filed with Registrant's Post-Effective Amendment No.
26, 8/1/95, and incorporated herein by reference.
(iv) Specimen Class A Share Certificate for Oppenheimer
Bond Fund: Filed with Registrant's Post-Effective Amendment No. 28,
10/2/95, and incorporated herein by reference.
(v) Specimen Class B Share Certificate for Oppenheimer
Bond Fund: Filed with Registrant's Post-Effective Amendment No. 28,
10/2/95, and incorporated herein by reference.
(vi) Specimen Class C Share Certificate for Oppenheimer
Bond Fund: Filed with Registrant's Post-Effective Amendment No. 28,
10/2/95, and incorporated herein by reference.
5. (i) Investment Advisory Agreement dated 7/10/95 for
Oppenheimer Bond Fund: Filed with Registrant's Post-Effective Amendment
No. 25, 7/10/95, and incorporated herein by reference.
(ii) Investment Advisory Agreement dated 3/28/91 for
Oppenheimer Value Stock Fund: Filed with Registrant's Post-Effective
Amendment No. 16, 5/1/92, and refiled pursuant to Item 102 of Regulation
S-T with Registrant's Post-Effective Amendment No. 28, 4/28/95 and
incorporated herein by reference.
(iii) Investment Sub-Advisory Agreement dated 4/23/93 for
Oppenheimer Value Stock Fund: Filed with Registrant's Post-Effective
Amendment No. 18, 4/30/93, and refiled pursuant to Item 102 of Regulation
S-T with Registrant's Post-Effective Amendment No. 23, 4/28/95, and
incorporated herein by reference.
(iv) Letter dated 12/16/92 concerning temporary
delegation of duties to manage Oppenheimer Value Stock Fund: Filed with
Registrant's Post-Effective Amendment No. 18, 4/30/93, and refiled
pursuant to Item 102 of Regulation S-T with Registrant's Post-Effective
Amendment No. 23, 4/28/95, and incorporated herein by reference.
(v) Unconditional Guarantee Agreement dated 1/1/93 by
Massachusetts Mutual Life Insurance Company to Oppenheimer Value Stock
Fund of Concert Capital Management, Inc.'s performance: Filed with
Registrant's Post-Effective Amendment No. 18, 4/30/93, and refiled
pursuant to Item 102 of Regulation S-T with Registrant's Post-Effective
Amendment No. 23, 4/28/95, and incorporated herein by reference.
6. (i) General Distributor's Agreement dated 10/13/92:
Filed with Registrant's Post-Effective Amendment No. 17, 2/26/93, and
refiled pursuant to Item 102 of Regulation S-T with Registrant's Post-
Effective Amendment No. 23, 4/28/95, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed with
Post-Effective Amendment No. 25 to the Registration Statement of
Oppenheimer Growth Fund (Reg. No. 2-45272), 11/1/86, and refiled with
Post-Effective Amendment No. 45 to the Registration Statement of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
7. Not applicable.
8. Custody Agreement dated 11/12/92, between the Registrant
and The Bank of New York: Filed with Registrant's Post-Effective Amendment
No. 17, 2/26/93, and refiled with Post-Effective Amendment No. 23, 4/28/95
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
9. Not applicable.
10. Opinion and Consent of Counsel dated 2/11/91: Incorporated
herein by reference to Registrant's Rule 24f-2 Notice filed on 2/19/91 and
refiled pursuant to Item 102 of Regulation S-T with Registrant's Post-
Effective Amendment No. 23, 4/28/95, and incorporated herein by reference.
11. Independent Auditors' Consent: Filed herewith.
12. Not applicable.
13. Not applicable.
14. (i) Form of Individual Retirement Account Trust
Agreement: Filed as Exhibit 14 of Post-Effective Amendment No. 21 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 Plan and Money Purchase Pension Plan for self-employed
persons and corporations: Filed with Post-Effective Amendment No. 3 of
Oppenheimer Global Growth & Income Fund (File No. 33-33799), 1/31/92, and
refiled with Post-Effective Amendment No. 7 to the Registration Statement
of Oppenheimer Global Growth & Income Fund (Reg. No. 33-33799), 12/1/94,
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt organizations:
Filed with Post-Effective Amendment No. 47 to the Registration Statement
of Oppenheimer Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated
herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 42 to the Registration Statement of
Oppenheimer Equity Income Fund (Reg. No. 2-33043), 10/28/94, and
incorporated herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA:
Filed with Registrant's Post-Effective Amendment No. 19, 3/1/94, and
incorporated herein by reference.
(vi) Form of Prototype 401(k) plan: Filed with Post-
Effective Amendment No. 7 to the Registration Statement of Oppenheimer
Strategic Income & Growth Fund (33-47378), 9/28/95, and incorporated
herein by reference.
15. (i) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of Oppenheimer Bond Fund
dated 6/22/93: Filed with Registrant's Post-Effective Amendment No. 19,
3/1/94, and incorporated herein by reference.
(ii) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of Oppenheimer Value
Stock Fund dated 6/22/93: Filed with Registrant's Post-Effective Amendment
No. 19, 3/1/94, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement under
Rule 12b-1 of the Investment Company Act of 1940 for Class B shares of
Oppenheimer Bond Fund dated 7/10/95: Filed with Registrant's Post-
Effective Amendment No. 25, 7/10/95, and incorporated herein by reference.
(iv) Distribution and Service Plan and Agreement under
Rule 12b-1 of the Investment Company Act of 1940 for Class B shares of
Oppenheimer Value Stock Fund dated 6/22/93: Filed with Registrant's Post-
Effective Amendment No. 19, 3/1/94, and incorporated herein by reference.
(v) Distribution and Service Plan and Agreement under
Rule 12b-1 of the Investment Company Act of 1940 for Class C Shares of
Oppenheimer Bond Fund dated 7/10/95: Filed with Registrant's Post-
Effective Amendment No. 25, 7/10/95 and incorporated herein by reference.
(vi) Distribution and Service Plan and Agreement under
Rule 12b-1 of the Investment Company Act of 1940 for Class C shares of
Oppenheimer Value Stock dated 8/29/95: Filed with Registrant's Post-
Effective Amendment No. 26, 8/1/95, and incorporated herein by reference.
16. (i) Performance Computation Schedule for Oppenheimer
Value Stock Fund: Filed herewith.
(ii) Performance Computation Schedule for Oppenheimer
Bond Fund (formerly "Oppenheimer Investment Grade Bond Fund"): Filed
herewith.
17. (i) Financial Data Schedule for Class A Shares of
Oppenheimer Bond Fund (formerly Oppenheimer Investment Grade Bond Fund"):
Filed herewith.
(ii) Financial Data Schedule for Class B Shares of
Oppenheimer Bond Fund (formerly Oppenheimer Investment Grade Bond Fund"):
Filed herewith.
(iii) Financial Data Schedule for Class C Shares of
Oppenheimer Bond Fund (formerly Oppenheimer Investment Grade Bond Fund"):
Filed herewith.
(iv) Financial Data Schedule for Class A Shares of
Oppenheimer Value Stock Fund: Filed herewith.
(v) Financial Data Schedule for Class B Shares of
Oppenheimer Value Stock Fund: Filed herewith.
(vi) Financial Data Schedule for Class C Shares of
Oppenheimer Value Stock Fund: Filed herewith.
-- Powers of Attorney and Certified Board Resolution:
Filed with Registrant's Post-Effective Amendment No. 19, 3/1/94, and
incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of
Record Holders as
Title of Class of March 6, 1996
- -------------- ---------------------
Oppenheimer Bond Fund
Class A Shares of Beneficial Interest 15,079,858.332
Class B Shares of Beneficial Interest 3,563,619.091
Class C Shares of Beneficial Interest 266,068.403
Number of
Record Holders as
Title of Class of March 6, 1996
- -------------- ---------------------
Oppenheimer Value Stock Fund
Class A Shares of Beneficial Interest 7,657,799.744
Class B Shares of Beneficial Interest 1,624,632.961
Class C Shares of Beneficial Interest 26,872.561
Item 27. Indemnification
- -------- ---------------
Article IV of Registrant's Declaration of Trust filed as Exhibit
24(b)(1) to this Registration Statement, generally provides, among other
things, for the indemnification of Registrant's Trustees and officers in
a manner consistent with Securities and Exchange Commission Release No.
IC-11330.
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.
(a)(1) The directors and executive officers of Massachusetts Mutual
Life Insurance Company ("MassMutual") and Concert Capital Management, Inc.
("Concert Capital"), their positions and their other business affiliations
and business experience for the past two years are 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.
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
Mark Anson, Formerly Vice President of
Vice President Equity Derivatives at Salomon
Brothers, Inc.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Robert J. Bishop,
Assistant Vice President Treasurer of the Oppenheimer Funds
(listed below); previously a Fund
Controller for OppenheimerFunds,
Inc. (the "Manager").
Bruce Bartlett,
Vice President Vice President and Portfolio
Manager of Oppenheimer Total Return
Fund, Inc., Oppenheimer Main Street
Funds, Inc. and Oppenheimer
Variable Account Funds; formerly a
Vice President and Senior Portfolio
Manager at First of America
Investment Corp.
Susan Burton, None.
Assistant Vice President
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Secretary and Treasurer of the
Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc.
(the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the Manager;
Senior Vice President, Treasurer,
Assistant Secretary and a director
of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of
the Manager; Vice President,
Treasurer and Secretary of
Shareholder Services, Inc. ("SSI")
and Shareholder Financial Services,
Inc. ("SFSI"), transfer agent
subsidiaries of the Manager;
President, Treasurer and Director
of Centennial Capital Corporation;
Vice President and Treasurer of
Main Street Advisers.
Michael A. Carbuto,
Vice President Vice President and Portfolio
Manager of Centennial California
Tax Exempt Trust, Centennial New
York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice
President of Centennial.
Ruxandra Chivu, None.
Assistant Vice President
Lynn Coluccy,
Vice President Formerly Vice President / Director
of Internal Audit of the Manager.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President Vice President and Portfolio
Manager of Oppenheimer Growth Fund,
Oppenheimer Variable Account Funds;
Senior Vice President and Portfolio
Manager of Oppenheimer Strategic
Income & Growth Fund; Vice
President of Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest
Officers Value Fund, Oppenheimer
Quest For Value Funds and
Oppenheimer Quest Global Value
Fund, Inc.
John Doney,
Vice President Vice President and Portfolio
Manager of Oppenheimer Equity
Income Fund.
Andrew J. Donohue,
Executive Vice President
& General Counsel Secretary of the New York-based
Oppenheimer Funds; Vice President
of the Denver-based Oppenheimer
Funds; Executive Vice President,
Director and General Counsel of the
Distributor; President and a
Director of Cetennial; formerly
Senior Vice President and Associate
General Counsel of the Manager and
the Distributor.
George Evans,
Vice President Vice President and Portfolio
Manager of Oppenheimer Global
Emerging Growth Fund.
Scott Farrar,
Assistant Vice President Assistant Treasurer of the
Oppenheimer Funds; previously a
Fund Controller for the Manager.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView, Main
Street Advisers, Inc. and
Centennial; Secretary, Vice
President and Director of
Centennial Capital Corp.
Ronald H. Fielding,
Senior Vice President 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"); President
and Director of Rochester Fund
Services, Inc. ("RFS"); President
and Director of Rochester Tax
Managed Fund, Inc.; Vice President
and Portfolio Manager of Rochester
Fund Municipals and Rochester
Portfolio Series - Limited Term New
York Municipal Fund.
Jon S. Fossel,
Chairman of the Board and Director Director of OAC, the Manager's
parent holding company; President,
CEO and a director of HarbourView;
a director of SSI and SFSI;
President, Director, Trustee, and
Managing General Partner of the
Denver-based Oppenheimer Funds;
President and Chairman of the Board
of Main Street Advisers, Inc.;
formerly Chief Executive Officer of
the Manager.
John Fortuna, None.
Assistant Vice President
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions: a
director of the Distributor, Vice
President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer Funds
and Executive Vice President &
General Counsel of the Manager and
the Distributor.
Linda Gardner,
Assistant Vice President None.
Ginger Gonzalez,
Vice President Formerly 1st Vice President /
Director of Creative Services for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President Vice President and Portfolio
Manager of Oppenheimer Insured Tax-
Exempt Fund and Oppenheimer
Intermediate Tax Exempt Fund; an
officer of other Oppenheimer Funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Barbara Hennigar,
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Bennett Inkeles,
Assistant Vice President Formerly employed by Doremus &
Company, an advertising agency.
Ronald Jamison, Formerly Vice President and
Vice President Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President Portfolio Manager of Oppenheimer
Global Growth & Income Fund.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Stephen Jobe,
Vice President None.
Heidi Kagan,
Assistant Vice President None.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Assistant Vice President Portfolio Manager of Oppenheimer
Variable Account Funds; Associate
Portfolio Manager of Oppenheimer
Discovery Fund. Formerly a
Securities Analyst for Columbus
Circle Investors.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of
the New York-based and the Denver-
based Oppenheimer funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of Main
Street Advisers, Inc.; Chairman and
Director of SSI.
Timothy Martin, Formerly Vice President, Mortgage
Assistant Vice President Trading, at S.N. Phelps & Co.,
Salomon Brothers, and Kidder Peabody.
Sally Marzouk,
Vice President None.
Marilyn Miller,
Vice President Formerly a Director of marketing
for TransAmerica Fund Management
Company.
Robert J. Milnamow,
Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc. Formerly a Portfolio
Manager with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer
Strategic Income Fund, Oppenheimer
Strategic Income & Growth Fund; an
officer of other Oppenheimer Funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc., Oppenheimer Multi-
State Tax-Exempt Trust, Oppenheimer
Tax-Exempt Fund, Oppenheimer
California Tax-Exempt Fund,
Oppenheimer New York Tax-Exempt
Fund and Oppenheimer Tax-Free Bond
Fund; Vice President of The New
York Tax-Exempt Income Fund, Inc.;
Vice President of Oppenheimer
Multi-Sector Income Trust.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President Associate Portfolio Manager of
Oppenheimer Growth Fund; Vice
President and Portfolio Manager of
Oppenheimer Target Fund and
Oppenheimer Variable Account Funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President Formerly an International Finance
Consultant for Dow Chemical.
Thomas Reedy,
Vice President Vice President of Oppenheimer
Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust;
an officer of other Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President Vice President 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.; Vice President and
Portfolio Manager of Rochester Fund
Series - The Bond Fund For Growth.
David Rosenberg,
Vice President Vice President and Portfolio
Manager of Oppenheimer Limited-Term
Government Fund, Oppenheimer U.S.
Government Trust and Oppenheimer
Integrity Funds. Formerly Vice
President and Senior Portfolio
Manager for Delaware Investment
Advisors.
Richard H. Rubinstein,
Vice President Vice President and Portfolio
Manager of Oppenheimer Asset
Allocation Fund, Oppenheimer Fund
and Oppenheimer Variable Account
Funds; an officer of other
Oppenheimer Funds; formerly Vice
President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Diane Sobin,
Vice President Vice President and Portfolio
Manager of Oppenheimer Gold &
Special Minerals Fund, Oppenheimer
Total Return Fund, Inc. Oppenheimer
Main Street Funds, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and
Senior Portfolio Manager for Dean
Witter InterCapital, Inc.
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.
Arthur Steinmetz,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Strategic
Income Fund, Oppenheimer Strategic
Income & Growth Fund; an officer of
other Oppenheimer Funds.
Ralph Stellmacher,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Champion
Income Fund and Oppenheimer High
Yield Fund; an officer of other
Oppenheimer Funds.
John Stoma,
Vice President Formerly Vice President of Pension
Marketing with Manulife Financial.
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 Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund,
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Jeffrey Van Giesen,
Vice President Formerly employed by Kidder Peabody
Asset Management.
Ashwin Vasan,
Vice President Vice President and Portfolio
Manager of Oppenheimer Multi-Sector
Income Trust, Oppenheimer Multi-
Government Trust and Oppenheimer
International Bond Fund; an officer
of other Oppenheimer Funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President Vice President and Portfolio
Manager of Daily Cash Accumulation
Fund, Inc., Oppenheimer Cash
Reserves, Oppenheimer Variable
Account Funds, Centennial America
Fund, L.P., Centennial Government
Trust and Centennial Money Market
Trust; Vice President of
Centennial.
Jerry Webman, Director of New York-based
Senior Vice President tax-exempt fixed income Oppenheimer
Funds; Formerly Managing Director and Chief
Fixed Income Strategist at
Prudential Mutual Funds.
Christine Wells,
Vice President None.
William L. Wilby,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Global
Fund and Oppenheimer Global Growth
& Income Fund; Vice President of
HarbourView; an officer of other
Oppenheimer Funds.
Carol Wolf,
Vice President Vice President and Portfolio
Manager of Oppenheimer Money Market
Fund, Inc., Centennial America
Fund, L.P., Centennial Government
Trust, Centennial Money Market
Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust; Vice President of
Centennial.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Eva A. Zeff,
Assistant Vice President An officer of certain Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
Arthur J. Zimmer,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Centennial America
Fund, L.P., Centennial Government
Trust, Centennial Money Market
Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust; Vice President of
Centennial; an officer of other
Oppenheimer Funds.
The Oppenheimer Funds include the New York-based Oppenheimer Funds and the
Denver-based Oppenheimer Funds set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
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 Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Rochester-based Funds
- ---------------------
Bond Fund Series - Oppenheimer Bond Fund For
Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
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 Main Street Advisers, Inc. is 3410 South Galena Street, Denver,
Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
DIRECTORS OF MASSMUTUAL
Name & Current Position with
Massachusetts Mutual Life Insurance
Company and/or Concert Capital Other Business and Connections
Management, Inc. During the Past Two Years
- ------------------------ ----------------------------------
Roger G. Ackerman,
Director and Member, Auditing
and Compensation Committees President and Chief Operating
Officer, Corning Incorporated;
Director, Dow Corning Corporation;
Director, The Pittson Company.
Jack F. Bennett,
Director and Member, Auditing
and Investment Committees Retired (since 1989); former Senior
Vice President and Director, Exxon
Corporation; Director, Philips
Electronics N.V., Groenewoudseweg
1, 5621 BA Eindhoven, The
Netherlands; Dean Witter Mutual
Funds; and Tandem Computer, Inc.
William J. Clark,
Chairman of the Board and
Member, Investment, Dividend
Policy, and Organization &
Operations Committees Chairman of the Board of
MassMutual.
Anthony Downs,
Director and Member, Dividend
Policy and Investment Committees Senior Fellow, The Brookings
Institution; Director: The Pittway
Corporation; National Housing
Partnerships Foundation; Bedford
Properties, Inc.; General Growth
Properties, Inc.; NAACP Legal and
Educational Defense Fund, Inc.;
Consultant, Aetna Realty Investors;
and Salomon Brothers Inc.; Trustee:
Urban Institute and Urban Land
Institute.
James L. Dunlap,
Director and Member, Compensation
and Organization & Operations
Committees Senior Vice President of Texaco,
Inc. and President, Texaco USA.
Richard N. Frank, Director and
Member, Dividend Policy and
Organization & Operations
Committees Chairman of the Board of Directors
and Chief Executive Officer,
Lawry's Restaurants, Inc.; Trustee,
PIC Growth Fund and PIC Balanced
Pinnacle Fund.
Charles K. Gifford,
Director and Member, Investment
and Auditing Committees President, The First National Bank
of Boston; President, Bank of
Boston Corporation; Director,
Member of Audit and Compensation
Committees, Boston Edison Co.
William N. Griggs,
Director, Chairman, Auditing
Committee and Member,
Investment Committee Chairman and President, Oklahoma
Gas and Electric Company; Director,
Fleming Companies; Director,
Associated Electric & Gas Insurance
Services Limited.
Barbara B. Hauptfuhrer,
Director, Chairman, Compensation
Committee and Member,
Organization & Operations
Committee Director and Member, Compensation,
Nominating and Audit Committees,
The Vanguard Group of Investment
Companies including among others
the following funds: Vanguard /
Windsor Funds, Vanguard /
Wellington Fund, Vanguard / Morgan
Growth Fund, Vanguard / Wellesley
Income Fund, Vanguard / Gemini
Fund, Vanguard / Explorer Fund,
Vanguard Municipal Bond Fund,
Vanguard Fixed Income Securities
Fund, Vanguard World Fund, Vanguard
/ Star Fund, Vanguard Ginnie Mae
Fund, Vanguard / Primecap Fund,
Vanguard Convertible Securities
Fund, Vanguard Quantitative Fund,
Vanguard Index Trust, Vanguard /
Trustees Commingled Equity Fund,
Vanguard / Trustees Commingled
Fund-International, Vanguard Money
Market Trust, Vanguard/Windsor II,
Vanguard Asset Allocation Fund and
Vanguard Equity Income Fund;
Director, Chairman of Retirement
Benefits Committee and Pension Fund
Investment Review - USA and Canada
and Member, Audit, Finance and
Executive Committees, The Great
Atlantic and Pacific Tea Company,
Inc.; Director, Chairman of
Nominating Committee and Member,
Compensation Committee, Knight-
Ridder, Inc.; Director and Member,
Compensation Committee, Raytheon
Company; Director and Member,
Executive and Chairman, Human
Resources Committees, Alco
Standard Corp.
Sheldon B. Lubar,
Director, Member, Investment
Committee and Chairman,
Organization & Operations
Committee Chairman, Lubar & Co. Incorporated;
Chairman, President and Director,
The Christiana Companies, Inc.;
Director: Firstar Bank, Firstar
Corporation , SLX Energy, Inc.;
Member, Advisory Committee, Venture
Capital Fund, L.P.; Director: Grey
Wolf Drilling Co.; Marshall Erdman
and Associates, Inc.; Prideco,
Inc.; MGIC Investment Corporation;
Director, Ameritech, Inc.;
Director, Schwitzer, Inc.; and
Briggs & Stratton.
William B. Marx, Jr.,
Director and Member,
Dividend Policy and Compensation
Committees Executive Vice President and Chief
Executive Officer, Multimedia
Products Group and Network Systems
Group, AT&T; Group Executive and
President, AT&T Network Systems.
Donald F. McCullough,
Director and Member, Dividend
Policy and Auditing Committees Retired; former Chairman and Chief
Executive Officer, Collins & Aikman
Corp.; Director: Bankers Trust New
York Corp. and Bankers Trust
Company; Melville Corporation.
Barbara S. Preiskel,
Director, Chairman, Dividend
Policy Committee and Member,
Compensation Committee Attorney-at-Law; Director: Textron,
Inc; General Electric Company; The
Washington Post Company; American
Stores Company.
Thomas B. Wheeler,
President, Director, Chief
Executive Officer, Chairman,
Investment Committee and Member,
Dividend Policy and Organization
& Operations Committees President, Chief Executive Officer
and Director of MassMutual; and
Chairman of the Board of Directors,
MML Pension Insurance Company;
Chairman of the Board of Directors,
Concert Capital Management, Inc.;
Director, The First National Bank
of Boston and Bank of Boston
Corporation and Massachusetts
Capital Resources Company; Chairman
and Director, Oppenheimer
Acquisition Corp.; Director.
Alfred M. Zeien,
Director and Member Compensation
and Organization & Operations
Committees Chairman and Chief Executive
Officer, The Gillette Company;
Director: Polaroid Corporation;
Repligen Corporation; Bank of
Boston Corporation; and Raytheon
Corporation; Trustee, University
Hospital of Boston, Massachusetts.
EXECUTIVE VICE PRESIDENTS OF MASSMUTUAL
Lawrence V. Burkett,
Executive Vice President
and General Counsel Executive Vice President and
General Counsel, Senior Vice
President and Deputy General
Counsel of MassMutual; Director,
MassMutual Holding Company and
Director, MassMutual Holding
Company Two, Inc., Director:
MassMutual Holding Company Two MSC,
Inc.; and MML Pension Insurance
Company; Cornerstone Real Estate
Advisers, Inc.; Director, Sargasso
Mutual Insurance Co., Ltd.;
MassMutual of Ireland, Ltd.;
Chairman, Director, MML Reinsurance
(Bermuda) Ltd.
JOHN B. DAVIES,
Executive Vice President Executive Vice President, Associate
Executive Vice President, General
Agent of MassMutual; Director, MML
Investors Services, Inc., MML
Insurance Agency, Inc., and MML
Insurance Agency of Ohio, Inc.; and
Cornerstone Real Estate Advisers,
Inc.
Daniel J. Fitzgerald,
Executive Vice President,
Corporate Financial Operations Executive Vice President, Corporate
Financial Operations, Senior Vice
President of MassMutual; Vice
President, Director, MassMutual
Holding Company; and Vice President
and Director, MassMutual Holding
Company Two, Inc.; Vice President
and Director: MassMutual Holding
Company Two MSC, Inc.; Director,
MML Pension Insurance Company; MML
Bay State Life Insurance Company;
MML Real Estate Corporation and MML
Realty Management Corporation;
Director, Concert Capital
Management, Inc.; Director and
Member, Compensation Committee,
Cornerstone Real Estate Advisers,
Inc.; Director and Member, Audit
and Compensation Committees, MML
Investors Services, Inc. and
Director, MML Insurance Agency,
Inc.; Director, MassMutual of
Ireland, Ltd.
Lawrence L. Grypp,
Executive Vice President Executive Vice President of
MassMutual; Chairman and Member
Executive and Compensation
Committees, MML Investors Services,
Inc. and Director, MML Insurance
Agency; Director, Oppenheimer
Acquisition Corp.; Director,
Concert Capital Management, Inc.;
Trustee, The American College, Bryn
Mawr, Pennsylvania.
James E. Miller,
Executive Vice President Executive Vice President of
MassMutual; President, Director and
Chief Executive Officer, MML
Pension Insurance Company; Chairman
and Director, MassMutual of Ireland
Ltd.; Director: Benefit Panel
Services; and National Capital
Preferred Provider Organization;
Director, Sloan's Lake Management
Corp.; Vice President and
Treasurer, Dental Learning Systems;
Director, The Ethix Corporation.
John M. Naughton,
Executive Vice President Executive Vice President of
MassMutual; Trustee and Member,
Investment Pricing Committee,
MassMutual Institutional Funds;
Chairman and Trustee; Trustee,
BayState Health Systems; and
American International College;
Director, Oppenheimer Acquisition
Corp.; and Concert Capital
Management, Inc.; Director,
Colebrook Group; Trustee,
University of Massachusetts.
John J. Pajak,
Executive Vice President Executive Vice President of
MassMutual; Director: MassMutual
Holding Company and MassMutual
Holding Company Two, Inc.;
MassMutual Holding Company Two MSC,
Inc.; and MML Pension Insurance
Company.
Gary E. Wendlandt,
Executive Vice President Chief Investment Officer, Executive
Vice President of MassMutual;
Trustee and President, MassMutual
Corporate Investors and MassMutual
Participation Investors; Vice
Chairman and Trustee and President,
MML Series Investment Fund;
Chairman, Chief Executive Officer
and Member, Investment Pricing
Committee, MassMutual Institutional
Funds; Chairman, President and
Chief Executive Officer and
Director, MassMutual Holding
Company; Chairman, President and
Director, MassMutual Holding
Company Two, Inc. and MassMutual
Holding Company Two MSC, Inc.;
Chairman and Director, MML Real
Estate Corporation and MML Realty
Management Corporation; Chairman,
Chief Executive Officer and Member,
Executive and Compensation
Committees, Cornerstone Real Estate
Advisers, Inc.; President and Chief
Executive Officer and Director,
Concert Capital Management, Inc.;
Director, Oppenheimer Acquisition
Corporation; Supervisory Director,
MassMutual/Carlson CBO N.V.;
Director, Merrill Lynch Derivative
Products, Inc.; Director,
MassMutual Corporate Value Partners
Limited and MassMutual Corporate
Value Limited.
DIRECTORS OF CONCERT CAPITAL
Thomas B. Wheeler,
Chairman Chairman of the Board of Directors,
Concert Capital Management, Inc.
See Directors of MassMutual, above,
for further details.
Richard G. Dooley,
Director Director, Concert Capital
Management, Inc.; Retired,
Executive Vice President and Chief
Investment Officer of MassMutual;
Chairman: MassMutual Corporate
Investors and MassMutual
Participation Investors and MML
Series Investment Fund; Director:
The Advest Group, Inc.; The New
England Education Loan Marketing
Corp.; The Hartford Steam Boiler
Inspection and Insurance Co.;
Trustee, Kimco Realty Corp.;
Supervisory Director,
MassMutual/Carlson CBO; Director
and Vice President, Oppenheimer
Acquisition Corp.; Director,
Luxonen S.A.; and Jefferies Group,
Inc.
Daniel J. Fitzgerald,
Director Director, Concert Capital
Management, Inc. See Executive
Officers of MassMutual, above, for
further details.
Lawrence L. Grypp,
Director Director, Concert Capital
Management, Inc. See Executive
Officers of MassMutual, above, for
further details.
John M. Naughton,
Director Director, Concert Capital
Management, Inc. See Executive
Officers of MassMutual, above, for
further details.
Gary E. Wendlandt,
President, Director and
Chief Executive Officer President and Chief Executive
Officer and Director, Concert
Capital Management, Inc. See
Executive Officers of MassMutual,
above, for further details.
EXECUTIVE OFFICERS OF CONCERT CAPITAL
David B. Salerno,
Managing Director Managing Director, Vice President
and Managing Director of Concert
Capital Management, Inc.; Senior
Vice President, MML Series
Investment Fund; Vice President,
Oppenheimer Value Stock Fund.
John V. Murphy,
Chief Operating Officer Chief Operating Officer, Concert
Capital Management, Inc.; Chief
Financial Officer, Liberty
Financial Companies, Boston,
Massachusetts.
George M. Ulrich,
Senior Vice President Senior Vice President of Concert
Capital Management, Inc.
The address of MassMutual is 1295 State Street, Springfield,
Massachusetts 01111 and the address of Concert Capital is 100
Northfield Drive, Windsor, Connecticut 06095.
For information as to the business, profession, vocation or
employment of a substantial nature of the officers and trustees
of MML Series Investment Fund, reference is made to Part B of
this registration statement and to the registration on Form ADV
filed by the Massachusetts Mutual Life Insurance Company and
Concert Capital Management, Inc., under the Investment Advisers
Act of 1940, which are incorporated herein by reference.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
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.
(b) The directors and officers of the Registrant's principal
underwriter are:
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
George Clarence Bowen+ Vice President & Treasurer Vice President
and Treasurer
of the NY-based
Oppenheimer
funds / Vice
President,
Secretary and
Treasurer of
the Denver-
based Oppen-
heimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Mary Ann Bruce* Senior Vice President - None
Financial Institution Div.
Robert Coli Vice President None
12 Whitetail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
1400 Laurel Avenue
Apt. W710
Minneapolis, MN 55403
Mary Crooks+ Vice President None
Paul Delli-Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Secretary of
President & Director the New York-
based Oppen-
heimer funds /
Vice President
of the Denver-
based Oppen-
heimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President None
Reed F. Finley Vice President - None
1657 Graefield Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President - None
11339 Avant Lane Eastern Division Manager
Cincinnati, OH 45249
Patricia Gadecki Vice President None
6026 First Ave. South,
Apt. 10
St. Petersburg, FL 33707
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President None
609 Chimney Bluff Drive
Mt. Pleasant, SC 29464
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Ilene Kutno* Assistant Vice President None
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Joseph Norton Vice President None
1550 Bryant Street
San Francisco, CA 94103
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
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
19 Spinnaker Way
Portsmouth, NH 03801
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.
Minnie Ra Vice President - None
109 Peach Street Financial Institution Div.
Avenel, NJ 07001
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen++ Vice President None
James Ruff* President None
Timothy Schoeffler Vice President None
3118 N. Military Road
Arlington, VA 22207
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
785 Beau Chene Dr.
Mandeville, LA 70448
James A. Shaw Vice President - None
5155 West Fair Place Financial Institution Div.
Littleton, CO 80123
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker Vice President - None
2017 N. Cleveland, #2 Financial Institution Div.
Chicago, IL 60614
Michael Stenger Vice President None
C/O America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
++ 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 28th day of March, 1996.
OPPENHEIMER INTEGRITY FUNDS
By: /s/ James C. Swain*
---------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the March 28, 1996
- ---------------------- Board of Trustees
James C. Swain
/s/ George C. Bowen* Chief Financial March 28, 1996
- ---------------------- and Accounting
George C. Bowen Officer
/s/ Robert G. Avis* Trustee March 28, 1996
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee March 28, 1996
- ----------------------
William A. Baker
/s/ Charles Conrad Jr.* Trustee March 28, 1996
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee March 28, 1996
- -------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Trustee March 28, 1996
- ------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee March 28, 1996
- ------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee March 28, 1996
- ------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact OPPENHEIMER INTEGRITY FUNDS
Registration NO. 2-76547
POST-EFFECTIVE AMENDMENT NO. 29
EXHIBIT INDEX
Form N-1A
Item No. Description
- --------- -----------
24(b)11 Independent Auditors' Consent
24(b)(16)(i) Performance Data Computation for Oppenheimer Bond Fund
24(b)(16)(ii) Performance Data Computation for Oppenheimer Value
Stock Fund
24(b)17(i) Financial Data for Class A shares of Oppenheimer Bond
Fund for fiscal year ended 12/31/95
24(b)17(ii) Financial Data for Class B shares of Oppenheimer Bond
Fund for fiscal year ended 12/31/95
24(b)17(iii) Financial Data for Class C shares of Oppenheimer Bond
Fund for fiscal year ended 12/31/95
24(b)17(iv) Financial Data for Class A shares of Oppenheimer
Value Stock Fund for fiscal year ended 12/31/95
24(b)17(v) Financial Data for Class B shares of Oppenheimer
Value Stock Fund for fiscal year ended 12/31/95
24(b)17(vi) Financial Data for Class C shares of Oppenheimer
Value Stock Fund for fiscal year ended 12/31/95
Exhibit 24(b)11
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Integrity Funds:
We consent to the use in this Post-Effective Amendment No. 29 to
Registration Statement No. 2-76547 of Oppenheimer Integrity Funds of our
reports dated January 22, 1996 appearing in the Statements of Additional
Information, which are a part of such Registration Statement, and to the
reference to us under the caption "Financial Highlights" appearing in the
Prospectuses, which are also a part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
March 27, 1996
Oppenheimer Bond 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:
Amount From
Distribution Amount From Long or
Reinvestment Investment Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
Class A Shares
06/30/88 0.2600 0.0000 10.360
09/30/88 0.2400 0.0000 10.370
12/30/88 0.2500 0.0000 10.110
03/31/89 0.2500 0.0000 10.020
06/30/89 0.2400 0.0000 10.450
09/29/89 0.2300 0.0000 10.360
12/29/89 0.2200 0.0000 10.290
01/31/90 0.0800 0.0000 10.120
02/28/90 0.0800 0.0000 9.930
03/30/90 0.0800 0.0000 9.930
04/30/90 0.0700 0.0000 9.840
05/31/90 0.0700 0.0000 10.060
06/29/90 0.0700 0.0000 9.960
07/31/90 0.0750 0.0000 9.900
08/31/90 0.0750 0.0000 9.810
09/28/90 0.0750 0.0000 9.690
10/31/90 0.0700 0.0000 9.790
11/30/90 0.0750 0.0000 9.930
12/31/90 0.0640 0.0000 9.780
01/31/91 0.0650 0.0000 10.030
02/28/91 0.0650 0.0000 9.970
04/03/91 0.0650 0.0000 9.980
05/01/91 0.0650 0.0000 10.040
05/29/91 0.0650 0.0000 10.030
06/26/91 0.0650 0.0000 9.930
07/24/91 0.0620 0.0000 9.980
08/21/91 0.0650 0.0000 10.250
09/18/91 0.0650 0.0000 10.290
10/16/91 0.0600 0.0000 10.370
11/20/91 0.0650 0.0000 10.470
12/18/91 0.0760 0.0000 10.550
01/15/92 0.0600 0.0000 10.670
02/19/92 0.0650 0.0000 10.470
03/18/92 0.0650 0.0000 10.380
04/15/92 0.0610 0.0000 10.530
05/20/92 0.0650 0.0000 10.610
06/17/92 0.0620 0.0000 10.600
07/15/92 0.0600 0.0000 10.800
08/19/92 0.0600 0.0000 10.990
09/16/92 0.0600 0.0000 11.050
10/21/92 0.0600 0.0000 10.830
11/18/92 0.0600 0.0000 10.790
12/16/92 0.0850 0.0000 10.730
01/20/93 0.0500 0.0000 10.790
02/17/93 0.0600 0.0000 10.990
03/17/93 0.0600 0.0000 11.060
04/21/93 0.0600 0.0000 11.160
05/19/93 0.0600 0.0000 11.050
06/16/93 0.0560 0.0000 11.110
07/29/93 0.0810 0.0000 11.180
08/30/93 0.0590 0.0000 11.350
09/30/93 0.0530000 0.0000 11.350
10/29/93 0.0565332 0.0000 11.340
11/30/93 0.0574140 0.0000 11.130
12/31/93 0.0538857 0.0000 11.120
12/31/94 0.0525032 0.0000 11.210
02/28/94 0.0504297 0.0000 10.920
03/31/94 0.0589669 0.0000 10.610
04/29/94 0.0472313 0.0000 10.450
05/31/94 0.0510183 0.0000 10.390
06/30/94 0.0531201 0.0000 10.310
07/29/94 0.0562604 0.0000 10.430
08/31/94 0.0552602 0.0000 10.390
09/30/94 0.0569318 0.0000 10.190
10/31/94 0.0519490 0.0000 10.110
11/30/94 0.0551407 0.0000 10.040
12/30/94 0.0956482 0.0000 10.010
01/31/95 0.0581961 0.0000 10.130
02/28/95 0.0541779 0.0000 10.310
03/31/95 0.0614796 0.0000 10.330
04/28/95 0.0513689 0.0000 10.420
05/31/95 0.0549710 0.0000 10.790
06/30/95 0.0555805 0.0000 10.810
07/31/95 0.0480139 0.0000 10.680
08/31/95 0.0536231 0.0000 10.730
09/29/95 0.0576012 0.0000 10.750
10/31/95 0.0595075 0.0000 10.820
11/30/95 0.0619609 0.0000 10.890
12/29/95 0.0655338 0.0000 10.980
Class B Shares
05/19/93 0.0540000 0.0000 11.050
06/16/93 0.0490000 0.0000 11.100
07/29/93 0.0740000 0.0000 11.180
08/30/93 0.0520000 0.0000 11.350
09/30/93 0.0460000 0.0000 11.340
10/29/93 0.0489813 0.0000 11.330
11/30/93 0.0493279 0.0000 11.120
12/31/93 0.0466107 0.0000 11.110
01/31/94 0.0460055 0.0000 11.200
02/28/94 0.0434651 0.0000 10.910
03/31/94 0.0480784 0.0000 10.600
04/29/94 0.0410750 0.0000 10.450
05/31/94 0.0448825 0.0000 10.390
06/30/94 0.0466505 0.0000 10.310
07/29/94 0.0495636 0.0000 10.430
08/31/94 0.0487199 0.0000 10.390
09/30/94 0.0500287 0.0000 10.190
10/31/94 0.0461829 0.0000 10.110
11/30/94 0.0486446 0.0000 10.040
12/30/94 0.0891509 0.0000 10.010
01/31/95 0.0526001 0.0000 10.130
02/28/95 0.0485818 0.0000 10.310
03/31/95 0.0540074 0.0000 10.330
04/28/95 0.0451727 0.0000 10.420
05/31/95 0.0479439 0.0000 10.790
06/30/95 0.0480453 0.0000 10.810
07/31/95 0.0415648 0.0000 10.680
08/31/95 0.0470590 0.0000 10.730
09/29/95 0.0496775 0.0000 10.750
10/31/95 0.0525478 0.0000 10.820
11/30/95 0.0554821 0.0000 10.890
12/29/95 0.0584873 0.0000 10.980
Class C Shares
07/31/95 0.0280101 0.0000 10.680
08/31/95 0.0422630 0.0000 10.730
09/29/95 0.0468798 0.0000 10.760
10/31/95 0.0521141 0.0000 10.830
11/30/95 0.0537598 0.0000 10.900
12/29/95 0.0588323 0.0000 10.990
1. Average Annual Total Returns for the Periods Ended 12/31/95:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,113.80 1 $1,491.62 .2
(---------) - 1 = 11.38% (---------) - 1 = 8.33%
$1,000 $1,000
Inception
$1,816.94 .1297
(---------) - 1 = 8.05%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of
5.00% for the first year, and 3.00% for the inception year:
One Year Inception
$1,110.55 1 $1,121.62 .3750
(---------) - 1 = 11.06% (---------) - 1 = 4.40%
$1,000 $1,000
Oppenheimer Bond Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 12/31/95 (Continued):
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%
for the inception year:
Inception
$1,027.62 2.1176
(---------) - 1 = 5.94%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,169.36 1 $1,565.99 .2
(---------) - 1 = 16.94% (---------) - 1 = 9.39%
$1,000 $1,000
Inception
$1,907.53 .1297
(---------) - 1 = 8.74%
$1,000
Class B Shares
One Year Inception
$1,160.55 1 $1,151.30 .3750
(---------) - 1 = 16.06% (---------) - 1 = 5.43%
$1,000 $1,000
Class C Shares
Inception
$1,037.62 2.1176
(---------) - 1 = 8.13%
$1,000
Oppenheimer Bond Fund
Page 5
2. Cumulative Total Returns for the Periods Ended 12/31/95:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,113.80 - $1,000 $1,491.62 - $1,000
------------------ = 11.38% ------------------ = 49.16%
$1,000 $1,000
Inception
$1,816.94 - $1,000
------------------ = 81.69%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales
charge of 5.00% for the first year, and 3.00% for the inception year:
One Year Inception
$1,110.55 - $1,000 $1,121.62 - $1,000
------------------ = 11.06% ------------------ = 12.16%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
inception year:
Inception
$1,027.62 - $1,000
------------------ = 2.76%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,169.36 - $1,000 $1,565.99 - $1,000
------------------ = 16.94% ------------------ = 56.60%
$1,000 $1,000
Inception
$1,907.53 - $1,000
------------------ = 90.75%
$1,000
Oppenheimer Bond Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 12/31/95 (Continued):
Examples at NAV (Continued):
Class B Shares
One Year Inception
$1,160.55 - $1,000 $1,151.30 - $1,000
------------------ = 16.06% ------------------ = 15.13%
$1,000 $1,000
Class C Shares
Inception
$1,037.62 - $1,000
------------------ = 3.76%
$1,000
Oppenheimer Bond Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 12/31/95:
The Fund's standardized yields are calculated using the following formula set
forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$1,068,736.10 - $168,720.10 6
2{(---------------------------- + 1) - 1} = 6.14%
15,440,090 x $11.53
Class B Shares
Example at NAV:
$ 244,790.04 - $ 62,819.58 6
2{(--------------------------- + 1) - 1} = 5.69%
3,537,349 x $10.98
Class C Shares
Example at NAV:
$ 26,065.41 - $ 6,661.11 6
2{(-------------------------- + 1) - 1} = 5.70%
376,288 x $10.99
Oppenheimer Bond Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/95:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering ($.0634202/30 x 365)/$11.53 = 6.69%
Dividend Yield
at Net Asset Value ($.0634202/30 x 365)/$10.98 = 7.03%
Class B Shares
Dividend Yield
at Net Asset Value ($.0565953/30 x 365)/$10.98 = 6.27%
Class C Shares
Dividend Yield
at Net Asset Value ($.0569479/30 x 365)/$10.99 = 6.30%
Oppenheimer Bond Fund
Page 9
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/95:
The Fund's tax-equivalent yields are calculated using the
following formula:
(a / ( 1 - c)) + b = Tax-Equivalent Yeild
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Stated income tax rate for an individual in the 39.6% federal tax
bracket filing singly).
Examples:
Class A Shares
(0.0614 / ( 1 - .3960 ) ) + 0 = 10.17%
Class B Shares
(0.0569 / ( 1 - .3960 ) ) + 0 = 9.42%
Class C Shares
(0.0570 / ( 1 - .3960 ) ) + 0 = 9.44%
Oppenheimer Value Stock 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:
Amount From
Distribution Amount From Long or
Reinvestment Investment Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
03/19/87 0.0900 0.0100 11.270
12/31/87 0.3138 0.1777 9.520
06/30/88 0.1800 0.0000 10.460
09/30/88 0.0700 0.0000 10.530
12/30/88 0.0806 0.1894 10.590
03/31/89 0.1000 0.0000 11.060
06/30/89 0.1200 0.0000 11.770
09/29/89 0.0900 0.0000 12.300
12/29/89 0.0993 0.2507 11.990
03/30/90 0.1000 0.0000 11.700
06/29/90 0.1000 0.0000 12.230
09/28/90 0.0900 0.0000 10.600
12/31/90 0.0964 0.1036 10.850
04/03/91 0.0900 0.0000 12.840
06/21/91 0.0800 0.0000 13.040
09/20/91 0.0800 0.0000 13.150
12/20/91 0.0840 0.3110 12.680
03/27/92 0.0800 0.0000 13.510
06/26/92 0.0800 0.0000 13.780
09/25/92 0.0800 0.0000 13.970
12/28/92 0.0820 0.3460 14.220
03/24/93 0.0700 0.0000 14.790
06/25/93 0.0700 0.0000 14.650
09/24/93 0.0700 0.0000 14.910
12/29/93 0.0780 0.7600 14.460
03/25/94 0.0660 0.0000 14.380
06/24/94 0.0600 0.0000 14.170
09/23/94 0.0700 0.0000 14.580
12/20/94 0.1240 0.3950 14.080
03/24/95 0.0600 0.0000 15.140
06/23/95 0.0700 0.0000 16.370
09/22/95 0.0900 0.0000 17.070
12/21/95 0.0842 0.2389 17.610
Class B Shares
06/25/93 0.0600 0.0000 14.630
09/24/93 0.0530 0.0000 14.870
12/29/93 0.0530 0.7600 14.400
03/25/94 0.0430 0.0000 14.320
06/24/94 0.0360 0.0000 14.100
09/23/94 0.0440 0.0000 14.510
12/20/94 0.0960 0.3950 14.020
03/24/95 0.0380 0.0000 15.060
06/23/95 0.0440 0.0000 16.280
09/22/95 0.0600 0.0000 16.980
12/21/95 0.0492 0.2389 17.510
Class C Shares
12/21/95 0.0657 0.2389 17.580
f:\rr\dnvshare\sai\1995\123195\325.sch
Oppenheimer Value Stock Fund
Page 2
1. Average Annual Total Returns for the Periods Ended 12/31/95:
The formula for calculating average annual total return is as
follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$1,225.68 1 $1,893.32 .2
(---------) - 1 = 22.57% (---------) - 1 = 13.62%
$1,000 $1,000
Inception
$2,609.71 .1108
(---------) - 1 = 11.21%
$1,000
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00%
for the first year, and 3.00% for the inception year:
One Year Inception
$1,240.27 1 $1,353.86 .3750
(---------) - 1 = 24.03% (---------) - 1 = 12.03%
$1,000 $1,000
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00%
for the inception year:
Inception
$1,048.94 4.0449
(---------) - 1 = 21.32%
$1,000
Oppenheimer Value Stock Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 12/31/95
(Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,300.39 1 $2,008.82 .2
(---------) - 1 = 30.04% (---------) - 1 = 14.97%
$1,000 $1,000
Inception
$2,768.84 .1108
(---------) - 1 = 11.95%
$1,000
Class B Shares
One Year Inception
$1,290.27 1 $1,383.86 .3750
(---------) - 1 = 29.03% (---------) - 1 = 12.96%
$1,000 $1,000
Class C Shares
Inception
$1,058.93 4.0449
(---------) - 1 = 26.06%
$1,000
2. Cumulative Total Returns for the Periods Ended 12/31/95:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$1,225.68 - $1,000 $1,893.32 - $1,000
------------------ = 22.57% ------------------ = 89.33%
$1,000 $1,000
Inception
$2,609.71 - $1,000
------------------ = 160.97%
$1,000
Oppenheimer Value Stock Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 12/31/95
(Continued):
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00%
for the first year, and 3.00% for the inception year:
One Year Inception
$1,240.27 - $1,000 $1,353.86 - $1,000
------------------ = 24.03% ------------------ = 35.39%
$1,000 $1,000
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00%
for the inception year:
Inception
$1,048.94 - $1,000
------------------ = 4.89%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,300.39 - $1,000 $2,008.82 - $1,000
------------------ = 30.04% ------------------ = 100.88%
$1,000 $1,000
Inception
$2,768.84 - $1,000
------------------ = 176.88%
$1,000
Class B Shares
One Year Inception
$1,290.27 - $1,000 $1,383.86 - $1,000
------------------ = 29.03% ------------------ = 38.39%
$1,000 $1,000
Class C Shares
Inception
$1,058.93 - $1,000
------------------ = 5.89%
$1,000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> OPPENHEIMER VALUE STOCK FUND - CLASS C
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<NAME> OPPENHEIMER INTEGRITY FUNDS
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<INVESTMENTS-AT-COST> 120070593
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