Registration No. 2-86903
File No. 811-3864
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. 24 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
AMENDMENT NO. 24 / X /
OPPENHEIMER ASSET ALLOCATION FUND
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center
New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On August 29, 1995, 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
Registration of Shares Under the Securities Act of 1933
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1994 was filed on February 27, 1995.
<PAGE>
FORM N-1A
OPPENHEIMER ASSET ALLOCATION FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
--------- ------------------
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed - Organization and
History; Investment Objective and Policies; Investment
Restrictions
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; Investment Objective and
Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy Shares;
Special Investor Services; How to Sell Shares; How to
Exchange Shares; Service Plan for Class A Shares;
Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares
8 Special Investor Services; How to Sell Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
--------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed - Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 Financial Statements
_________________________________
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
Prospectus dated August 29, 1995
Oppenheimer Asset Allocation Fund (the "Fund") is a mutual fund that
seeks high total investment return as its investment objective. That
means the Fund seeks current income and capital appreciation in the value
of its shares. In seeking this objective, the Fund may invest in
different types of securities, including common stocks and other equity
securities, money market securities and bonds and other debt securities,
including lower-rated, high yield debt securities of U.S. companies
commonly known as "junk bonds."
In seeking its objective, the Fund periodically allocates some or all
of its assets to invest in any one or more of different types of
securities. The Fund also uses "hedging instruments" to try to reduce the
risks of market fluctuations that can affect the value of the securities
the Fund holds. The Fund may invest up to 100% of its assets in junk
bonds or foreign debt securities rated below investment grade. These
securities may be considered to be speculative and involve greater risks,
including risk of default, than higher-rated securities. An investment
in the Fund does not constitute a complete investment program and is not
appropriate for persons unwilling or unable to assume the high degree of
risk associated with investing in lower rated securities. Investors
should carefully consider these risks before investing. Some other
investment techniques the Fund uses may be considered to be speculative
investment methods that may increase the risks of investing in the Fund
and may also increase the Fund's operating costs. You should carefully
review the risks associated with an investment in the Fund discussed in
"Investment Policies and Strategies" 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 August 29, 1995, Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
(logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION 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
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Ratings Categories
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you will bear
indirectly. The calculations are based on the Fund's expenses during its
last fiscal year ended December 31, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account", from
pages __ through __ for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% None None
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 5% in the 1% if shares
first year, are redeemed
declining to within 12 months
1% in the of purchase(2)
sixth year
and eliminated
thereafter(2)
Exchange Fee None None None
_______________________
<FN>
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 during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
2. See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class
C Shares," below.
</TABLE>
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund Is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds the Fund's portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan fees for
Class A shares are the Service Plan 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 Distribution and Service Plan Fees (the maximum service fee
is 0.25% of average annual net assets of that class) and the asset-based
sales charge of 0.75%. The actual expenses for each class of shares in
future years may be more or less, depending on a number of factors,
including the actual amount of the assets represented by each class of
shares. These plans are described in greater detail in "How to Buy
Shares."
The Management Fees are restated to apply the new management fee
rates approved by the Fund's shareholders at a meeting held on June 27,
1994, as if those rates had been in effect for the entire fiscal year.
Had the fee rates not changed, the actual management fee rates would have
been 0.70% for Class A and Class C shares. Class B shares were not
publicly offered during the Fund's fiscal year ended December 31, 1994.
Therefore, the Annual Fund Operating Expenses for Class B shares are
estimates based on amounts that would have been payable if Class B shares
had been outstanding during that fiscal year.
Also, as of July 1, 1994, a new Service Plan took effect for Class
A shares that applies to all Class A shares, regardless of the date on
which the shares were purchased. Therefore, those fees are restated as
though the new rates had been in effect during the entire fiscal year
ended December 31, 1994. The actual Class A Service Plan fee rate was
0.15% of average net assets, and actual total Fund operating expenses were
1.09% of average net assets for Class A shares and 2.00% for Class C
shares.
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.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees (restated) 0.74% 0.74% 0.74%
12b-1 Distribution or Service Plan Fees 0.25% 1.00% 1.00%
(restated)
Other Expenses 0.24% 0.30% 0.30%
Total Fund Operating Expenses (restated) 1.23% 2.04% 2.04%
</TABLE>
- 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 (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 $69 $94 $121 $198
Class B Shares $71 $94 $130 $197
Class C Shares $31 $64 $110 $237
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $69 $94 $121 $198
Class B Shares $21 $64 $110 $197
Class C Shares $21 $64 $110 $237
<FN>
_____________________
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge imposed
on Class B and Class C shares, long-term shareholders of Class B and Class
C shares could pay the economic equivalent of an amount greater than the
maximum front-end sales charges permitted under applicable regulatory
requirements. For Class B shareholders, the automatic conversion of Class
B 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.
</TABLE>
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 vary.
<PAGE>
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's investment
objective is to seek high total investment return, which includes both
current income and capital appreciation.
- What Does the Fund Invest In? The Fund invests in a variety of
different types of securities. These include common and preferred stocks,
convertible securities and warrants, debt securities such as corporate
bonds and notes, U.S. Government securities, and money market instruments.
The Fund's investments can include "junk bonds" and foreign securities,
including foreign debt securities that are below investment grade, which
have special risks. While all securities investments entail risks, high
yield bonds and foreign securities have special risks, described in more
detail in "Investment Objective and Policies." The Fund may also write
covered calls and use certain types of securities called "derivative
investments" and hedging instruments to try to manage investment risks.
These investments are more fully explained in "Investment Objective and
Policies" starting on page __.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation, which (including a
subsidiary) manages investment companies currently having over $35 billion
in assets. The Manager is paid an advisory fee by the Fund, based on its
assets. The Fund's portfolio manager, who is employed by the Manager and
is primarily responsible for the selection of the Fund's securities, is
Richard H. Rubinstein. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page ___ for more
information about the Manager and its fees.
- How Risky Is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds are subject to changes
in their value from a number of factors such as changes in general bond
and stock market movements. The change in value of particular stocks or
bonds may result from an event affecting the issuer, or changes in
interest rates that can affect bond prices. 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 moderately aggressive because it may invest in foreign
securities and high-yield debt securities ("junk bonds") and may invest
for capital appreciation in stocks. 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 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"
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 5.75%, and reduced for larger purchases. Class B
shares are offered without a front-end sales charge, 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 owned your
shares. Class C shares are offered without a front-end sales charge, but
may be subject to a contingent deferred sales charge of 1% if redeemed
within one year of buying them. There is also an annual asset-based sales
charge on Class B and Class C shares. Please review "How To Buy Shares"
starting on page ___ for more details, including a discussion about
factors you and your financial advisor should consider in determining
which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___. The Fund also
offers exchange privileges to other OppenheimerFunds, 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 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 page ___. Please remember that past performance does not
guarantee future results.
<PAGE>
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense ratios and
other data based on the Fund's average net assets. This information has
been audited by KPMG Peat Marwick LLP, the Fund's independent auditors,
whose report on the Fund's financial statements for the fiscal year ended
December 31, 1994, is included in the Statement of Additional Information.
Class B shares were not publicly offered during the periods shown.
Accordingly, no information on Class B shares is included in the table
below or in the Fund's financial statements for the fiscal year ended
December 31, 1994.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------------------------
Class A Class C
------------------------------------------------------------------------------- ------------------
Year Period
Year Ended Ended Ended
December 31, Dec.31, Dec.31,
1994 1993 1992 1991(3) 1990 1989 1988 1987(2) 1994 1993(1)
==========================================================
==========================================================
===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $ 13.05 $ 11.63 $ 11.22 $ 10.19 $ 10.67 $ 9.78 $ 8.89 $ 10.00 $ 13.05 $ 12.86
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income (loss) .54 .44 .39 .40 .53 .49 .39 .27 .44 (.97)
Net realized and unrealized
gain (loss) on investments,
options written and
foreign currency transactions (.75) 1.43 .44 1.06 (.43) 1.17 1.09 (1.11) (.77) 1.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (.21) 1.87 .83 1.46 .10 1.66 1.48 (.84) (.33) .32
-----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.53) (.44) (.42) (.43) (.52) (.48) (.40) (.26) (.44) (.12)
Distributions from net
realized gain on investments,
options written, and
foreign currency transactions (.79) (.01) -- -- (.06) (.29) (.19) (.01) (.79) (.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (1.32) (.45) (.42) (.43) (.58) (.77) (.59) (.27) (1.23) (.13)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.52 $ 13.05 $11.63 $11.22 $ 10.19 $ 10.67 $ 9.78 $ 8.89 $ 11.49 $
13.05
======= ======= ====== ====== ======= =======
======= ======= ======= =======
==========================================================
==========================================================
===============
Total Return,
at Net Asset Value(4) (1.59)% 16.30% 7.54% 14.67% .93% 18.21% 15.88% (8.60)% (2.50)%
2.51%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $237,771 $277,914 $266,713 $276,800 $83,292 $81,194 $51,602 $32,718 $9,182
$ 396
-----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)$260,767 $272,303 $269,096 $192,870 $82,490 $68,134 $40,662 $31,407 $5,601
$ 194
-----------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 20,633 21,302 22,938 24,666 8,171 7,611 5,275 3,679 799 30
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.10% 3.58% 3.41% 3.78% 5.14% 4.71% 4.30% 3.84%(5) 3.30%
2.19%(5)
Expenses 1.09% 1.14% 1.17% 1.27% 1.36% 1.47% 1.50% 1.60%(5) 2.00%
2.50%(5)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 31.5% 32.7% 60.3% 102.0% 71.3% 60.2% 185.5% 83.7% 31.5%
32.7%
<FN>
1. For the period from December 1, 1993 (inception of offering) to December 31, 1993.
2. For the period from April 24, 1987 (commencement of operations) to December 31, 1987.
3. Per share amounts calculated based on the weighted average number of shares outstanding during
the year.
4. 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.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term securities) for
the year ended December 31, 1994 were $80,945,381 and $94,867,765, respectively.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high total investment return, which includes
current income as well as capital appreciation in the value of its shares.
Investment Policies and Strategies. The Fund seeks its investment
objective by investing its assets in a variety of different types of
securities. In general, those investments include the categories listed
below.
- Equity securities. Generally these are securities that represent
an ownership interest in the company issuing the security. They include
common stocks, preferred stocks, convertible securities and warrants
issued by domestic and foreign companies. When investing in convertible
securities, the Manager looks to the conversion feature and treats the
securities as "equity securities."
- Debt securities. The Fund's debt security investments may include
bonds and notes issued by domestic or foreign companies, and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (these are referred to as U.S. Government securities),
and by foreign governments. The Fund is not required to limit those
investments to securities having particular ratings by nationally-
recognized rating agencies. The Manager does not rely solely on ratings
of securities in making investment decisions, but evaluates other business
and economic factors affecting the issues as well. The Fund can buy
unrated securities, and when doing so, the Manager will determine in its
judgement whether unrated securities are of comparable quality to
securities rated by rating organizations.
- Money market instruments. These are short-term debt securities
(that is, they have a maturity of 13 months or less). They include U.S.
Treasury Bills (which have maturities of one year or less) and short-term
debt obligations, payable in U.S. dollars, issued by banks, savings and
loan associations and corporations.
- Hedging Instruments. These are investments used by the Fund
primarily to manage or "hedge" against investment risks. The Fund's
hedging instruments may include put and call options, forward contracts,
swap agreements, Futures and options on Futures.
The Fund is not required to invest any set amount or percentage of
its assets at any one time in one or more of the types of investments
identified above. To seek the Fund's investment objective of a high total
investment return, from time to time the Manager reallocates the Fund's
assets among the different investment categories listed above. That
allocation is based upon many factors, including the Manager's evaluation
of general economic and market conditions in the U.S. and abroad and its
expectations as to the potential total return of a particular category of
investments. For example, at certain times, equity securities may be
emphasized. When stock market conditions are unstable, the Fund may
reallocate its assets to debt securities, with emphasis on money market
instruments. Using this "asset allocation" approach, the proportion of
the Fund's assets invested in any one type of investment will vary from
time to time.
The Fund's portfolio manager may employ special investing techniques
in selecting investments for the Fund. These are also described below in
"Other Investment Techniques and Strategies." Additional information
about the types of investments, techniques and strategies the Fund employs
may be found under the same headings in the Statement of Additional
Information.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and practices
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.
- 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.
- Special Risks of Lower-Rated Securities. The domestic and foreign
debt securities the Fund can invest in may include (without any
restriction as to the amount) high-yield, "lower-grade" debt securities
(including both high-yielding rated and unrated securities). They
generally offer higher income potential than investment grade securities.
"Lower-grade" securities are those rated below "investment grade," which
means they have a rating below "BBB" by Standard & Poor's Corporation or
"Baa" by Moody's Investors Service, Inc. or similar ratings by other
rating organizations. "Lower-grade" debt securities the Fund may invest
in also include securities that are not rated by a nationally-recognized
rating organization like Standard & Poor's or Moody's, but which the
Manager judges to be comparable to lower-rated securities. The Fund may
invest in securities rated as low as "D" by Standard & Poor's or "C" by
Moody's. For a description of these securities ratings, please refer to
the Appendix to this Prospectus.
At June 30, 1995, the Fund's portfolio contained domestic and foreign
debt securities in the categories that follow. The ratings were by
Standard & Poor's or, if unrated, determined by the Manager to be
comparable to the category indicated, and the percentages relate to the
weighted average value of the bonds in each rating category as a
percentage of the Fund's total assets: A, 0.44%, BBB, 2.00%; BB, 2.33%;
B, 6.03%, CCC, 1.28%; and CC, 0.12% If a bond was not rated by Standard
& Poor's but was rated by Moody's, it is included in Standard & Poor's
comparable category. Unrated bonds were not rated by either Moody's or
Standard & Poor's.
High yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics and special risks that make them riskier
investments than investment grade securities. They may be subject to
greater market fluctuations and risk of loss of income and principal than
lower yielding, investment grade securities. There may be less of a
market for them and therefore they may be harder to sell at an acceptable
price. There is a relatively greater possibility that the issuer's
earnings may be insufficient to make the payments of interest due on the
bonds. The issuer's low creditworthiness may increase the potential for
its insolvency. For foreign lower-grade debt securities, these risks are
in addition to the risks of investing in foreign securities, described in
"Foreign Securities," below.
These risks mean that the Fund may not achieve the income it expects
from lower-grade securities, and that the Fund's net asset value per share
may be affected by declines in value of these securities. However, the
Fund's allocation of its assets among different types of investments under
normal conditions may reduce some of the risk that investing in these
securities can have on the value of the Fund's shares, as will the Fund's
policy of diversifying its investments. Also, convertible securities may
be less subject to some of these risks than other debt securities, to the
extent they can be converted into stock. That is because stock may be
more liquid and less affected by the other risk factors affecting junk
bonds.
- Stock Investment Risks. Because the Fund can invest a substantial
portion (or 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,
changes in government regulations affecting an industry). Not all of
these factors can be predicted.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial amount
of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does
not concentrate its investments in any one industry or group of
industries. Because changes in overall market prices can occur at any
time, and because the income earned on securities is subject to change,
there is no assurance that the Fund will achieve its investment objective,
and when you redeem your shares, they may be worth more or less than what
you paid for them.
Equity Securities. When investing for capital appreciation, the Fund may
buy equity securities issued by domestic or foreign companies in any
industry (for example, industrial, financial or utility). These
investments may include common stocks, preferred stocks, convertible
securities and warrants. In selecting stocks, the Fund will emphasize
issues that are listed on a U.S. securities exchange or quoted on the
automated quotation system of the National Association of Securities
Dealers, Inc. (NASDAQ). Although the Fund may invest in securities of
small, unseasoned companies, it does not currently intend that its
investments in the current year in securities of companies (including
predecessors) that have operated less than three years will exceed 5% of
its total assets.
Debt Securities. The Fund has no limitations on the maturity,
capitalization of the issuer or credit rating of the domestic debt
securities in which it invests. The Fund may invest in any debt
securities, including bonds, debentures, notes, participation interests,
asset-backed securities and zero coupon securities, issued by corporations
in any industry.
The Fund may also invest in U.S. Government Securities. Certain of
these obligations, including U.S. Treasury notes, bills and bonds, and
mortgage-backed securities guaranteed by Government National Mortgage
Association (these securities are called "Ginnie Maes") are supported by
the full faith and credit of the U.S. government. Other mortgage-related
U.S. Government Securities the Fund invests in are issued or guaranteed
by federal agencies or government-sponsored entities but 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 (these securities are referred to as "Freddie Macs") and
obligations supported only by the credit of the instrumentality, such as
Federal National Mortgage Association (these securities are referred to
as "Fannie Maes"). The Fund may invest in zero coupon U.S. Treasury
securities (described below) and short-term U.S. Government Securities
that are money market instruments.
- Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies. These
interests are acquired from banks or brokers that have made the loan or
are members of the lending syndicate. No more than 5% of the Fund's net
assets can be invested in participation interests of the same borrower.
The value of loan participation interests depends primarily upon the
creditworthiness of the borrower, and its ability to pay interest and
repay the principal.
The Manager has set creditworthiness standards for issuers of loan
participations, and monitors their creditworthiness. One risk of these
investments is that the borrower may have difficulty making payments on
the loan. Under the Fund's standard for creditworthiness, some borrowers
may have senior securities rated as low as "C" by Moody's or "D" by
Standard & Poor's, but may be considered to be acceptable credit risks.
If a borrower fails to make scheduled interest or principal payments, the
value of the Fund's participation in that loan could decline, and the Fund
could experience a decline in the net asset value of its shares as well
as a reduction of income. Participation interests are subject to the
Fund's limitations on investments in illiquid securities, described in
"Illiquid and Restricted Securities."
- Asset-Backed Securities. The Fund may invest in "asset-backed"
securities. These are interests in pools of consumer loans and other
trade receivables similar to mortgage-backed securities, described below.
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 debt that forms the income stream for the security.
- Mortgage-Backed Securities and CMOs. The Fund may invest in
securities that represent an interest in a pool of residential mortgage
loans. These include collateralized mortgage-backed obligations (referred
to as "CMOs"). CMOs are considered U.S. Government Securities if they are
issued or guaranteed by agencies or instrumentalities of the U.S.
Government (for example, Ginnie Maes, Freddie Macs and Fannie Maes).
However, other mortgage-backed securities represent pools of mortgages
"packaged" and offered by private issuers, and there is a risk that
private issuers will be unable to meet their obligations on CMOs.
CMOs and mortgage-backed securities differ from conventional debt
securities that provide periodic payments of interest in fixed amounts and
repay the principal at maturity or specified call dates. Mortgage-backed
securities provide monthly payments that are, in effect, a "pass-through"
of the monthly interest and principal payments made by the individual
borrowers on the pooled mortgage loans. Those payments may include
prepayments of mortgages, which have the effect of paying the debt on the
CMO early. When the Fund receives scheduled principal payments and
unscheduled prepayments it will have cash to reinvest but may have to
invest that cash in investments having lower interest rates than the
original investment. That could reduce the yield of the Fund.
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 the other which receives some or all
of the interest. Stripped securities that receive only interest are
subject to increased price volatility when interest rates change. They
have an additional risk that if the principal underlying the CMO is
prepaid (which is more likely to happen if interest rates fall), the Fund
will lose the anticipated cash flow from the interest on the mortgages
that were prepaid.
- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued either by private issuers or by the U.S. Treasury. Some
zero coupon securities of private issuers are notes or debentures that do
not pay current interest and are issued at substantial discounts from par
value. Other private issuer zero coupon securities are notes or
debentures that pay no current interest until a stated date one or more
years in the future, after which the issuer is obligated to pay interest
until maturity. Usually that interest rate is higher than if interest
were payable from the date the security is issued. Private issuer zero
coupon securities are subject to the risk of the issuer's failure to pay
interest and repay the principal value of the security.
Zero coupon U.S. Treasury securities generally are U.S. Treasury
notes or bonds that have been "stripped" of their interest coupons, U.S.
Treasury bills issued without interest coupons, or certificates
representing an interest in the stripped securities. A zero coupon
Treasury security pays no current interest and trades at a deep discount
from its face value. It will be subject to greater market fluctuations
from changes in interest rates than interest-paying securities.
While the Fund does not receive cash payments of interest on zero
coupon securities, it does accrue taxable income on these securities. As
a result, the Fund may be forced to sell portfolio securities to pay cash
dividends or meet redemptions.
- 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
commodities; however, the Fund may purchase and sell foreign currency in
hedging transactions. This shall not prevent the Fund from buying or
selling options and futures contracts.
Derivative investments used by the Fund are used in some cases for
hedging purposes and in other cases to attempt to seek total return. In
the broadest sense, exchange-traded options and futures contracts
(discussed in "Hedging," below) 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 make
fixed interest payments and/or to pay a fixed sum on the maturity of the
note. Principal and/or interest payments on an index-linked note depend
on the performance of one or more market indices, such as the S & P 500
Index or a weighted index of commodity futures, such as crude oil,
gasoline and natural gas. The Fund may invest in "debt exchangeable for
common stock" of an issuer or "equity-linked" debt securities of an
issuer. At maturity, the principal amount of the debt security is
exchanged for common stock of the issuer or is payable in an amount based
on the issuer's common stock price at the time of maturity. In either
case there is a risk that the amount payable at maturity will be less than
the expected principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value
at maturity, and/or an interest rate, determined by reference to one or
more foreign currencies. The currency-indexed securities purchased by the
Fund may make payments based on a formula. The payment of principal or
periodic interest may be calculated as a multiple of the movement of one
currency against another currency, or against an index. These investments
may entail increased risk to principal and increased price volatility.
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. 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."
Money Market Instruments. The Fund may invest in money market
instruments, which are debt obligations generally maturing in 13 months
or less. They may include short-term certificates of deposit, bankers'
acceptances, commercial paper (including variable amount master demand
notes), U.S. Government obligations, and other debt instruments (including
bonds) issued by corporations. These securities may have variable or
floating interest rates. The Fund's investments in this sector include
high quality commercial paper (in general, paper in the top two rating
categories of Standard & Poor's or Moody's); in addition, there are
restrictions on the types of issuers whose securities will be purchased.
These are more fully described in the Statement of Additional Information.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." Generally, the Fund will not trade in
securities for short-term profits, and the Fund's portfolio turnover rate
is normally expected to be less than 100% a year. However, the portfolio
turnover rate may vary when the Fund re-allocates its assets. The Fund
will actively use portfolio trading to try to benefit from differences in
short-term yields among different issues of debt securities, to try to
increase its income or to take advantage of differences in securities
prices. The "Financial Highlights," above, show the Fund's portfolio
turnover rate during past fiscal years.
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. The Fund qualified in its last fiscal year and intends
to do so in the coming year, although it reserves the right not to
qualify. 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.
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 may help reduce some of the risks.
- Foreign Securities. The Fund may invest in equity and debt
securities issued by foreign companies and debt securities issued by
foreign governments. The Fund does not have any limit on the amount of
foreign securities it may purchase. However, normally the Fund does not
expect to have more than 35% of its assets invested in foreign securities.
Foreign securities are those that are listed on a foreign securities
exchange or are traded in the foreign over-the-counter markets. The Fund
may purchase foreign securities issued by companies engaged in mining gold
and other precious metals. If the Fund's investments are held abroad, the
countries in which they are held and the sub-custodians holding them must
be approved by the Fund's Board of Trustees.
- 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.
The Fund may invest in foreign securities issued in any country,
developed or underdeveloped. Securities of issuers in non-industrialized
countries generally involve more risk and may be considered highly
speculative. 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.
- 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 (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). The Fund's percentage
limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers.
- Loans of Portfolio Securities. To attempt to increase its income,
or to raise cash for liquidity purposes, the Fund may lend its portfolio
securities to brokers, dealers and other financial institutions. The Fund
must receive collateral for a loan. As a matter of fundamental policy,
these loans are limited to not more than 25% of the value of the Fund's
total assets. Loans are subject to the conditions described in the
Statement of Additional Information. The Fund presently does not intend
to engage in loans of portfolio securities that will exceed 5% of the
value of its 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 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 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.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures, broadly-based stock 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 hedging instruments the Fund may use are described
below and in greater detail in "Hedging" 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. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Forward
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. At present, the Fund does not intend to enter
into futures contracts, forward contracts or options on futures if, after
any purchase or sale, the value of all put and call options held by the
Fund would exceed 5% of its total assets.
- Futures. The Fund may buy and sell futures contracts that relate
to (1) foreign currencies (these are called Forward Contracts), (2)
broadly-based stock indices (these are called Stock Index Futures) or (3)
interest rates (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). 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 calls on debt or equity securities, broadly-based
stock indices, foreign currencies, or futures, or to terminate its
obligation on a call the Fund previously wrote. The value of debt
securities underlying calls bought by the Fund will not exceed the value
of the Fund's cash or cash-equivalent portfolio holdings (that is,
securities with a maturity of less than one year).
The Fund may write (that is, sell) call options that are listed on
a domestic securities exchange or quoted on NASDAQ. In addition, the Fund
may write calls on debt securities in the over-the-counter market, and on
foreign currency or Futures. All calls must be "covered." That means
the Fund must own the security subject to the call while the call is
outstanding (or own other securities acceptable for applicable escrow
requirements). Calls on futures 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.
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 25% 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 can buy puts that relate to debt
securities, equity securities, broadly-based stock indices, futures, or
foreign currencies. The Fund can buy a put on a debt or an equity
security, futures, broadly-based stock indices or foreign currency,
whether or not the Fund owns the particular investment in its portfolio.
The Fund may sell a put on equity or debt securities or on futures, but
only if the puts are covered by segregated liquid assets. The Fund will
not write puts if more than 50% of the Fund's net assets would have to be
segregated to cover put obligations.
Foreign currency options 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, described in "Illiquid and Restricted Securities,"
below.
- Forward Contracts. Forward Contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for
future delivery at a fixed price. The Fund uses them to try to "lock in"
the U.S. dollar price of a security denominated in a foreign currency that
the Fund has purchased or sold, or to protect against possible losses from
changes in the relative value of the U.S. dollar and a foreign currency.
The Fund may also use "cross hedging," where the Fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated. The Fund limits its exposure in foreign currency exchange
contracts to the amount of its assets denominated in the foreign currency
to avoid having to buy or sell foreign currency at disadvantageous prices.
- Interest Rate Swaps. 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 50% 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. 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. Cross-hedging entails a risk of loss on
both the value of the security that is the basis of the hedge and the
currency contract that was used in the hedge. These risks and the hedging
strategies the Fund may use are described in greater detail in the
Statement of Additional Information.
- Short Sales Against-the-Box. In a short sale, the seller does not
own the security that is sold, but normally borrows the security to
fulfill the delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Fund may not
sell securities short except in collateralized transactions referred to
as "short sales against-the-box," where the Fund owns an equivalent amount
of the securities sold short. No more than 15% of the Fund's net assets
will be held as collateral for short sales at any one time.
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:
- invest in securities (except U.S. Government Securities) of any
issuer if immediately thereafter, either (a) more than 5% of the Fund's
total assets would be invested in securities of that issuer, or (b) the
Fund would then own more than 10% of that issuer's voting securities;
- lend money, except that the Fund may buy debt securities that the
Fund's investment policies and restrictions permit it to purchase; the
Fund may also make loans of portfolio securities subject to the
restrictions stated under "Loans of Portfolio Securities";
- borrow money in excess of 5% of the value of its total assets and
then only as a temporary measure for extraordinary or emergency purposes;
or mortgage, pledge or hypothecate any of its assets to secure a debt (the
escrow or other collateral arrangements in connection with hedging
instruments are not considered to involve a mortgage, hypothecation or
pledge);
- invest more than 5% of the value of its total assets in warrants
nor more than 2% of that value in warrants that are not listed on the New
York or American Stock Exchanges; warrants attached to other securities
are not subject to this restriction; or
- invest in commodities or commodity contracts; however, the Fund may
buy and sell hedging instruments permitted by any of its other fundamental
policies.
In addition, the Fund may not concentrate investments in any
particular industry. Therefore, the Fund will not purchase the securities
of companies in any one industry if thereafter more than 25% of the value
of the Fund's total assets would consist of companies in that industry.
However, that limitation does not apply to U.S. Government Securities.
All of the percentage restrictions described above and elsewhere in
this Prospectus (other than the percentage limits that apply to borrowing)
apply only at the time the Fund purchases a security, and the Fund need
not dispose of a security merely because the Fund's assets have changed
or the security has increased in value relative to the size of the Fund.
There are other fundamental policies discussed in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized as a Massachusetts
business trust in 1987 as the result of the combination of three series
of a mutual fund managed by the Manager into a single fund that became
this Fund, with a new investment objective and policies. The Fund is an
open-end, diversified management investment company, with an unlimited
number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees periodically meet 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 is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses, which may be different for the different classes. Each class
may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote together on matters that affect that
class alone. Shares are freely transferable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which chooses the Fund's investments
and handles its day-to-day business. The Manager carries out its duties,
subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement with the Fund 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 pays to conduct its
business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 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.
- Portfolio Manager. The Portfolio Manager of the Fund is Richard
H. Rubinstein, who is a Vice President of the Fund and also a Vice
President of the Manager. Mr. Rubinstein is the person, and since April
1991, has been one of the persons, primarily responsible for the day-to-
day management of the Fund's portfolio. He serves as an officer and
portfolio manager of other OppenheimerFunds.
- Fees and Expenses. Under the Investment Advisory Agreement that
became effective June 27, 1994, 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 aggregate net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million,
and 0.60% of aggregate net assets in excess of $800 million. Under the
Fund's investment advisory agreement in effect prior to June 27, 1994, the
rates were: 1.00% of the first $50 million of aggregate net assets, 0.75%
of the next $150 million of aggregate net assets; 0.70% of the next $200
million; 0.65% of the next $200 million; and 0.60% of net assets in excess
of $600 million. Prior to the adoption of the current fee rates on June
27, 1994, the Manager had voluntarily agreed to reduce its management fee
rates to the rates under the current agreement. The Fund's management fee
for its last fiscal year was 0.70% of average annual net assets for Class
A shares and 0.70% for Class C shares. These rates have been restated in
the "Annual Fund Operating Expenses" chart on page to reflect the fact
that the fee rates were reduced effective June 27, 1994.
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 affect the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the Investment Advisory
Agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free number shown
below in this Prospectus or 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 will usually be
different as a result of the different kinds of expenses each class bears.
These returns measure the performance of a hypothetical account in the
Fund over various periods, and do not show the performance of each
shareholder's account (which will vary if dividends are received in cash,
or shares are sold or purchased). The Fund's performance data may help
you see how well your Fund has done over time and to compare it to other
funds or market indices.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but more
detailed information about how total returns are calculated is contained
in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different "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 maximum initial sales charge. When total
returns are shown for Class B shares, they include the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown. When total returns are shown for a one-year period
for Class C shares, they include the effect of the contingent deferred
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. They may also be shown based on the change
in net asset value, without including the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
followed by a graphical comparison of the Fund's performance to two
appropriate broad-based market indices.
- Management's Discussion of Performance. During the Fund's last
fiscal year, the stock and bond markets were both affected by a series of
increases in U.S. interest rates by the Federal Reserve Board. As
interest rates increased, the overall stock and bond markets declined.
The portfolio manager emphasized investments in technology, health care
and industrial stocks, to attempt to improve performance. The Fund also
increased its investments in foreign stocks, especially in Latin America
and Asia, in anticipation of the resumption of growth in those markets.
The manager employed a variety of investment styles in selecting stocks,
including value, growth, contrarian, foreign and dividend yield emphasis.
Bond investments were allocated principally among high yield bonds and
foreign securities, to broaden the Fund's diversification.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in Class A and
Class C shares of the Fund held until December 31, 1994, with all
dividends and capital gains distributions reinvested in additional shares;
in the case of Class A shares, from the inception of the Class on April
24, 1987, and in the case of Class C shares, from the inception of the
Class on December 1, 1993. Class B shares were not publicly offered
during the fiscal year ended December 31, 1994. Accordingly, no
information is presented on Class B shares in the graphs below.
Because the Fund invests in a variety of equity and fixed-income
securities, the Fund's performance is compared to the performance of two
market indices: (i) the S&P 500 Index, a broad-based index of equity
securities widely regarded as a general measurement of the performance of
the U.S. equity securities market; and (ii) the Lehman Brothers Aggregate
Bond Index, a broad-based index of U.S. corporate bond issues, U.S.
government securities and mortgage-backed securities, widely regarded as
a measure of the performance of the domestic debt securities market.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance data
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 and the index 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 Asset Allocation Fund Class A,
the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index
(Graph)
Average Annual Total Return of Class A shares
of the Fund at 12/31/94(1)
1 Year 5 Years Life of Class*
-7.24% 6.07% 7.07%
-------------------------
* The inception date of the Fund (Class A shares) was 4/24/87. The
average annual total returns and ending account value in the graph reflect
reinvestment of all dividends and capital gains distributions and are
shown net of the 5.75% maximum initial sales charge.
Class C Shares
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Asset Allocation Fund Class C,
the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index
(Graph)
Average Annual Total Return of Class C shares
of the Fund at 12/31/94
1 Year Life of Class**
-3.39% -0.34%
-------------------------
** Class C shares were first publicly offered on 12/01/93. The average
annual total returns reflect reinvestment of all dividends and capital
gains distributions. The 1-year return is shown net of the 1% contingent
deferred sales charge; no sales charge applies to the life of class data.
Past performance is not predictive of future performance. Graphs are not
drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- 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 at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months 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. 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 you will normally pay a contingent deferred sales charge that
varies, depending on how long you have owned your shares. It is described
in "Buying Class B Shares" below.
- Class C Shares. When 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%. It is 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, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B and Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the asset-based sales charges 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 the investment each
year. Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Fund's actual investment returns and
the operating expenses borne by each class of shares, and which class you
invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. 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 Class B or 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 appropriatechoice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C Shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases
toward six years, Class C shares might not be as advantageous as Class A
shares. That is because the annual asset-based sales charge on Class C
shares will have a greater impact on your account over the longer term
than the reduced front-end sales charge available for larger purchases of
Class A shares. For example, Class A 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 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 $1 million or more of Class
B or C shares respectively from a single investor. Of course, these
examples are based on approximations of the effect of current sales
charges and expenses on a hypothetical investment over time, using the
assumed annual performance return stated above, and therefore should not
be relied on as rigid guidelines.
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 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.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class B or Class
C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares, and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Additionally, dividends
payable to Class B and Class C shareholders will be reduced by the
additional expenses borne solely 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 rather than another class. It is important that investors
understand that the purpose of the contingent deferred sales charges and
asset-based sales charges for Class B and Class C shares are the same as
the purpose of the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways: through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, 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 "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to 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 the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day the New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day the New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
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, where purchases are not subject
to an initial sales charge, the offering price may be net asset value. In
some cases, reduced sales charges may be available, as described below.
Out of the amount you invest, the Fund receives the net asset value to
invest for your account. The sales charge varies depending on the amount
of your purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________
Front-End Sales Charge Front-End Sales Charge Commission as
as a Percentage of as a Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
_________________________________________________________________________________
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
</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
OppenheimerFunds 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 eligibly participants, or (3) certifies that it
projects to have annual plan purchases of $200,00 or more.
Shares of any of the OppenheimerFunds that offer 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 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
(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 OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A 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 cumulate 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 OppenheimerFunds 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 OppenheimerFunds 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 that investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Clss A and Class B shares of the Fund and other
OppenheimerFunds 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 providing specifically for the use
of shares of the Fund in particular investment products made available to
their clients; and
- dealers, brokers or registered investment advisers that have entered
into an agreement with the Distributor to sell shares of defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administrative services.
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, or
- 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.
Waivers of the Class A Contingent Deferred Sales Charge. 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 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 (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
<S> <C>
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
</TABLE>
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 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.
- Distribution 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.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per
year. Both fees are computed on the average annual net assets of Class
B shares, determined as of the close of each regular business day. The
asset-based sales charge allows investors to buy Class B shares without
a front-end sales charge while allowing the Distributor to compensate
dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fee increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class B shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to the
Distributor for distributing Class B shares before the Plan was
terminated.
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 (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. 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 Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class C shares.
Those payments are at a fixed rate which is not related to the
Distributor's expense. The services rendered by the Distributor include
paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class C shares, including
compensation of personnel of the Distributor who support distribution of
Class C shares. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing Class C shares before the plan
was terminated.
- Waivers of Class B and Class C Sales Charges. The Class B and Class
C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to 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 in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases:
- 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 received the request), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by
the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP accounts)
before the participant is age 59-1/2, and distributions from 403(b)(7)
custodial plans or pension or profit sharing plans before the participant
is age 59-1/2 but only after the participant has separated from service,
if the distributions are made in substantially equal periodic payments
over the life (or life expectancy) of the participant or the joint lives
(or joint life and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must comply
with other requirements for such distributions under the Internal Revenue
Code and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent received the request);
- shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
- 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; (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 sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; or
- shares issued in plans or reorganization to which the Fund is a
party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use to
buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
shares, you have up to 6 months to reinvest all or part of the redemption
proceeds in Class A shares of the Fund or other OppenheimerFunds without
paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A shares on
which you paid a contingent deferred sales charge when you redeemed them.
It does not apply to Class C shares. 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 on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require A Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive a
check
- The redemption check is not payable to all shareholders listed on
the account statement
- The 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 as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- 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:
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or
Express Mail requests to:
Oppenheimer Shareholder 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 wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 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. 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 wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open
7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. In some
cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
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, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. 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.
- 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 with your bank to provide telephone
or written assurance to the Transfer Agent that your purchase payment has
cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- 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 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 taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, 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 and
updated prospectus 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 quarterly, payable on or about the 29th of March, June,
September and December. Another date may be selected by the Fund's Board
of Trustees. Normally, distributions paid on Class A shares generally are
expected to be higher than for Class B and Class C shares because expenses
allocable to Class B and Class C shares will generally be higher. There
is no fixed dividend rate and there can be no assurance as to the payment
of any dividends. The amount of a class's dividends or distributions may
vary from time to time depending on market conditions, the composition of
the Fund's portfolio and expenses borne by that class.
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 Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases if 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: Description of Ratings Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality and to carry
the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, the changes
that can be expected are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group, they comprise what are generally known as
"high-grade" bonds. They are rated lower than the best bonds because
margins of protection may not be as large as with "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than those of "Aaa" securities.
A: Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa: Bonds rated "Baa" are considered medium grade obligations, that
is, they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
APPENDIX A TO PROSPECTUS OF
OPPENHEIMER ASSET ALLOCATION FUND
Graphic material included in Prospectus of Oppenheimer Asset Allocation
Fund: "Comparison of Change in Value of $10,000 Investments in Oppenheimer
Asset Allocation Fund, the S&P 500 Index, and The Lehman Brothers
Aggregate Bond Index".
Linear graphs will be included in the Prospectus of Oppenheimer Asset
Allocation Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund
during each of the Fund's fiscal periods since the commencement of the
Fund's operations (April 24, 1987) as to Class A shares and the
commencement of the Class (December 1, 1993) as to Class C shares, and
comparing such values with the same investments over the same time periods
with S&P 500 Index and The Lehman Brothers Aggregate 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 S&P 500 Index and The Lehman Brothers Aggregate Bond
Index is set forth in the Prospectus under "How the Fund is Managed - How
Has the Fund Performed?"
<TABLE>
<CAPTION>
Oppenheimer Lehman
Fiscal Year Asset Allocation Brothers Aggregate
(Period) Ended Fund Class A Shares Bond Index S&P 500 Index
<S> <C> <C> <C>
04/24/87(1) $ 9,425 $10,000 $10,000
12/31/87 $ 8,667 $10,343 $8,751
12/31/88 $10,043 $11,159 $10,200
12/31/89 $11,871 $12,780 $13,426
12/31/90 $11,982 $13,926 $13,009
12/31/91 $13,739 $16,154 $16,964
12/31/92 $14,774 $17,349 $18,255
12/31/93 $17,182 $19,041 $20,091
12/31/94 $16,910 $18,485 $20,354
Oppenheimer Lehman
Fiscal Year Asset Allocation Brothers Aggregate
(Period) Ended Fund Class C Shares Bond Index S&P 500 Index
12/01/93(2) $10,000 $10,000 $10,000
12/31/93 $10,219 $10,059 $10,121
12/31/94 $ 9,963 $ 9,765 $10,254
<FN>
_____________________
(1) Commencement of Fund's operations.
(2) Commencement of public offering of Class C shares.
</TABLE>
<PAGE>
Oppenheimer Asset Allocation Fund
Two World Trade Center
New York, New York 10048
Telephone: 1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person
has been authorized to give any information or to
make any representations other than those
contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information
and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom
it is unlawful to make such an offer in such state.
PR0240.001.0895 Printed on recycled paper.
<PAGE>
Oppenheimer Asset Allocation Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated August 29, 1995
This Statement of Additional Information of Oppenheimer Asset
Allocation Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated August 29, 1995. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
CONTENTS
Page
About the Fund
Investment Objective and Policies
Investment Policies and Strategies
Other Investment Techniques and Strategies
Other Investment Restrictions
How the Fund is Managed
Organization and History
Trustees and Officers of the Fund
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
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 described in the Prospectus. Set forth below is
supplemental information about those policies and strategies and the types
of securities in which the Fund may invest, as well as the strategies the
Fund may use to try to achieve its objective. Certain capitalized terms
used in this Statement of Additional Information have the same meaning as
those terms have in the Prospectus.
- Special Risks of Lower-Rated Securities. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk; these are in addition to other investment risks that may affect
a particular security. Credit risk relates to the ability of the issuer
to meet interest or principal payments or both as they become due.
Generally, higher yielding, lower-rated bonds are subject to credit risk
to a greater extent than lower yielding, investment grade bonds.
As stated in the Prospectus, the Fund may invest in debt securities
rated as low as "C" or "D" by Moody's or S&P. High yield securities,
whether rated or unrated, may be subject to greater market fluctuations
and risks of loss of income and principal than lower-yielding, higher-
rated, debt securities. Risks of high yield securities may include (i)
limited liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest rates,
(iii) subordination to the prior claims of banks and other senior lenders,
(iv) the operation of mandatory sinking fund or call/redemption provisions
during periods of declining interest rates that could cause the Fund to
be able to reinvest premature redemption proceeds only in lower-yielding
portfolio securities, (v) the possibility that earnings of the issuer may
be insufficient to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of rising
interest rates and economic downturn.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
substantial number of holders decided to sell. A decline is also likely
in the high yield bond market during an economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the
market for high yield bonds and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and interest. In
addition, there have been several Congressional attempts to limit the use
of tax and other advantages of high yield bonds which, if enacted, could
adversely affect the value of these securities and the Fund's net asset
value. For example, federally-insured savings and loan associations have
been required to divest their investments in high yield bonds.
- Interest Rate Risks. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely from the
inverse relationship between price and yield of outstanding fixed-income
securities. An increase in prevailing interest rates will generally
reduce the market value of 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 after the Fund buys them will not affect
the interest payable on those securities, and thus the cash income from
such securities. However, those price fluctuations will be reflected in
the valuations of these securities and therefore in the Fund's net asset
values.
- Equity Securities.
- Small, Unseasoned Companies. The securities of small, unseasoned
companies may have a limited trading market, which may adversely affect
the Fund's ability to sell them when it wants to, at an acceptable price.
Their limited liquidity can result in their being priced lower than might
otherwise be the case. If other investment companies and investors that
invest in such securities trade the same securities when the Fund attempts
to dispose of its holdings, the Fund might receive lower prices than might
otherwise be obtained because of the thinner market for such 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.
- Warrants and Rights. Warrants basically are options to purchase
equity securities at set prices valid for a specified period of time. The
prices of warrants do not necessarily move in a manner parallel to the
prices of the underlying securities. The price the Fund pays for a
warrant will be lost unless the warrant is exercised prior to its
expiration. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and have
no rights with respect to the assets of the issuer.
- Debt Securities. The Fund may purchase or sell debt securities
(including U.S. Government Securities, discussed below) and money market
instruments without regard to the length of time the security has been
held to take advantage of short-term differentials in yields. While
short-term trading increases the portfolio turnover, the execution cost
for these securities is substantially less than for equivalent dollar
values of equity securities. The Fund will only purchase securities
meeting the requirements, including applicable rating qualifications,
stated in the Prospectus. See the Appendix to the Prospectus for a
description of the factors considered by the rating agencies in rating
particular debt securities.
- 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. The U.S. Government Securities the Fund
can invest in are described in the Prospectus and include U.S. Treasury
securities such as "zero coupon" U.S. Treasury securities, mortgage-backed
securities and CMOs.
- 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.
- Variable Amount Master Demand Notes. Variable amount master
demand notes are corporate obligations that 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 corporate borrower.
These notes 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 repay up to the full amount of the note at any time 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
the 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 value, plus
accrued interest, at any time. Accordingly, the Fund's right to redeem
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 the possibility where all
holders of such notes made demand simultaneously. Investments in master
demand notes are subject to the Fund's limitation on investments in
illiquid securities described in "Illiquid and Restricted Securities" in
the Prospectus. The Fund does not currently intend that its investments
in variable amount master demand notes in the coming year will exceed 5%
of its total assets.
- Participation Interests. The Fund may invest in participation
interests, subject to the Fund's 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 borrower. The
issuing financial institution may have no obligation to the Fund other
than to pay the Fund the proportionate amount of the principal and
interest payments it receives.
Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan, 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.
- 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 the underlying 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 below for prepayments of a pool of mortgage loans underlying
mortgage-backed securities. However, asset-backed securities do not have
the benefit of the same type of security interest in the underlying
collateral as do mortgage backed securities.
- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans that 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 of the mortgage-backed securities in which the Fund may
invest may be backed by the full faith and credit of the U.S. Treasury
(for example, direct pass-through certificates of Government National
Mortgage Association ("GNMA"). Some are supported by the right of the
issuer to borrow from the U.S. Government (for example, obligations of
Federal Home Loan Mortgage Corporation ("FHLMC"). Some are backed by only
the credit of the issuer itself. Those guarantees do not extend to the
value 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
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 other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security
is not likely to rise on a basis comparable with other debt securities
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 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 that may increase
the yield to the Fund more than debt obligations that pay interest semi-
annually. Due to 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 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 purchase mortgage-backed securities
at par, at a premium or 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 having a 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 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 the GNMA, regardless of whether the mortgagor
actually makes the payments.
The National Housing Act authorized the GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration (the "FHA") or
guaranteed by the Veterans Administration (the "VA"). The GNMA guarantee
is backed by the full faith and credit of the U.S. Government. The GNMA
is also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments 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. 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. The 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. Federal Home Loan Mortgage Association
("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.
- 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. 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. That means 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). Instead,
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 though 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.
The issuer's obligation to make interest and principal payments on
a mortgage-backed security is secured by the underlying portfolio of
mortgages or mortgage-backed securities. Mortgage-backed securities
created by private issuers (such as commercial banks, savings and loan
institutions, and private mortgage insurance companies) may be supported
by insurance or guarantees, such as letters of credit issued by
governmental entities, private insurers or the private issuer of the
mortgage pool. There can be no assurance that private insurers will be
able to meet their obligations.
- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or private issuers. Zero coupon
U.S. Treasury securities include: (1) U.S. Treasury bills without interest
coupons, (2) U.S. Treasury notes and bonds that have been stripped of
their unmatured interest coupons, and (3) receipts or certificates
representing interest in such stripped debt obligations or coupons. These
securities usually trade at a deep discount from their face or par value
and will be subject to greater fluctuations in market value in response
to changing interest rates than debt obligations of comparable maturities
that make current payments of interest. However, the lack of periodic
interest payments means that the interest rate is "locked in" and there
is no risk of having to reinvest periodic interest payments in securities
having lower rates. The Fund may also invest in zero coupon securities
issued by private issuers, such as corporations.
Because the Fund accrues taxable income from zero coupon securities
issued by either the U.S. Treasury or other issuers without receiving
cash, the Fund may be required to sell portfolio securities in order to
pay dividends or redemption proceeds for its shares, which require the
payment of cash. This will depend on several factors: the proportion of
shareholders who elect to receive dividends in cash rather than
reinvesting dividends in additional shares of the Fund, the amount of cash
income the Fund receives from other investments, and the sale of shares.
The Fund might also sell portfolio securities to maintain portfolio
liquidity. In either case, cash distributed or held by the Fund and not
reinvested by investors in additional Fund shares will hinder the Fund
from seeking current income.
- Money Market Securities.
- Certificates of Deposit. Except as described below, the Fund may
purchase certificates of deposit if they are issued or guaranteed by
domestic banks (including foreign branches of domestic banks) which have
total assets in excess of $500 million, and the Fund may purchase bankers'
acceptances (which may be supported by letters of credit) only if
guaranteed by U.S. commercial banks having total assets in excess of $500
million. The Fund may invest in certificates of deposit of $100,000 or
less of a domestic bank, even if such bank has assets of less than $500
million, if the certificate of deposit is fully insured as to principal
by the Federal Deposit Insurance Corporation. At no time will the Fund
hold more than one certificate of deposit from any one such bank. Because
of the limited marketability of such certificates of deposit, no more than
10% of the Fund's net assets will be invested in certificates of deposit
of banks having total assets of less than $500 million. For these
purposes, the term "bank" includes U.S. commercial banks, savings banks
and savings and loan associations.
- Commercial Paper. The Fund may purchase commercial paper only if
rated "A-1" or "A-2" by S&P or "Prime-1" or "Prime-2" by Moody's or, if
not rated, issued by a corporation having an existing debt security rated
at least "AA" or "Aa" by S&P or Moody's, respectively. See Appendix A to
the Prospectus for a description of the factors considered by S&P and
Moody's for determining such ratings. The Fund may purchase obligations
issued by other entities (including U.S. dollar-denominated securities of
foreign branches of U.S. banks) if they are (i) guaranteed as to
principal and interest by a bank, government or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by
the Fund, or (ii) subject to repurchase agreements (described below). The
foregoing ratings restrictions do not apply to banks in which the Fund's
cash is kept.
Other Investment Techniques and Strategies
Foreign Securities. Investments in foreign securities offer potential
benefits not available from investing solely in securities of domestic
issuers. These investments offer the opportunity to invest in foreign
issuers that appear to offer growth potential, or in foreign countries
with economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. 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 the Fund's income available for distribution.
Although a portion of the Fund's investment income, if any, 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
With Options and Futures Contracts" below.
- Risks of Foreign Securities. Investing in foreign securities
involves considerations and risks not associated with investment in
securities of U.S. issuers. For example, foreign issuers are not required
to use generally-accepted accounting principles ("G.A.A.P."). If foreign
securities are not registered under the Securities Act of 1933, the issuer
does not have to comply with the disclosure requirements of the Securities
Exchange Act of 1934. The values of foreign securities investments will
be affected by incomplete or inaccurate information available as to
foreign issuers, changes in currency rates, exchange control regulations
or currency blockage, expropriation or nationalization of assets,
application of foreign tax laws (including withholding taxes), changes in
governmental administration or economic or monetary policy in the U.S. or
abroad, or changed circumstances in dealings between nations. In
addition, it is generally more difficult to obtain court judgments outside
the United States.
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. 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. Settlement periods for securities transactions may be longer
than in the U.S. 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.
Securities of foreign issuers that are represented by American
depository receipts, or that are not 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 them must be in most cases approved by the Fund's Board
of Trustees under applicable SEC rules.
The Fund may invest in U.S. dollar-denominated foreign securities
referred to as "Brady Bonds." These debt obligations of foreign entities
may be fixed-rate par bonds or floating rate discount bonds. The payment
of the principal at maturity is generally collateralized in full by U.S.
Treasury zero coupon obligations that have the same maturity as the Brady
Bonds. However, the Fund may also invest in uncollateralized Brady Bonds.
Brady Bonds are generally viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final
maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute the "residual risk"of such bonds). In the event of a default
with respect to collateralized Brady Bonds as a result of which the
payment obligations of the issuer are accelerated, the zero coupon U.S.
Treasury securities held as collateral for the payment of principal will
not be distributed to investors, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the collateral agent
to the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments which would have then been
due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds, and among other factors, the history of
defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
to be viewed as speculative.
The debt obligations of foreign governmental entities may or may not
be supported by the "full faith and credit" of a foreign government. The
Fund may invest in obligations of supranational entities, which include
those 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.
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. 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.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities, subject to the restrictions stated in the Prospectus, if the
loan is collateralized in accordance with applicable regulatory
requirements. Under those requirements (which are subject to change), the
loan collateral must, on each business day, at least equal the market
value of the loaned securities and must consist of cash, bank letters of
credit, U.S. Government Securities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the
demand meets the terms of the letter. Such terms and the issuing bank
must be satisfactory to the Fund. In a portfolio securities lending
transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during
the term of the loan as well as the interest on the collateral securities,
less any finders' or administrative fees the Fund pays in arranging the
loan. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least the minimum
amount of interest required by the lending guidelines established by its
Board of Trustees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of
delay in recovery of the securities, or loss of rights in the collateral
should the borrower fail financially.
The Fund will not lend its portfolio securities to any officer,
trustee, employee or affiliate of the Fund or its Manager. The terms of
the Fund's loans must meet certain tests under the Internal Revenue Code
and permit the Fund to reacquire loaned securities on five business days'
notice or in time to vote on any important matter.
- 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. "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. 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 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.
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. These securities are subject to market
fluctuation; the value at delivery may be less than the purchase price.
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.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 it
enters 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 to do so may result
in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous. 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 the settlement date. In
addition, changes in interest rates in a direction other than that
expected by the Manager before settlement will affect the value of such
securities and may cause 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.
- Repurchase Agreements. In a repurchase transaction, the Fund
purchases a security from, and simultaneously resells it to, an approved
vendor for delivery on an agreed-upon future date. An "approved vendor"
is 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 audit requirements met by the Fund's Board of Trustees
from time to time. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to the resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the 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. The Fund has percentage
limitations that apply to purchases of illiquid and restricted securities.
This policy applies to participation interests, bank time deposits, master
demand notes, repurchase transactions having a maturity beyond seven days,
over-the-counter options held by the Fund and that portion of assets used
to cover such options. This policy is not a fundamental policy and those
percentage restrictions do not limit purchases of restricted securities
eligible for resale 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 or by the Manager
under Board-approved guidelines. Those guidelines take into account
trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Fund's holdings of those
securities may be illiquid. There may be undesirable delays in selling
illiquid securities at prices representing their fair value.
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 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 fluctuations during that period. The Fund also may acquire, through
private placements, securities having contractual resale restrictions,
which might lower the amount realizable upon the sale of such securities.
- Hedging. As described in the Prospectus, the Fund may employ one
or more types of Hedging Instruments. Hedging Instruments may be used to
attempt to do the following: (1) protect against possible declines in the
market value of the Fund's portfolio resulting from down trends in the
securities markets, (2) protect unrealized gains in the value of the
Fund's securities which have appreciated, (3) facilitate selling
securities for investment reasons, (4) establish a position in the
securities markets as a temporary substitute for purchasing particular
securities, or (5) reduce the risk of adverse currency fluctuations.
The Fund may use 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.
To do so, the Fund may (i) sell Futures, (ii) buy puts on such Futures or
securities, or (iii) write covered calls on securities held by it or on
Futures. When hedging to establish a position in the equities market as
a temporary substitute for purchasing individual equity securities or to
attempt to protect against the possibility that portfolio debt securities
are not fully included in a rise in value of the debt securities market,
the Fund may (i) buy Futures, or (ii) buy calls on such Futures or on
securities.
When hedging to attempt to protect against declines in the dollar
value of a foreign currency-denominated security or in a payment on such
security, the Fund may (a) purchase puts on that foreign currency, (b)
write calls on that currency or (c) enter into Forward Contracts at a
different 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 and options on
Futures if, after any such purchase or sale, the sum of margin deposits
on Futures and premiums paid on Futures options exceeds 5% of the value
of the Fund's total assets. Certain options on foreign currencies are
considered related options for this purpose. Additional information about
the hedging instruments the Fund may use is provided below. The Fund may,
in the future, employ hedging instruments and strategies that are not
presently contemplated, to the extent such investment methods are
consistent with the Fund's investment objective, are legally permissible,
and are adequately disclosed.
- Writing Covered Call Options. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call on the same investment
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 retains the risk of loss if the price of the underlying security
declines 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 subsequently purchases. 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.
An option position may be closed out only on a market that provides
secondary trading for option of the same series, and there is no assurance
that a liquid secondary market will exist for a particular option. If the
Fund could not effect a closing purchase transaction due to lack of a
market, it would have to hold the callable investments until the call
lapsed or was exercised.
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 obligation under 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. 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 or Stock Index Futures, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. When the
Fund purchases a call on a stock index or Stock Index Future, settlement
is in cash rather than by delivery of the underlying investment to the
Fund. The Fund benefits only if the call is sold at a profit or if,
during the call period, the market price of the underlying investment is
above the sum of the call price plus the transaction costs and the premium
paid and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase
the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to
puts on stock indices, 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 index or on Futures it does not own permits the
Fund either to resell the put or, if applicable, 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 its 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 index or a Future not held by it, the
put protects the Fund to the extent that the prices of the underlying
Futures move in a similar pattern to the prices of the securities in the
Fund's portfolio.
- 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. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set
at the time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase. The Fund will not speculate with Forward Contracts or foreign
currency exchange rates.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities denominated in that currency.
The Fund, however, in order to avoid excess transactions and transaction
costs, may maintain a net exposure to Forward Contracts in excess of the
value of the Fund's portfolio securities denominated in that currency
provided the excess amount is "covered" by liquid, high grade debt
securities, denominated in either that foreign currency or U.S. dollars,
at least equal at all times to the amount of such excess. As an
alternative, the Fund may purchase a call option permitting the Fund to
purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the Forward Contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the Forward Contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and incur
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. As 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,
by 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. The value of securities subject
to interest rate swaps will not exceed 25% of the Fund's net assets. 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 covering a call on the expiration of the calls
or upon the Fund entering into a closing purchase transaction. An option
position may be closed out only on a market which provides secondary
trading for options of the same series, and there is no assurance that a
liquid secondary market will exist for any particular option.
When the Fund writes an OTC option, it will enter into an arrangement
with a primary U.S. government securities dealer, which will establish a
formula price at which the Fund 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"). For
any OTC option the Fund writes, it will treat as illiquid (for purposes
of the limit on its assets that may be invested in illiquid securities,
stated in the Prospectus) an amount of assets used to cover written OTC
options, equal to the formula price for the repurchase of the OTC option
less the amount by which the OTC option is "in-the-money." The Fund will
also treat as illiquid any OTC option held by it. The SEC is evaluating
whether OTC options should be considered liquid securities, and the
procedure described above could be affected by the outcome of that
evaluation.
The Fund's option activities may affect its 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, or sells a 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
Futures margin and related options premiums to no more than 5% of the
Fund's net assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through one
or more brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities,
including other investment companies having the same 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, 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 Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders will be taxed on the dividends and capital gains
they receive from the Fund. One of the tests for the Fund's qualification
is that less than 30% of its gross income (irrespective of losses) must
be derived from gains realized on the sale of securities held for less
than three months. To comply with that 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 Futures, held
for less than three months, whether or not they were purchased on the
exercise of a call held by the Fund; (ii) writing calls on investments
held for less than three months; (iii) purchasing calls or puts which
expire in less than three months; (iv) effecting closing transactions with
respect to calls or puts purchased less than three months previously; and
(v) exercising puts or calls held by the Fund for less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a
position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Futures and Options. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging discussed in the Prospectus and above, there is
a risk in using short hedging by selling Futures to attempt to protect
against decline in the 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 portfolio 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 market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close out futures contracts through offsetting transactions
which could distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures market may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the 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.
If the Fund uses hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of
particular securities (long hedging) by buying Futures and/or calls on
such Futures, on securities or on stock indices, it is possible that the
market may decline. If the Fund then concludes not to invest in
securities at that time because of concerns as to possible further market
decline or for other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
securities purchased.
- Short Sales Against-the-Box. In this type of 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 (1) 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 (2) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot:
(1) buy or sell real estate or commodities or commodity contracts,
including futures contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein, and the Fund may
buy and sell any of the hedging instruments which it may use as approved
by the Fund's Board of Trustees, whether or not such hedging instrument
is considered to be a commodity or commodity contract;
(2) buy securities on margin, except that the Fund may make margin
deposits in connection with any of the hedging instruments which it may
use;
(3) underwrite securities issued by other persons except to the
extent that in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter for purposes of the
Securities Act of 1933;
(4) buy the securities of any company for the purpose of acquiring
control or management thereof, except in connection with a merger,
consolidation, reorganization or acquisition of assets;
(5) buy and retain securities of any issuer if officers and Trustees
or Directors of the Fund and the Manager individually owning more than 0.5%
of the securities of such issuer together own more than 5% of the securities
of such issuer; or
(6) invest in other open-end investment companies, or invest more
than 5% of its net assets at the time of purchase in closed-end investment
companies (including small business investment companies), nor make any
such investments at commission rates in excess of normal brokerage
commissions.
In connection with the qualification of its shares in certain states,
the Fund has undertaken that in addition to the above, as a non-
fundamental policy, the Fund will not (i) invest in oil, gas or mineral
leases or (ii) invest in real estate limited partnership interests. In
the event the Fund's shares cease to be qualified under such laws or if
such undertaking(s) otherwise cease to be operative, the Fund would not
be subject to such restrictions.
The percentage restrictions described above and in the Prospectus are
applicable only at the time of investment and require no action by the
Fund as a result of subsequent changes in value of the investments or the
size of the Fund.
For purposes of the Fund's policy not to concentrate its investments,
described under investment restriction number two in the Prospectus, the
Fund has adopted the Industry Classifications set forth in Appendix A to
this Statement of Additional Information. This is not a fundamental
policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers
and their principal occupations and business affiliations during the past
five years are set forth below. The address of each Trustee and officer
is Two World Trade Center, New York, New York 10048-0203, unless another
address is listed below. All of the Trustees are also trustees of
Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Growth Fund,
Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Emerging Growth Fund, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-
Exempt Fund, Oppenheimer California Tax-Exempt Fund, Oppenheimer Multi-
State Tax-Exempt Trust, Oppenheimer Target Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Multi-Sector Income Trust and Oppenheimer
Multi-Government Trust (the "New York OppenheimerFunds"). Messrs. Spiro,
Donohue, Bowen, Zack, Bishop and Farrar hold the same offices with the
other New York-based OppenheimerFunds as with the Fund. As of August 16,
1995, the Trustees and officers of the Fund as a group owned of record or
beneficially less than 1% of the outstanding shares of the Fund. The
foregoing statement does not reflect shares held of record by an employee
benefit plan for employees of the Manager for which an officer of the Fund
(Andrew J. Donohue) is a Trustee, other than the shares beneficially owned
under that plan by the officers of the Fund listed below.
Leon Levy, Chairman of the Board of Trustees; Age 69
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership); and
Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee; Age 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee (philanthropic
organization); formerly Executive Director of The Research Institute of
America.
Robert G. Galli, Trustee;* Age 62
Vice Chairman of the Manager and Vice President and Counsel of Oppenheimer
Acquisition Corp., the Manager's parent holding company; formerly he held
the following positions: a director of the Manager and Oppenheimer Funds
Distributor, Inc. (the "Distributor"), Vice President and a director of
HarbourView Asset Management Corporation ("HarbourView") and Centennial
Asset Management Corporation ("Centennial"), investment advisory
subsidiaries of the Manager, a director of Shareholder Financial Services,
Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, an officer of other OppenheimerFunds and
Executive Vice President and General Counsel of the Manager and the
Distributor.
Benjamin Lipstein, Trustee; Age 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publications,
Inc. (publishers of Psychology Today and Mother Earth News) and of Spy
Magazine, L.P.
__________________
* A Trustee who is an "interested person" of the Fund, as defined in the
Investment Company Act.
Elizabeth B. Moynihan, Trustee; Age 65
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York
University), and the National Building Museum; a member of the Indo-U.S.
Sub-Commission on Education and Culture; and a member of the Trustees
Council, Preservation League of New York State.
Kenneth A. Randall, Trustee; Age 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Enron-
Dominion Cogen Corp. (cogeneration company), Kemper Corporation (insurance
and financial services company) and Fidelity Life Association (mutual life
insurance company); formerly Chairman of the Board of ICL Inc.
(information systems) and President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research).
Edward V. Regan, Trustee; Age 65
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health care
provider); formerly New York State Comptroller and trustee, New York State
and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age 63
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age 83
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of Finance,
University of Hawaii; a director of The Korea Fund, Inc. (closed-end
investment company); a member of the Board of Advisors, Olympus Private
Placement Fund, L.P.; Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*; Age 69
Chairman Emeritus and a director of the Manager; formerly Chairman of the
Manager and the Distributor.
Pauline Trigere, Trustee; Age 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
__________________
* A Trustee who is an "interested person" of the Fund, as defined in the
Investment Company Act.
Clayton K. Yeutter, Trustee; Age 64
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments, Inc.
(electronics) and The Vigoro Corporation (fertilizer manufacturer);
formerly (in descending chronological order) Counsellor to the President
(Bush) for Domestic Policy, Chairman of the Republican National Committee,
Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
Richard H. Rubinstein, Vice President and Portfolio Manager; Age 47
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly Vice President and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment adviser.
Andrew J. Donohue, Secretary; Age 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior Vice
President and Associate General Counsel of the Manager and the
Distributor; partner in Kraft & McManimon (a law firm); an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and a
director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
George C. Bowen, Treasurer; Age 58
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert G. Zack, Assistant Secretary; Age 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 29
3410 South Galena Street, Denver, Colorado 80310
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co., a bank, and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(excluding Messrs. Galli and Spiro) received the total amounts shown below
(i) from the Fund, during its fiscal year ended December 31, 1994, and
(ii) from all of the New York-based OppenheimerFunds (including the Fund)
listed in the first paragraph of this section (and from Oppenheimer Global
Environment Fund, Oppenheimer Mortgage Income Fund and Oppenheiemr Time
Fund, former New York-based OppenheimerFunds), for services in the
positions shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation New York-based
Name and Position From Fund OppenheimerFunds1
<S> <C> <C>
Leon Levy, Chairman and Trustee $4,610 $141,000.00
Leo Cherne, Audit Committee $2,251 $ 68,800.00
Member and Trustee
Benjamin Lipstein, $2,819 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan, $1,982 $ 60,625.00
Study Committee
Member2 and Trustee
Kenneth A. Randall, $2,564 $ 78,400.00
Audit Committee Member
and Trustee
Edward V. Regan, $1,839 $ 56,275.00
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr., Trustee $1,705 $ 52,100.00
Sidney M. Robbins, Study $3,994 $122,100.00
Committee Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere, Trustee $1,705 $ 52,100.00
Clayton K. Yeutter, Trustee $1,705 $ 52,100.00
<FN>
______________________
1 For the 1994 calendar year.
2 Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. Because each Trustee's retirement benefits will depend
on the amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor can
the Fund estimate the number of years of credited service that will be
used to determine those benefits. No sums were accrued during the fiscal
year ended December 31, 1994, for the Fund's projected retirement benefit
obligations.
- Major Shareholders. As of August 16, 1995, no person owned of
record or was known by the Fund to own beneficially 5% or more of the
Fund's outstanding Class A, Class B or Class C shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
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 Fund
and two of whom (Messrs. Galli and Spiro) also serve as Trustees of the
Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. A management fee is payable
monthly to the Manager under the terms of the investment advisory
agreement between the Manager and the Fund, and is computed on the
aggregate net assets of the Fund as of the close of business each day.
The investment advisory agreement requires the Manager, at its expense,
to provide the Fund with adequate office space, facilities and equipment,
and to provide and supervise the activities of all administrative and
clerical personnel required to provide corporate effective administration
for the Fund, including the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified
reports, and 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 Distribution 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. During the fiscal year ended December 31, 1994, the
rates under the investment advisory fee were changed effective June 27,
1994. Prior to that date the annual fees were: 1.00% of the first $50
million of aggregate net assets, 0.75% of the next $150 million, 0.70% of
the next $200 million, 0.65% of the next $200 million and 0.60% of net
assets in excess of $600 million. Effective June 27, 1994, the rates were
reduced to 0.75% of the first $200 million of aggregate net assets, 0.72%
of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, and 0.60% of aggregate net assets in excess of $800
million. For the Fund's fiscal years ended December 31, 1992, 1993 and
1994, the management fees paid by the Fund to the Manager were $2,110,846,
$2,130,917 and $1,869,498, respectively.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has voluntarily
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed (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 regulatory limitation
on fund expenses. Currently, the most stringent state expense limitation
is imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average net assets, 2.0%
of the next $70 million of average annual net assets, and 1.5% of average
annual net assets in excess of $100 million. The payment of the
management fee at the end of any month will be reduced or eliminated such
that there will not be any accrued but unpaid liability under this expense
limitation. The Manager reserves the right to terminate or amend the
undertaking at any time. Any assumption of the Fund's expenses under this
undertaking would lower the Fund's overall expense ratio and increase its
total return during any period in which expenses are limited.
The 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 its 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 Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares but is not obligated to sell a specific number of shares. Expenses
normally attributable to sales, 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, 1992, 1993, and 1994, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $39,326,104,
$413,077 and $446,064 in those respective years, of which the Distributor
and an affiliated broker-dealer retained in the aggregate $9,834,389,
$165,368 and $160,107, respectively. During the Fund's fiscal year ended
December 31, 1994, Class B shares were not publicly offered, and no
contingent deferred sales charges were collected. During the same period,
contingent deferred sales charges collected on the Fund's Class C shares
totaled $2,135, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans" below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
transfer agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ such broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in it's best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding, but is expected to minimize the
commissions paid to the extent consistent with the interest and policies
of the Fund as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject
to the provisions of the advisory agreement and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders 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 transactions in the
secondary market, and are otherwise paid only if it appears likely that
a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transactions 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 is determined 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, and purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of such orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The Board of Trustees 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 when the broker has represented to the Manager that:
(i) the trade is not from or for the broker's own inventory, (ii) the
trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and 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 and Service Plans
described below), annually reviews information furnished by the Manager
as to the commissions paid to brokers furnishing such services so that the
Board may ascertain whether the amount of such commissions was reasonably
related to the value or benefit of such services. The Board of 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.
During the Fund's fiscal years ended December 31, 1992, 1993 and
1994, total brokerage commissions paid by the Fund (not including spreads
or concessions on principal transactions on a net trade basis) amounted
to $359,816, $2,914,950 and $227,996, respectively. During the fiscal
year ended December 31, 1994, $86,396 was paid to brokers as commissions
in return for research services (including special research, statistical
information and execution); the aggregate dollar amount of those
transactions was $38,599,918.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return", "cumulative total return," and
"total return at net asset value" of an investment in each class of Fund
shares may be advertised. An explanation of how these total returns are
calculated for each class and the components of those calculations is set
forth below. No total return calculations are presented below for Class
B shares because no shares of that class were publicly issued during the
fiscal year ended December 31, 1994.
The Fund's advertisement of its performance 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 period (or the life of the class, if less) 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; total return 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 return for any
given past period are not a prediction or representation by the Fund of
future rates of return. The total returns of each class of 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 discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge (5.0% for the first year, 4.0%
for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year, and none thereafter) is applied to the
investment result for the period shown (unless the total return is shown
at net asset value, as described below). For Class C shares, the payment
of the 1.0% 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, 1994, and for the period from
April 24, 1987 (commencement of operations) to December 31, 1994, were -
7.24%, 6.07% and 7.07%, respectively. The "cumulative total return" on
Class A shares for the latter period from April 24, 1987, to December 31,
1994 was 69.10%. For the periods from December 1, 1993, and the 1-year
period ended December 31, 1994, the average total returns on an investment
in Class C shares of the Fund were -0.34% and -3.39%, 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 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 returns at net
asset value" of the Fund's Class A shares for the period from April 24,
1987 (commencement of operations) to December 31, 1994 was 79.41%. For
Class C shares, the "cumulative total return at net asset value" for the
one-year period ended December 31, 1994, was -2.50%.
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 shares of the Fund with
that of other alternatives, investors should understand that as the Fund
is an aggressive equity fund seeking capital appreciation, its shares are
subject to greater market risks than shares of funds having other
investment objectives and that the Fund is designed for investors who are
willing to accept greater risk of loss in the hopes of realizing greater
gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) flexible portfolio funds.
The Lipper performance rankings are based on total returns that include
the reinvestment of capital gains distributions and income dividends but
do not take sales charges or taxes into consideration.
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, tax-exempt and other), 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) in excess of 90-day
U.S. Treasury bill monthly returns after considering sales charges and
expenses. Risk measures fund performance below 90-day U.S. Treasury bill
monthly returns. Risk and return are combined to produce star rankings
reflecting performance relative to the average fund in a fund's category.
Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is
"below average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar ranks the Class A, Class B and Class C shares of the Fund in
relation to other rated "hybrid" funds, including all other asset
allocation funds. The current ranking is a weighted average of the 3 and
5 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
newspapers and other periodicals, such as The New York Times, which may
include performance quotations from other sources, including Lipper.
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 the other of the following indices: (i) the S&P 500 Index, an unmanaged
index of common stocks widely used as a measure of general U.S. stock
market performance; and (ii) the Lehman Brothers Aggregate Bond Index, an
unmanaged index of U.S. corporate bond issues, U.S. government securities
and mortgage-backed securities, widely regarded as a measure of the
performance of the domestic debt securities market. Other indices may be
used from time to time. The foregoing indices do not reflect reinvestment
of capital gains or take transaction charges or taxes into consideration,
as these items are not applicable to indices.
Investors may also wish to compare the Fund's Class A, Class B or
Class C return to the returns on fixed income investments available from
banks and thrift institutions, such as certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed
or variable time deposits, and various other instruments such as Treasury
bills. However, the Fund's returns and share price are not guaranteed nor
insured by the FDIC, 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.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of the Fund
under Rule 12b-1 of the Investment Company Act, pursuant to which the Fund
makes payments to the Distributor in connection with the distribution
and/or servicing of the shares of that class, as described in the
Prospectus. Each Plan has been approved by a vote of (i) the Board of
Trustees of the Fund, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on that Plan,
and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of each class. For the Distribution and Service Plans
for Class B shares and for Class C shares, that vote was cast by the
Manager as the sole initial holder of Class B shares and 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 derived from the
advisory fee it receives from the Fund) to make payments to brokers,
dealers or other financial institutions (each is referred to as a
"Recipient" under the Plans) for distribution and administrative services
they perform, at no cost to the Fund. The Distributor and the Manager
may, in their sole discretion, increase or decrease the amount of payments
they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such 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. Each 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. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required 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 Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class C Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of such 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 does 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
fee at the maximum rate and set no minimum amount.
The Fund's shareholders approved a new Service Plan for Class A
shares on June 20, 1994. Under the old plan, payments were made to
Recipients only as to Class A shares acquired on or after April 1, 1988.
Under the current Plan, payments are based on the value of all Class A
shares, whenever acquired.
For the fiscal year ended December 31, 1994, payments under the Class
A Plan totaled $386,300, all of which was paid by the Distributor to
Recipients, including $103,221 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Any unreimbursed expenses incurred with
respect to Class A shares for any fiscal quarter by the Distributor may
not be recovered in subsequent fiscal quarters. 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 allow the service fee payment to be
paid by the Distributor to Recipients in advance for the first year such
shares are outstanding, and thereafter on a quarterly basis, as described
in the Prospectus. The advance payment is based on the net asset value
of shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event shares are redeemed during
the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. Payments made under the Class C Plan during the fiscal year
ended December 31, 1994, totaled $55,806, of which $55,744 was retained
by the Distributor, including $150 paid to an affiliate of the
Distributor. Since no Class B shares were outstanding during the Fund's
fiscal year ended December 31, 1994, no payments were made under the Class
B Plan.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on such
shares, or to pay Recipients the service fee on a quarterly basis without
payment in advance, the Distributor presently intends to pay the service
fee to Recipients in the manner described above. A minimum holding period
may be established from time to time under the Class B and Class C Plans
by the Board. Initially, the Board has set no minimum holding period.
All payments under the Class B Plan and the Class C Plan are subject to
the limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and service fees.
The Class C Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described above and in the Prospectus. The asset-based
sales charge paid to the Distributor by the Fund under the Class C Plan
is intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of sale,
plus financing costs, as described in the Prospectus. Such payments may
also be used to pay for the following expenses in connection with the
distribution of Class C shares: (i) financing the advance of the service
fee payment to Recipients under the Class C Plan, (ii) compensation and
expenses of personnel employed by the Distributor to support distribution
of Class C shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and
state "blue sky" registration fees.
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. Such
payments are made in recognition that the Distributor (i) pays sales
commissions to authorized brokers and dealers at the time of sale and pays
service fees as described in the Prospectus, (ii) may finance such
commissions and/or the advance of the service fee payment to Recipients
under those Plans, or may provide such financing from its own resources,
or from an affiliate, (iii) employs personnel to support distribution of
shares, and (iv) may bear the costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders), state
"blue sky" registration fees and certain other distribution expenses.
ABOUT YOUR ACCOUNT
How to Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B 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 will not accept
any order for $500,000 or more of Class B shares or $1 million or more of
Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund
instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on such shares will be
reduced by incremental expenses borne solely by those classes, including
the asset-based sales charge to which both classes of shares are subject.
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 either class are allocated pro rata to the shares of each class, based
on the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, 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/or
Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
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.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the "NYSE")
on each day that the Exchange is open by dividing the value of the Fund's
net assets attributable to that class by the number of shares of that
class outstanding. The Exchange normally closes at 4:00 P.M. but may
close earlier on some other days (for example, in case of weather
emergencies or days falling before a holiday). The NYSE's most recent
annual announcement (which is subject to change) states that it will close
New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day; it may also close on
other days. Trading may occur in debt securities and in foreign
securities primarily listed on foreign exchanges or in foreign
over-the-counter markets at times when the NYSE is closed. Because the
Fund's price and net asset value will not be calculated at such times, the
net asset values per share of Class A, Class B and Class C shares of the
Fund may be significantly affected at times when shareholders do not have
the ability to 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 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
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 have
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity and other special factors involved.
The Fund's Board of 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.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of 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. 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 at the time of valuation.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable
or, if there were no sales that day, in accordance with (i), above.
Forward currency contracts are valued at the closing price on the London
foreign exchange market. When the Fund writes an option, an amount equal
to the premium received by the Fund is included in 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
("ACH") transfer to buy the shares. Dividends will begin to accrue on
shares purchased by the proceeds of ACH transfers on the business day the
Fund receives Federal Funds for such purchase through the ACH system
before the close of The New York Stock Exchange. The Exchange normally
closes at 4:00 P.M. but may close earlier on certain days. If the Federal
Funds are received on a business day after the close of the Exchange,
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
transfers are initiated. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor or
dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, sons- and daughters-in-law,
siblings, a sibling's spouse and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt 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 Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield 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 Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
and, the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
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 of the Fund (and Class A and Class B shares of
other OppenheimerFunds) 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 investors holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. 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
OppenheimerFunds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the
Letter will be made at the public offering price (including the sales
charge) applicable to a single lump-sum purchase of shares in the amount
intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to 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 amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent 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 the Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares of other
OppenheimerFunds acquired subject to a contingent deferred sales charge,
and (c) Class A or B shares acquired in exchange for shares for either (i)
Class A shares of one of the OppenheimerFunds 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 "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) (available from the Distributor) should be
obtained 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.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed. The reinvestment may be
made without sales charge only in Class A shares of the Fund or any of the
other OppenheimerFunds into which shares of the Fund are exchangeable as
described in "How To Exchange Shares" below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfer 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 B or the 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. 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 customer prior to the time the Exchange closed (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed
by a broker-dealer under this procedure, payment will be made within three
business days after the shares have been redeemed upon the Distributor's
receipt of the required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the redemption
documents 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 by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
and Class C shareholders should not establish withdrawal plans, because
of the imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B or the Class C contingent deferred
sales charge is waived as described in "Class B Contingent Deferred Sales
Charge" or in "Class C Contingent Deferred Sales Charge").
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
such 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 shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $500
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.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class without a class designation are
deemed "Class A" shares for this purpose, and all of the OppenheimerFunds
offer Class A shares, but only the following other OppenheimerFunds offer
Class B shares:
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer U.S. Government Trust
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Only the following other OppenheimerFunds offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Target Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C shares are available
only by exchange)
Oppenheimer Strategic Income Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Limited-Term Government Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund. Shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a contingent
deferred sales charge). 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 OppenheimerFunds without being subject to
an initial or contingent deferred sales charge, whichever is applicable.
To qualify for this 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. However,
if the Distributor receives, at the time of purchase, notice that shares
of Oppenheimer Money Market Fund, Inc. are being purchased with the
redemption proceeds of shares of other mutual funds (other than other
money market funds) that are not part of the OppenheimerFunds family,
those shares of Oppenheimer Money Market Fund may be exchanged for shares
of other OppenheimerFunds at net asset value without paying a sales
charge.
Shares of the 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 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.
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 Class B shares or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or the Class C contingent
deferred sales charge will be followed in determining the order in which
the shares are exchanged. 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.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
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
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 will not
be declared or paid on newly purchased shares 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. Shares purchased through dealers or brokers
normally are paid for by the third business day following the placement
of the purchase order. Shares redeemed through the regular redemption
procedures will be paid dividends through and including the day on which
the redemption request is received by the Transfer Agent in proper form.
Dividends will be paid with respect to shares repurchased by a dealer or
broker for three business days following the trade date (i.e., to and
including the day prior to settlement of the repurchase). If a
shareholder redeems all shares in an account, all dividends accrued on
shares of the same class held in that 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, 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 gross income from option premiums,
interest income or short-term capital 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.
If prior distributions must be re-characterized at the end of the
fiscal year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
(although the Fund may have a targeted dividend rate for Class A shares)
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Hedging Instruments and Covered
Calls," above). If it does not qualify, the Fund will be treated for tax
purposes as an ordinary corporation and will receive no tax deduction for
payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board and the Manager might determine in
a particular year that it might 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.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
and Class C shareholders should be aware, however, that as of the date of
this Statement of Additional Information, only certain OppenheimerFunds
offer Class B or Class C shares. The names of funds that do as of the
date of this document can be obtained by referring to "How to Exchange
Shares," above or by calling the Distributor at 1-800-525-7048. 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 certain 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, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that its banking
relationships with the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates. The 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 certain other funds advised by the Manager
and its affiliates.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Asset Allocation
Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Asset Allocation Fund as of December 31, 1994,
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the seven-year period then ended and the period from April 24, 1987
(commencement of operations) to December 31, 1987. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian and brokers; and where confirmations
were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Asset Allocation Fund as of December 31, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the seven-year period then
ended and the period from April 24, 1987 (commencement of operations) to
December 31, 1987, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
-------------------------
Denver, Colorado
January 23, 1995
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Investments December 31, 1994
------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
==========================================================
==========================================================
===============
<S> <C> <C> <C>
Repurchase Agreements--3.6%
-----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago
Capital Markets, 6%, dated 12/30/94, to
be repurchased at $9,006,000 on 1/3/95,
collateralized by U.S. Treasury Nts.,
3.875%--8.875%, 5/31/95--8/31/05,
with a value of $8,558,896 and U.S. Treasury
Bonds, 10.75%--14.25%, 2/15/02--8/15/05,
with a value of $628,741 (Cost $9,000,000) $ 9,000,000 $ 9,000,000
==========================================================
==========================================================
===============
Mortgage-Backed Obligations--0.7%
-----------------------------------------------------------------------------------------------------------------------------------
Government Agency--0.6%
-----------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--0.3% Federal National Mortgage Assn.:
11%, 11/1/14 17,241 18,582
11.50%, 7/1/11 257,614 278,373
11.75%, 1/1/16 282,817 309,855
------------
606,810
-----------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--0.3% Government National Mortgage Assn.:
9%, 11/15/08 208,785 211,988
9%, 11/15/08 84,086 85,377
9%, 2/15/09 311,750 316,660
9%, 5/15/09 90,475 91,900
------------
705,925
-----------------------------------------------------------------------------------------------------------------------------------
Private--0.1%
-----------------------------------------------------------------------------------------------------------------------------------
Multi-Family--0.1% Resolution Trust Corp. Commercial Mtg. Pass-Through Certificates,
8%, Series 1994-C2, Cl. E, 4/25/25 415,508 332,147
------------
Total Mortgage-Backed Obligations (Cost $1,605,042) 1,644,882
==========================================================
==========================================================
===============
U.S. Government Obligations--18.1%
-----------------------------------------------------------------------------------------------------------------------------------
Treasury--18.1% U.S. Treasury Nts.:
6.75%, 5/31/97 3,000,000 2,933,439
7.875%, 1/15/98 1,600,000 1,602,499
7.875%, 6/30/96 8,500,000 8,545,151
8.25%, 7/15/98 16,000,000 16,194,990
8.75%, 10/15/97 350,000 358,094
8.875%, 11/15/98 950,000 982,656
9.25%, 1/15/96 825,000 839,953
9.25%, 8/15/98 9,450,000 9,863,438
STRIPS, 0%, 8/15/02 6,100,000 3,385,823
------------
Total U.S. Government Obligations (Cost $44,682,711) 44,706,043
==========================================================
==========================================================
===============
Foreign Government Obligations--9.7%
-----------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Bonds, Bonos de Consolidacion de
Deudas, Series I, 5.625%, 4/1/01(4)(6) 3,490,713 2,236,057
------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds, 9.75%, 12/1/01(CAD) 6,000,000 4,425,085
------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds, 9.75%, 6/1/01(CAD) 2,000,000 1,474,315
------------------------------------------------------------------------------------------------------
Queensland (Government of) Development Authority Global
Transferable Registered Nts., 10.50%, 5/15/03(AUD) 5,000,000 3,920,014
6 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Foreign Government Spain (Kingdom of) Bonds, 11.45%, 8/30/98(ESP) $125,000,000 $
943,174
Obligations ------------------------------------------------------------------------------------------------------
(continued) Spain (Kingdom of) Bonds, 13.45%, 4/15/96(ESP) 435,000,000 3,422,034
------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Bonds, 11%, 1/21/99(SEK) 7,500,000 1,031,972
------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds,
8.25%, 10/15/03(AUD) 3,000,000 2,030,148
------------------------------------------------------------------------------------------------------
United Mexican States Gtd. Cv. Bonds, Series B,
6.25%, 12/31/19 4,000,000 2,130,000
------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Collateralized Par Bonds, Series W-A,
6.75%, 3/31/20 1,500,000 690,000
------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Collateralized Par Bonds, Series W-B,
6.75%, 3/31/20 3,500,000 1,610,000
------------
Total Foreign Government Obligations (Cost $28,425,565) 23,912,799
==========================================================
==========================================================
===============
Non-Convertible Corporate Bonds and Notes--13.7%
-----------------------------------------------------------------------------------------------------------------------------------
Basic Materials--1.4%
-----------------------------------------------------------------------------------------------------------------------------------
Chemicals--0.5% Quantum Chemical Corp., 10.375% Fst. Mtg. Nts., 6/1/03 500,000
542,017
------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 900,000 796,500
------------
1,338,517
-----------------------------------------------------------------------------------------------------------------------------------
Metals--0.5% Horsehead Industries, Inc., 14% Sub. Nts., 6/1/99 400,000 398,000
------------------------------------------------------------------------------------------------------
Inland Steel Industries, Inc., 12.75% Nts., 12/15/02 400,000 432,000
------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 500,000 503,750
------------
1,333,750
-----------------------------------------------------------------------------------------------------------------------------------
Paper and Forest Gaylord Container Corp., 0%/12.75% Sr. Sub. Disc. Debs., 5/15/05(3) 600,000
532,500
Products--0.4% ------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.75% Sr. Nts., 6/15/00 500,000 507,500
------------
1,040,000
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.3%
-----------------------------------------------------------------------------------------------------------------------------------
Construction Supplies and Hovnanian K. Enterprises, Inc., 11.25% Gtd. Sub. Nts., 4/15/02 725,000
610,813
Development--0.5% ------------------------------------------------------------------------------------------------------
USG Corp., 10.25% Sr. Sec. Nts., 12/15/02 500,000 511,250
------------
1,122,063
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Goods and Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 900,000 895,500
Services--0.7% ------------------------------------------------------------------------------------------------------
MacAndrews & Forbes Group, Inc., 12.25% Sub. Nts., 7/1/96 500,000 498,750
------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 9.375% Sr. Nts., 4/1/01 250,000 225,000
------------
1,619,250
-----------------------------------------------------------------------------------------------------------------------------------
Entertainment--0.2% Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., 6/30/02 400,000 425,000
-----------------------------------------------------------------------------------------------------------------------------------
Hotels/Lodging--0.3% Host Marriott Hospitality, Inc., 9.125% Sr. Nts., Series C, 12/1/00 624,000
609,180
-----------------------------------------------------------------------------------------------------------------------------------
Media--0.6% News America Holdings, Inc., 8.50% Sr. Nts., 2/15/05 1,000,000 956,283
------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Nts., Series 1, 6/30/05 500,000 500,000
------------
1,456,283
7 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--3.1%
-----------------------------------------------------------------------------------------------------------------------------------
Food--0.7% Family Restaurants, Inc., 9.75% Sr. Nts., 2/1/02 $ 1,000,000 $ 787,500
------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 14.25% Sr. Sub. Nts., 5/15/98 1,000,000 1,035,000
------------
1,822,500
-----------------------------------------------------------------------------------------------------------------------------------
Food and Drug Di Giorgio Corp., 12% Sr. Nts., 2/15/03 750,000 705,000
Distribution--1.5% ------------------------------------------------------------------------------------------------------
Grand Union Co., 11.25% Sr. Nts., 7/15/00 1,000,000 890,000
------------------------------------------------------------------------------------------------------
Ralph's Grocery Co., 10.25% Sr. Sub. Nts., 7/15/02 500,000 491,250
------------------------------------------------------------------------------------------------------
Revco D.S., Inc., 9.125% Sr. Nts., 1/15/00 500,000 501,250
------------------------------------------------------------------------------------------------------
Southland Corp., 4.50% 2nd Priority Sr. Sub. Debs., Series A, 6/15/04 1,700,000 1,054,000
------------
3,641,500
-----------------------------------------------------------------------------------------------------------------------------------
Healthcare--0.9% American Medical International, Inc., 13.50% Sr. Sub. Nts., 8/15/01 500,000
548,750
------------------------------------------------------------------------------------------------------
Mediq, Inc., 7.50% Exch. Sub. Debs., 7/15/03 1,650,000 1,334,438
------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02 345,000 401,925
------------
2,285,113
-----------------------------------------------------------------------------------------------------------------------------------
Energy--1.3% Global Marine, Inc., 12.75% Sr. Sec. Nts., 12/15/99 400,000 430,000
------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15 1,000,000 947,500
------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Gtd. Sr. Nts., 7/15/02 750,000 836,250
------------------------------------------------------------------------------------------------------
Rowan Cos., Inc., 11.875% Sr. Nts., 12/1/01 1,000,000 1,045,000
------------
3,258,750
-----------------------------------------------------------------------------------------------------------------------------------
Financial--0.8% Card Establishment Services, Inc., 10% Sr. Sub. Nts., Series B, 10/1/03 1,000,000
1,045,000
------------------------------------------------------------------------------------------------------
Conseco, Inc., 8.125% Sr. Nts., 2/15/03 1,000,000 881,282
------------
1,926,282
-----------------------------------------------------------------------------------------------------------------------------------
Industrial--0.8%
-----------------------------------------------------------------------------------------------------------------------------------
Containers--0.2% Owens-Illinois, Inc., 10% Sr. Sub. Nts., 8/1/02 500,000 490,000
-----------------------------------------------------------------------------------------------------------------------------------
General Industrial--0.5% EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 1,000,000 862,500
------------------------------------------------------------------------------------------------------
Terex Corp., 13% Sr. Nts., 8/1/96(5) 450,000 426,375
------------
1,288,875
-----------------------------------------------------------------------------------------------------------------------------------
Transportation--0.1% Tiphook Financial Corp., 7.125% Gtd. Nts., 5/1/98 418,000 308,275
-----------------------------------------------------------------------------------------------------------------------------------
Technology--3.6%
-----------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.6% GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 750,000
577,500
------------------------------------------------------------------------------------------------------
GPA Holland, 9.75%, 6/10/96 1,000,000 940,000
------------
1,517,500
8 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Cable Television--2.0% Adelphia Communications Corp., 12.50% Sr. Nts., 5/15/02 $ 1,000,000 $
960,000
------------------------------------------------------------------------------------------------------
Auburn Hills Trust, 12.375% Gtd. Exch. Certificates, 5/1/20 800,000 1,042,947
------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 1,000,000 900,000
------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 10.75% Sr. Sub. Debs., 4/1/04 500,000 502,500
------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 500,000 461,250
------------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.95% Nts., 2/1/00 1,000,000 955,215
------------
4,821,912
-----------------------------------------------------------------------------------------------------------------------------------
Communications--0.4% Centennial Cellular Corp., 8.875% Sr. Nts., 11/1/01 500,000 440,000
------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(3) 1,000,000 620,000
------------
1,060,000
-----------------------------------------------------------------------------------------------------------------------------------
Technology--0.6% TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,100,000 1,141,250
------------------------------------------------------------------------------------------------------
Unisys Corp., 13.50% Credit Sensitive Nts., 7/1/97 400,000 434,000
------------
1,575,250
-----------------------------------------------------------------------------------------------------------------------------------
Utilities--0.4% First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16 1,000,000 906,814
------------
Total Non-Convertible Corporate Bonds and Notes
(Cost $35,699,985) 33,846,814
Shares
==========================================================
==========================================================
===============
Common Stocks--50.9%
-----------------------------------------------------------------------------------------------------------------------------------
Basic Materials--4.5%
-----------------------------------------------------------------------------------------------------------------------------------
Chemicals--1.1% IMC Global, Inc.(7) 24,000 1,038,000
------------------------------------------------------------------------------------------------------
Praxair, Inc. 47,300 969,650
------------------------------------------------------------------------------------------------------
Sybron Chemical Industries, Inc.(2) 42,800 663,400
------------
2,671,050
-----------------------------------------------------------------------------------------------------------------------------------
Chemicals: Diversified--1.2% ARCO Chemical Co. 21,000 924,000
------------------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR(2) 90,000 2,084,490
------------
3,008,490
-----------------------------------------------------------------------------------------------------------------------------------
Metal: Miscellaneous--0.8% Brush Wellman, Inc. 103,300 1,794,838
-----------------------------------------------------------------------------------------------------------------------------------
Paper and Forest Georgia-Pacific Corp. 13,200 943,800
Products--0.8% ------------------------------------------------------------------------------------------------------
Indah Kiat 79,800 90,764
------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 27,900 760,275
------------------------------------------------------------------------------------------------------
PT Pabrik Kertas Tjiwi Kimia 30,000 55,960
------------
1,850,799
-----------------------------------------------------------------------------------------------------------------------------------
Steel--0.6% Inland Steel Industries, Inc.(2)(7) 41,000 1,440,125
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--6.9%
-----------------------------------------------------------------------------------------------------------------------------------
Airlines--0.3% AMR Corp.(2) 14,000 745,500
-----------------------------------------------------------------------------------------------------------------------------------
Automobiles--0.5% Fiat SpA(2) 320,000 1,187,486
------------------------------------------------------------------------------------------------------
Mahindra & Mahindra Ltd., GDR 8,000 89,260
------------
1,276,746
9 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Broadcast Media--0.6% Comcast Corp., Cl. A Special 100,000 $1,568,750
-----------------------------------------------------------------------------------------------------------------------------------
Entertainment--0.9% King World Productions, Inc.(2) 45,100 1,555,950
------------------------------------------------------------------------------------------------------
Sega Enterprises 13,500 778,039
------------
2,333,989
-----------------------------------------------------------------------------------------------------------------------------------
Leisure Time--0.9% Caesar's World, Inc.(2) (7) 18,000 1,201,500
------------------------------------------------------------------------------------------------------
Eastman Kodak Co. 21,900 1,045,725
------------
2,247,225
-----------------------------------------------------------------------------------------------------------------------------------
Publishing--0.9% Time Warner, Inc. 40,000 1,405,000
------------------------------------------------------------------------------------------------------
Wolters Kluwer NV 10,167 752,280
------------
2,157,280
-----------------------------------------------------------------------------------------------------------------------------------
Retail Stores: Dillard Department Stores, Inc., Cl. A 25,000 668,750
Department Stores--0.3%
-----------------------------------------------------------------------------------------------------------------------------------
Retail: Specialty--0.7% CML Group, Inc.(7) 69,000 698,625
------------------------------------------------------------------------------------------------------
Venture Stores, Inc. 88,000 1,023,000
------------
1,721,625
-----------------------------------------------------------------------------------------------------------------------------------
Textiles: Apparel Authentic Fitness Corp.(2) 77,300 1,072,538
Manufacturers--0.8% ------------------------------------------------------------------------------------------------------
Warnaco Group, Inc. (The), Cl. A(2) 56,400 972,900
------------
2,045,438
-----------------------------------------------------------------------------------------------------------------------------------
Toys--1.0% Mattel, Inc.(7) 63,000 1,582,875
------------------------------------------------------------------------------------------------------
Nintendo Co. 15,000 810,364
------------
2,393,239
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--9.5%
-----------------------------------------------------------------------------------------------------------------------------------
Beverages: Alcoholic--0.4% Guinness PLC 160,000 1,126,440
-----------------------------------------------------------------------------------------------------------------------------------
Beverages: Soft Drinks--0.7% Whitman Corp. 104,300 1,799,175
-----------------------------------------------------------------------------------------------------------------------------------
Cosmetics--0.2% Maybelline, Inc. 22,800 410,400
-----------------------------------------------------------------------------------------------------------------------------------
Drugs--1.5% Agouron Pharmaceuticals, Inc.(2) 24,000 270,000
------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 37,250 962,057
------------------------------------------------------------------------------------------------------
Ciba-Geigy AG 1,825 1,089,148
------------------------------------------------------------------------------------------------------
Lilly (Eli) & Co.(7) 9,000 590,625
------------------------------------------------------------------------------------------------------
Medeva PLC 342,715 873,969
------------
3,785,799
-----------------------------------------------------------------------------------------------------------------------------------
Food Processing--1.0% Chiquita Brands International, Inc. 2 27
------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 30,000 1,429,323
------------------------------------------------------------------------------------------------------
Sara Lee Corp. 40,000 1,010,000
------------
2,439,350
10 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Healthcare: Abbott Laboratories 26,200 $ 854,775
Diversified--1.6% ------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 33,000 1,909,875
------------------------------------------------------------------------------------------------------
Schering AG 1,825 1,195,068
------------
3,959,718
-----------------------------------------------------------------------------------------------------------------------------------
Healthcare: Amgen, Inc.(2)(7) 12,900 761,100
Miscellaneous--2.3% ------------------------------------------------------------------------------------------------------
Biosys, Inc.(2) 74,400 167,400
------------------------------------------------------------------------------------------------------
Chiron Corp.(2)(7) 8,100 651,038
------------------------------------------------------------------------------------------------------
Genzyme Corp.(2)(7) 28,100 885,150
------------------------------------------------------------------------------------------------------
Manor Care, Inc. 40,000 1,095,000
------------------------------------------------------------------------------------------------------
U.S. Healthcare, Inc.(7) 50,000 2,062,500
------------
5,622,188
-----------------------------------------------------------------------------------------------------------------------------------
Hospital Management--0.2% Novacare, Inc.(2) 72,500 525,625
-----------------------------------------------------------------------------------------------------------------------------------
Medical Products--1.1% Medtronic, Inc. 19,200 1,068,000
------------------------------------------------------------------------------------------------------
Mitek Surgical Products, Inc.(2) 26,400 653,400
------------------------------------------------------------------------------------------------------
Nellcor, Inc.(2) 28,000 924,000
------------
2,645,400
-----------------------------------------------------------------------------------------------------------------------------------
Tobacco--0.5% Philip Morris Cos., Inc. 22,000 1,265,000
-----------------------------------------------------------------------------------------------------------------------------------
Energy--2.2%
-----------------------------------------------------------------------------------------------------------------------------------
Coal--0.5% Ashland Coal, Inc. 42,400 1,208,400
-----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated Atlantic Richfield Co. 9,400 956,450
Domestic--1.1% ------------------------------------------------------------------------------------------------------
Unocal Corp. 62,000 1,689,500
------------
2,645,950
-----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated Royal Dutch Petroleum Co. 7,000 752,500
International--0.6% ------------------------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 70,000 724,422
------------
1,476,922
-----------------------------------------------------------------------------------------------------------------------------------
Industrial--7.0%
-----------------------------------------------------------------------------------------------------------------------------------
Building Materials Owens-Corning Fiberglass Corp.(2) 68,000 2,176,000
Group--0.9%
-----------------------------------------------------------------------------------------------------------------------------------
Conglomerates--1.1% Jardine Matheson Holdings Ltd. 70,936 506,552
------------------------------------------------------------------------------------------------------
Tenneco, Inc. 33,000 1,402,500
------------------------------------------------------------------------------------------------------
Wharf Holdings 205,000 691,543
------------
2,600,595
11 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Containers: Metal Corning, Inc. 27,200 $ 812,600
And Glass--0.3%
-----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--0.5% General Electric Co. 26,400 1,346,400
-----------------------------------------------------------------------------------------------------------------------------------
Engineering Empresas ICA Sociedad Controladora SA de C.V.(7) 40,600 629,300
And Construction--0.6% ------------------------------------------------------------------------------------------------------
Huarte SA 88,350 825,575
------------
1,454,875
-----------------------------------------------------------------------------------------------------------------------------------
Manufacturing: Mannesmann AG 7,412 2,008,392
Diversified ------------------------------------------------------------------------------------------------------
Industrials--1.3% Siemens AG, ADR 14,200 1,189,124
------------
3,197,516
-----------------------------------------------------------------------------------------------------------------------------------
Pollution Control--0.3% Waste Management International PLC, Sponsored ADR(2) 55,000
625,625
-----------------------------------------------------------------------------------------------------------------------------------
Railroads--0.9% Burlington Northern, Inc. 33,900 1,631,438
------------------------------------------------------------------------------------------------------
Chicago & North Western Holdings Corp.(2) 34,700 667,975
------------
2,299,413
-----------------------------------------------------------------------------------------------------------------------------------
Transportation: Consolidated Freightways, Inc. 52,000 1,163,500
Miscellaneous--1.1% ------------------------------------------------------------------------------------------------------
Lisnave-Estaleiros Navais de Lisbona SA(2) 15,000 73,492
------------------------------------------------------------------------------------------------------
OMI Corp.(2) 25,900 171,588
------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA(2) 65,000 1,340,625
------------------------------------------------------------------------------------------------------
Westmont Berhad 11,000 68,493
------------
2,817,698
-----------------------------------------------------------------------------------------------------------------------------------
Financial--6.5%
-----------------------------------------------------------------------------------------------------------------------------------
Commercial Finance--0.3% SG Warburg & Co., Inc. Ords 76,500 827,018
-----------------------------------------------------------------------------------------------------------------------------------
Financial Services: American Express Co.(7) 28,000 826,000
Miscellaneous--1.3% ------------------------------------------------------------------------------------------------------
CMAC Investment Corp. 41,300 1,192,538
------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 37,000 1,322,750
------------
3,341,288
-----------------------------------------------------------------------------------------------------------------------------------
Insurance: Life--0.4% Bankers Life Holding Corp. 45,800 870,200
------------------------------------------------------------------------------------------------------
National Mutual Asia Ltd.(2) 120,000 79,100
------------
949,300
-----------------------------------------------------------------------------------------------------------------------------------
Insurance: Multi-Line--1.3% Aetna Life & Casualty Co. 16,800 791,700
------------------------------------------------------------------------------------------------------
American International Group, Inc. 10,400 1,019,200
------------------------------------------------------------------------------------------------------
AmericanRe Corp.(2) 40,000 1,290,000
------------
3,100,900
-----------------------------------------------------------------------------------------------------------------------------------
Major Banks: Other--0.5% Banco Frances del Rio Plata 9,000 64,125
------------------------------------------------------------------------------------------------------
Deutsche Bank AG, ADR 2,250 1,045,151
------------------------------------------------------------------------------------------------------
Korea First Bank 12,357 172,387
------------------------------------------------------------------------------------------------------
Turkiye Garanti Bankasi AS, Sponsored ADR(5) 8,000 20,258
------------
1,301,921
12 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Major Banks: Regional--1.0% NationsBank Corp. 53,200 $ 2,400,650
-----------------------------------------------------------------------------------------------------------------------------------
Money Center Banks--1.3% Bankers Trust New York Corp.(7) 26,000 1,439,750
------------------------------------------------------------------------------------------------------
Chemical Banking Corp. 52,400 1,879,850
------------
3,319,600
-----------------------------------------------------------------------------------------------------------------------------------
Savings and Loans/ Golden West Financial Corp. 25,000 881,250
Holding Cos.--0.4%
-----------------------------------------------------------------------------------------------------------------------------------
Technology--11.8%
-----------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.1% General Dynamics Corp.(7) 24,300 1,057,050
------------------------------------------------------------------------------------------------------
McDonnell Douglas Corp.(7) 11,000 1,562,000
------------
2,619,050
-----------------------------------------------------------------------------------------------------------------------------------
Computer Software Bay Networks, Inc.(2)(7) 42,920 1,266,140
And Services--4.7% ------------------------------------------------------------------------------------------------------
BMC Software, Inc.(2)(7) 25,700 1,461,688
------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.(7) 28,700 1,391,950
------------------------------------------------------------------------------------------------------
Delrina Corp.(2) 52,000 643,500
------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(2) 63,000 1,212,750
------------------------------------------------------------------------------------------------------
Landmark Graphics Corp.(2) 36,900 664,200
------------------------------------------------------------------------------------------------------
Lotus Development Corp.(2)(7) 18,000 738,000
------------------------------------------------------------------------------------------------------
Marcam Corp.(2) 69,300 701,663
------------------------------------------------------------------------------------------------------
Microsoft Corp.(2)(7) 18,600 1,136,925
------------------------------------------------------------------------------------------------------
Novell, Inc.(2) 52,500 899,063
------------------------------------------------------------------------------------------------------
Pyxis Corp.(2)(7) 34,000 646,000
------------------------------------------------------------------------------------------------------
Symantec Corp.(2) 55,000 962,500
------------
11,724,379
-----------------------------------------------------------------------------------------------------------------------------------
Computer Systems--1.2% Sun Microsystems, Inc.(2)(7) 41,500 1,473,250
------------------------------------------------------------------------------------------------------
Tandem Computers, Inc.(2)(7) 87,800 1,503,575
------------
2,976,825
-----------------------------------------------------------------------------------------------------------------------------------
Electronics: Hewlett-Packard Co.(7) 14,300 1,428,213
Instrumentation--0.6%
-----------------------------------------------------------------------------------------------------------------------------------
Electronics: Intel Corp. 40,000 2,555,000
Semiconductors--1.0%
-----------------------------------------------------------------------------------------------------------------------------------
Office Equipment and Xerox Corp. 11,100 1,098,900
Supplies--0.4%
-----------------------------------------------------------------------------------------------------------------------------------
Telecommunications--2.8% AirTouch Communications, Inc.(2)(7) 36,500 1,063,060
------------------------------------------------------------------------------------------------------
AT&T Corp. 22,700 1,140,675
------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd. 62,000 844,750
------------------------------------------------------------------------------------------------------
MCI Communications Corp. 116,800 2,146,200
------------------------------------------------------------------------------------------------------
Rogers Cantel Mobile Communications, Inc., Sub. Cl. B(2) 54,000 1,574,440
------------------------------------------------------------------------------------------------------
Technology Resources Industries(2) 20,000 63,833
------------
6,832,958
13 Oppenheimer Asset Allocation Fund
<PAGE>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
Utilities--2.5%
-----------------------------------------------------------------------------------------------------------------------------------
Electric Companies--0.8% Central Puerto SA, ADR(5) 2,000 $ 49,497
------------------------------------------------------------------------------------------------------
Korea Electric Power Co. 25,000 862,397
------------------------------------------------------------------------------------------------------
Verbund Oest Electriz 19,000 1,097,409
------------
2,009,303
-----------------------------------------------------------------------------------------------------------------------------------
Natural Gas--0.4% Hong Kong & China Gas 619,200 1,000,382
-----------------------------------------------------------------------------------------------------------------------------------
Telephone--1.3% BCE, Inc. 34,000 1,092,250
------------------------------------------------------------------------------------------------------
US West, Inc. 54,800 1,952,250
------------
3,044,500
------------
Total Common Stocks (Cost $106,384,302) 125,576,370
==========================================================
==========================================================
===============
Preferred Stocks--3.0%
-----------------------------------------------------------------------------------------------------------------------------------
Advanced Micro Devices, Inc., Depositary Cv. Exchangeable
Preferred Shares Each Representing 1/10th Share of $30 Cv
Exchangeable Preferred Shares 13,700 719,250
------------------------------------------------------------------------------------------------------
Alumax, Inc., $19.50 Cv., Series A 7,333 885,460
------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc., $1.32 Depositary Shares 50,000 687,500
------------------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A 17,666 1,031,251
------------------------------------------------------------------------------------------------------
Delta Airlines, Inc., $3.50 Cv. Depositary Shares, Series C 29,000 1,268,750
------------------------------------------------------------------------------------------------------
First Chicago Corp., Debt Exchangeable for Common Stock
of Nextel Communications, Inc., 5.50%, 2/15/97 25,000 437,500
------------------------------------------------------------------------------------------------------
FHP International Corp., Series A 71,500 1,751,750
------------------------------------------------------------------------------------------------------
Sap AG 1,180 672,974
------------
Total Preferred Stocks (Cost $6,793,340) 7,454,435
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $232,590,945) 99.7% 246,141,343
-----------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 811,529
------------ ------------
Net Assets 100.0% $246,952,872
============
============
<FN>
1. Face amount is reported in local currency. Foreign currency abbreviations are as follows:
AUD--Australian Dollar
CAD--Canadian Dollar
ESP--Spanish Peseta
SEK--Swedish Krona
2. Non-income producing security.
3. Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date.
4. Represents the current interest rate for a variable rate security.
5. Restricted security--See Note 6 of Notes to Financial Statements.
6. Interest or dividend is paid in kind.
<PAGE>
7. Securities with an aggregate market value of $8,769,900 are held in escrow to cover outstanding
call options, as follows:
</FN>
</TABLE>
14 Oppenheimer Asset Allocation Fund
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Market
Shares Subject Expiration Exercise Premium Value
to Call Date Price Received See Note 1
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Airtouch Communications, Inc. 9,000 1/95 $ 30.00 $ 9,292 $ 3,375
American Express Co. 5,600 4/95 35.00 8,932 1,400
Amgen, Inc. 4,000 4/95 60.00 19,880 16,000
BMC Software, Inc. 7,500 4/95 60.00 28,874 37,500
Bankers Trust New York Corp. 5,200 1/95 70.00 23,243 325
Bay Networks, Inc. 8,400 3/95 30.00 18,647 23,625
CML Group, Inc. 14,000 1/95 12.50 15,329 1,750
Caesar's World, Inc. 4,200 2/95 50.00 14,574 73,500
Chiron Corp. 2,000 1/95 75.00 7,690 10,500
Chiron Corp. 3,000 4/95 80.00 20,159 3,375
Computer Associates
International, Inc. 5,500 4/95 50.00 27,472 19,938
Empresas ICA Sociedad Controladora
SA de C.V 14,000 1/95 35.00 31,954 875
General Dynamics Corp. 5,000 2/95 45.00 12,037 6,250
General Dynamics Corp. 5,000 5/95 50.00 8,705 5,313
Genzyme Corp. 5,400 1/95 40.00 7,792 338
Hewlett-Packard Co. 3,000 5/95 105.00 18,659 15,000
Hewlett-Packard Co. 3,000 5/95 95.00 23,534 34,125
IMC Global, Inc. 4,800 4/95 45.00 14,256 13,200
Inland Steel Industries, Inc. 7,600 3/95 45.00 11,172 1,425
Lilly (Eli) & Co. 4,500 4/95 60.00 19,552 34,875
Lotus Development Corp. 4,400 1/95 50.00 15,817 1,375
Lotus Development Corp. 6,600 1/95 50.00 21,251 413
Lotus Development Corp. 7,000 4/95 50.00 31,289 12,250
Mattel, Inc. 16,000 1/95 30.00 28,519 2,000
McDonnell Douglas Corp. 3,000 5/95 140.00 31,409 34,122
Microsoft Corp. 2,200 4/95 65.00 5,434 5,225
Pyxis Corp. 9,600 4/95 30.00 34,511 9,000
Sun Microsystems, Inc. 7,000 1/95 30.00 10,727 41,125
Sun Microsystems, Inc. 7,000 4/95 35.00 12,040 24,500
Sun Microsystems, Inc. 7,000 7/95 40.00 13,352 16,625
Tandem Computers, Inc. 15,800 4/95 17.50 19,275 23,700
U.S. Healthcare, Inc. 10,000 1/95 45.00 29,074 2,500
U.S. Healthcare, Inc. 10,000 4/95 50.00 38,449 8,750
Upjohn Co.(8) 4,500 1/95 40.00 7,177 564
-------- --------
$640,077 $484,838
======== ========
<FN>
8. The Fund owns U.S. Treasury Nts., 6.75%, 5/31/97, that are acceptable for the escrow arrangements
required for written call options. See accompanying Notes to Financial Statements.
</FN>
</TABLE>
15 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1994
------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
===============
<S> <C> <C>
Assets Investments, at value (cost $232,590,945)--see accompanying statement $ 246,141,343
------------------------------------------------------------------------------------------------------
Receivables:
Interest and dividends 3,340,358
Investments sold 890,847
Shares of beneficial interest sold 246,818
------------------------------------------------------------------------------------------------------
Other 83,508
--------------
Total assets 250,702,874
==========================================================
==========================================================
===============
Liabilities Bank overdraft 449,157
------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $640,077)--
see accompanying statement--Note 4 484,838
------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends and distributions 1,253,245
Shares of beneficial interest redeemed 853,673
Investments purchased 264,058
Distribution and service plan fees--Note 5 118,238
Other 326,793
--------------
Total liabilities 3,750,002
==========================================================
==========================================================
===============
Net Assets $ 246,952,872
==============
==========================================================
==========================================================
===============
Composition of Paid-in capital $234,046,423
Net Assets ------------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net investment income (610,110)
------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) from investment,
written option and foreign currency transactions (189,381)
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments, options written and
translation of assets and liabilities denominated in foreign currencies--Note 3 13,705,940
--------------
Net assets $ 246,952,872
==============
==========================================================
==========================================================
===============
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of $237,771,276 and
20,632,622 shares of beneficial interest outstanding) $11.52
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $12.22
------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $9,181,596 and 798,980 shares of beneficial interest outstanding) .$11.49
See accompanying Notes to Financial Statements.
</TABLE>
16 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1994
------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
===============
<S> <C> <C>
Investment Income Interest (net of withholding taxes of $17,780) $ 11,314,536
------------------------------------------------------------------------------------------------------
Dividends (net of withholding taxes of $78,254) 2,533,954
------------
Total income 13,848,490
==========================================================
==========================================================
===============
Expenses Management fees--Note 5 1,869,498
------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 386,300
Class C--Note 5 55,806
------------------------------------------------------------------------------------------------------
Shareholder reports 241,215
------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 213,430
------------------------------------------------------------------------------------------------------
Legal and auditing fees 56,127
------------------------------------------------------------------------------------------------------
Custodian fees and expenses 55,003
------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 27,993
------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 341
Class C 3,112
------------------------------------------------------------------------------------------------------
Other 51,749
------------
Total expenses 2,960,574
==========================================================
==========================================================
===============
Net Investment Income (Loss) 10,887,916
==========================================================
==========================================================
===============
Realized and Unrealized Net realized gain (loss) on:
Gain (Loss) on Investments, Investments 15,341,281
Options Written and Closing and expiration of option contracts written--Note 4 1,326,659
Foreign Currency Foreign currency transactions 315,662
Transactions ------------
Net realized gain (loss) 16,983,602
------------
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written (33,297,605)
Translation of assets and liabilities denominated in foreign currencies 946,267
------------
Net change (32,351,338)
------------
Net realized and unrealized gain (loss) on investments, options written
and foreign currency transactions (15,367,736)
==========================================================
==========================================================
===============
Net Increase (Decrease) in Net Assets Resulting From Operations $ (4,479,820)
============
See accompanying Notes to Financial Statements
</TABLE>
17 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993
==========================================================
==========================================================
===============
<S> <C> <C> <C>
Operations Net investment income (loss) $ 10,887,916 $ 9,755,468
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, options written
and foreign currency transactions 16,983,602 8,616,993
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments, options written and translation of
assets and liabilities denominated in foreign currencies (32,351,338) 22,617,333
------------ ------------
Net increase (decrease) in net assets resulting
from operations (4,479,820) 40,989,794
==========================================================
==========================================================
===============
Dividends and Dividends from net investment income:
Distributions to Class A ($.532 and $.438 per share, respectively) (10,574,115) (9,529,080)
Shareholders Class C ($.443 and $.12 per share, respectively) (258,031) (2,987)
------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments,
options written and foreign currency transactions:
Class A ($.787 and $.012 per share, respectively) (15,027,395) (254,071)
Class C ($.787 and $.012 per share, respectively) (578,336) (298)
==========================================================
==========================================================
===============
Beneficial Interest Net increase (decrease) in net assets resulting from
Transactions Class A beneficial interest transactions--Note 2 (10,144,316) (20,002,391)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
Class C beneficial interest transactions--Note 2 9,705,207 395,601
==========================================================
==========================================================
===============
Net Assets Total increase (decrease) (31,356,806) 11,596,568
------------------------------------------------------------------------------------------------------
Beginning of period 278,309,678 266,713,110
------------ ------------
End of period (including overdistributed net investment
income of $610,110 and $340,955, respectively) $246,952,872 $278,309,678
============
============
See accompanying Notes to Financial Statements.
</TABLE>
18 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------------------------
Class A Class C
------------------------------------------------------------------------------- ------------------
Year Period
Year Ended Ended Ended
December 31, Dec.31, Dec.31,
1994 1993 1992 1991(3) 1990 1989 1988 1987(2) 1994 1993(1)
==========================================================
==========================================================
===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $ 13.05 $ 11.63 $ 11.22 $ 10.19 $ 10.67 $ 9.78 $ 8.89 $ 10.00 $ 13.05 $ 12.86
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income (loss) .54 .44 .39 .40 .53 .49 .39 .27 .44 (.97)
Net realized and unrealized
gain (loss) on investments,
options written and
foreign currency transactions (.75) 1.43 .44 1.06 (.43) 1.17 1.09 (1.11) (.77) 1.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (.21) 1.87 .83 1.46 .10 1.66 1.48 (.84) (.33) .32
-----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.53) (.44) (.42) (.43) (.52) (.48) (.40) (.26) (.44) (.12)
Distributions from net
realized gain on investments,
options written, and
foreign currency transactions (.79) (.01) -- -- (.06) (.29) (.19) (.01) (.79) (.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (1.32) (.45) (.42) (.43) (.58) (.77) (.59) (.27) (1.23) (.13)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.52 $ 13.05 $11.63 $11.22 $ 10.19 $ 10.67 $ 9.78 $ 8.89 $ 11.49 $
13.05
======= ======= ====== ====== ======= =======
======= ======= ======= =======
==========================================================
==========================================================
===============
Total Return,
at Net Asset Value(4) (1.59)% 16.30% 7.54% 14.67% .93% 18.21% 15.88% (8.60)% (2.50)%
2.51%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $237,771 $277,914 $266,713 $276,800 $83,292 $81,194 $51,602 $32,718 $9,182
$ 396
-----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)$260,767 $272,303 $269,096 $192,870 $82,490 $68,134 $40,662 $31,407 $5,601
$ 194
-----------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 20,633 21,302 22,938 24,666 8,171 7,611 5,275 3,679 799 30
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.10% 3.58% 3.41% 3.78% 5.14% 4.71% 4.30% 3.84%(5) 3.30%
2.19%(5)
Expenses 1.09% 1.14% 1.17% 1.27% 1.36% 1.47% 1.50% 1.60%(5) 2.00%
2.50%(5)
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 31.5% 32.7% 60.3% 102.0% 71.3% 60.2% 185.5% 83.7% 31.5%
32.7%
<FN>
1. For the period from December 1, 1993 (inception of offering) to December 31, 1993.
2. For the period from April 24, 1987 (commencement of operations) to December 31, 1987.
3. Per share amounts calculated based on the weighted average number of shares outstanding during
the year.
4. 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.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term securities) for
the year ended December 31, 1994 were $80,945,381 and $94,867,765, respectively.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
19 Oppenheimer Asset Allocation Fund
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
1. Significant
Accounting Policies
Oppenheimer Asset Allocation Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The Fund offers both
Class A and Class C shares.
Class A shares are sold with a front-end sales charge. Class C shares may
be subject to a contingent deferred sales charge. Both classes of shares
have identical rights to earnings, assets and voting privileges, except
that each class has its own distribution plan, expenses directly
attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class. The following is a summary
of significant accounting policies consistently followed by the Fund.
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term
debt securities are valued by a portfolio pricing service approved by the
Board of Trustees.
Long-term debt securities which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied valuations provided the
Manager is satisfied that the firm rendering the quotes is reliable and
that the quotes reflect current market value, or under consistently
applied procedures established by the Board of Trustees to determine fair
value in good faith.
Short-term debt securities having a remaining maturity of 60 days or less
are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Options are valued
based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the
value is based upon the last sale on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid or asked price closest
to the last reported sale price is used.
Foreign Currency Translation. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rate of exchange prevailing on the
respective dates of such transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from
changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's results of operations.
Repurchase Agreements. The Fund requires the custodian to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian's vault, all securities held as
collateral for repurchase agreements. The market value of the underlying
securities is required to be at least 102% of the resale price at the time
of purchase. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
Allocation of Income, Expenses and Gains and Losses. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
Federal Income Taxes. The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required. At
December 31, 1994, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $1,781,000, $891,000 of
which will expire in 1996, $445,000 in 1997 and $445,000 in 1998, the
usage of which is subject to certain limitations.
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended December 31, 1994, the Fund's projected benefit obligations
were reduced by $38,525, resulting in an accumulated liability of $110,974
at December 31, 1994. No payments have been made under the plan.
Distributions to Shareholders. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Change in Accounting Classification of Distributions to Shareholders. Net
investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes primarily because of 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. Effective
January 1, 1994, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
As a result, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial
statement amounts and distributions determined in accordance with income
tax regulations. Accordingly, subsequent to December 31, 1993, amounts
have been reclassified to reflect an increase in paid-in capital of
$2,394,578, a decrease in undistributed net investment income of $235,825,
and a decrease in accumulated net realized gain on investments of
$2,158,753. During the year ended December 31, 1994, in accordance with
Statement of Position 93-2, undistributed net investment income was
decreased by $89,100, accumulated net realized gain on investments was
decreased by $356,108, and paid-in capital was increased by $445,208.
Other. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and options written and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1994 December 31, 1993 (1)
----------------------------- ---------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,464,805 $ 18,650,064 1,309,237 $ 16,208,603
Dividends and distributions
reinvested 1,895,898 22,211,167 593,184 7,426,650
Redeemed (4,030,121) (51,005,547) (3,538,545) (43,637,644)
--------- ------------ ---------- ------------
Net decrease (669,418) $(10,144,316) (1,636,124) $(20,002,391)
========= ============
========== ============
------------------------------------------------------------------------------------------------------
Class C:
Sold 757,806 $ 9,618,332 30,068 $ 392,326
Dividends and distributions
reinvested 62,679 725,448 251 3,275
Redeemed (51,824) (638,573) -- --
--------- ------------ ---------- ------------
Net increase 768,661 $ 9,705,207 30,319 $ 395,601
========= ============
========== ============
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period from December 1, 1993
(inception of offering) to December 31, 1993 for Class C shares.
</FN>
</TABLE>
3. Unrealized Gains and
Losses on Investments
At December 31, 1994, net unrealized appreciation on investments and
options written of $13,705,940 was composed of gross appreciation of
$27,640,976, and gross depreciation of $13,935,036. And Options Written
4. Option Activity
The Fund may buy and sell put and call options, or write covered call
options on portfolio securities in order to produce incremental earnings
or protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio
holdings. When an option is written, the Fund receives a premium and
becomes obligated to sell or purchase the underlying security at a fixed
price, upon exercise of the option.
The Fund segregates assets to cover its obligations under option
contracts.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized
appreciation or depreciation is recorded. The Fund will realize a gain or
loss upon the expiration or closing of the option transaction. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost of the security for
a purchased put or call option is adjusted by the amount of premium
received or paid.
In this report, securities segregated to cover outstanding call
options are noted in the Statement of Investments. Shares subject to call,
expiration date, exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments. Options written
are reported as a liability in the Statement of Assets and Liabilities.
Gains and losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and
the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the security decreases and the
option is exercised. The risk in buying an option is that the Fund pays
a premium whether or not the option is exercised. The Fund also has the
additional risk of not being able to enter into a closing transaction if
a liquid secondary market does not exist.
Call option activity for the year ended December 31, 1994 was as follows:
<TABLE>
<CAPTION>
Number Amount
of Options of Premiums
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1993 4,564 $ 1,222,221
------------------------------------------------------------------------------------------------------
Options written 5,769 1,805,614
------------------------------------------------------------------------------------------------------
Options cancelled in closing purchase transactions (3,274) (1,055,031)
------------------------------------------------------------------------------------------------------
Options exercised (1,744) (561,301)
------------------------------------------------------------------------------------------------------
Options expired prior to exercise (3,007) (771,426)
----- -----------
Options outstanding at December 31, 1994 2,308 $ 640,077
===== ===========
</TABLE>
=======================================================================
=========
5. Management Fees and
Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provided for an annual fee of 1%
on the first $50 million of net assets, .75% on the next $150 million with
a reduction of .05% on each $200 million thereafter, to .60% on net assets
in excess of $600 million. Effective June 27, 1994, management fees were
reduced to .75% on the first $200 million of net assets with a reduction
of .03% on each $200 million thereafter to $800 million, and .60% on net
assets in excess of $800 million. The Manager has agreed to reimburse the
Fund if aggregate expenses (with specified exceptions) exceed the most
stringent applicable regulatory limit on Fund expenses.
For the year ended December 31, 1994, commissions (sales charges paid
by investors) on sales of Class A shares totaled $446,064, of which
$160,107 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended December 31, 1994, OFDI received
contingent deferred sales charges of $2,135 upon redemption of Class C
shares, as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of
its net assets annually to reimburse OFDI for costs incurred in connection
with the personal service and maintenance of accounts that hold shares of
the Fund (prior to July 1, 1994, Class A reimbursement were made with
respect to shares sold subsequent to April 1, 1988), including amounts
paid to brokers, dealers, banks and other institutions. In addition, Class
C shares are subject to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions paid from its own
resources at the time of sale and associated financing costs. In the event
of termination or discontinuance of the Class 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 C shares sold
prior to termination or discontinuance of the plan. During the year ended
December 31, 1994, OFDI With Affiliates paid $103,221 to an affiliated
broker/dealer as reimbursement for Class A personal service and
maintenance expenses and retained $55,744 as reimbursement for Class C
sales commissions and service fee advances, as well as financing costs.
6. Restricted Securities
The Fund owns securities purchased in private placement transactions,
without registration under the Securities Act of 1933 (the Act). The
securities are valued under methods approved by the Board of 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 restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Illiquid and/or restricted
securities, including those restricted securities that are transferable
under Rule 144A of the Act are listed below.
<TABLE>
<CAPTION>
Valuation Per Unit as of
Security Acquisition Date Cost Per Unit December 31, 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Central Puerto SA, ADR(1) 7/21/94--7/25/94 $ 31.81 $ 24.75
------------------------------------------------------------------------------------------------------
Terex Corp., 13% Sr. Nts., 8/1/96(1) 11/16/94 $ 0.98 $ 0.95
------------------------------------------------------------------------------------------------------
Turkiye Garanti Bankasi AS,
Sponsored ADR(1) 7/21/94--10/26/94 $ 2.16 $ 2.53
<FN>
1. Transferable under Rule 144A of the Act.
</FN>
</TABLE>
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
(1) Financial Highlights (See Parts A and B): Filed herewith.
(2) Independent Auditors' Report (See Part B): Filed herewith.
(3) Statement of Investments (See Part B): Filed herewith.
(4) Statement of Assets and Liabilities (See Part B): Filed
herewith.
(5) Statement of Operations (See Part B): Filed herewith.
(6) Statements of Changes in Net Assets (See Part B): Filed
herewith.
(7) Notes to Financial Statements (See Part B): Filed
herewith.
(b) Exhibits
--------
1. Amended and Restated Declaration of Trust dated as of
August 17, 1995: Filed herewith.
2. By-Laws, amended as of 8/6/87: Filed with Registrant's
12/31/87 Annual Report Form N-SAR, refiled with
Registrant's Post-Effective Amendment No. 20, 3/2/95,
pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
3. Inapplicable
4. (i) Specimen Class A Share Certificate of Registrant:
Filed with Registrant's Post-Effective Amendment No.
17, 3/1/94, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed herewith.
(iii) Specimen Class C Share Certificate of Registrant:
Filed with Registrant's Post-Effective Amendment No.
17, 3/1/94, and incorporated herein by reference.
5. Investment Advisory Agreement dated 6/27/94: Filed with
Registrant's Post-Effective Amendment No. 20, 3/2/95,
and incorporated herein by reference.
6. (i) General Distributor's Agreement dated 12/10/92: Filed
with Registrant's Post-Effective Amendment No. 15,
4/19/93, refiled with Registrant's Post-Effective
Amendment No. 20, 3/2/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No.
14 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 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 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 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 11/1/86,
and refiled with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
7. Retirement Plan for Non-Interested Trustees or Directors
(dated 6/7/90): Filed with Post-Effective Amendment No. 97
of Oppenheimer Fund (File No. 2-14586), 8/30/90, refiled
with Post-Effective Amendment No. 45 of Oppenheimer Growth
Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
8. Custody Agreement with The Bank of New York dated 11/12/92:
Filed with Registrant's Post-Effective Amendment No. 15,
4/19/93, refiled with Registrant's Post-Effective Amendment
No. 20, 3/2/95, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
9. Inapplicable.
10. Opinion and Consent of Counsel dated 3/2/87: Filed with
Registrant's Post-Effective Amendment No.7, 4/24/87,
refiled with Registrant's Post-Effective Amendment No. 20,
3/2/95, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
11. Independent Auditors' Consent: Filed herewith.
12. Inapplicable.
13. Inapplicable.
14. (i) Form of Individual Retirement Account (IRA) Trust
Agreement: Filed with 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. 7 of the Registration
Statement of Oppenheimer Global Growth & Income Fund
(Reg. No. 33-33799), 12/2/94, and 1/19/95, 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 of Oppenheimer Growth Fund (File
No. 2-45272), 10/21/94, and incorporated herein by
reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 42 of Oppenheimer Equity
Income Fund (Reg. No. 2-33043), 10/28/94 and
incorporated herein by reference.
(v) Form of SAR-SEP Employee Pension IRA: Filed with Post-
Effective Amendment No. 15 of Oppenheimer Mortgage
Income Fund (File No. 33-6614), 1/19/95, and
incorporated herein by reference.
15. (i) Service Plan and Agreement dated 7/1/94 for Class A
Shares pursuant to Rule 12b-1: Filed with Registrant's
Post-Effective Amendment No. 20, 3/2/95, and
incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement dated
8/29/95 for Class B Shares pursuant to Rule 12b-1:
Filed with Registrant's Post-Effective Amendment No.
24, 6/27/95, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement dated
December 1, 1993 for Class C Shares pursuant to Rule
12b-1: Filed with Registrant's Post-Effective
Amendment No. 17, 2/28/94, and incorporated herein by
reference.
16. Performance Data Calculation Schedule: Filed herewith.
17. (i) Financial Data Schedule for Class A Shares: Filed
herewith.
(ii) Financial Data Schedule for Class B Shares: Not
applicable.
(iii) Financial Data Schedule for Class C Shares: Filed
herewith.
18. Not applicable.
-- Powers of Attorney and Certified Board Resolutions: Filed
with Registrant's Post-Effective Amendment No. 17, 2/28/94,
and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with
Registrant
---------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of August 16, 1995
-------------- ------------------------
Class A Shares of Beneficial Interest 18,265
Class B Shares of Beneficial Interest 0
Class C Shares of Beneficial Interest 965
Item 27. Indemnification
---------------
Reference is made to paragraphs (c) through (g) of Section 12 of
Article SEVENTH of Registrant's Declaration of Trust filed as Exhibit
24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment
adviser of the Registrant; it and certain subsidiaries and affiliates act
in the same capacity to other registered investment companies as described
in Parts A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial nature in
which each officer and director of Oppenheimer Management Corporation is,
or at any time during the past two fiscal years has been, engaged for
his/her own account or in the capacity of director, officer, employee,
partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position
with Oppenheimer Other Business and Connections
Management Corporation During the Past Two Years
----------------------- ------------------------------
<S> <C>
Lawrence Apolito, None.
Vice President
James C. Ayer, Jr., Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Gold & Special Minerals Fund and
Oppenheimer Global Emerging Growth Fund.
Victor Babin, None.
Senior Vice President
Robert J. Bishop Assistant Treasurer of the OppenheimerFunds
Assistant Vice President (listed below); previously a Fund Controller
for Oppenheimer Management Corporation (the
"Manager").
Bruce Bartlett Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
George Bowen Treasurer of the New York-based
Senior Vice President OppenheimerFunds; Vice President, Secretary
and Treasurer and Treasurer of the Denver-based
OppenheimerFunds. Vice President and
Treasurer of Oppenheimer Funds Distributor,
Inc. (the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of OMC; 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
OMC; President, Treasurer and Director of
Centennial Capital Corporation; Vice
President and Treasurer of Main Street
Advisers; formerly Senior Vice President/
Comptroller and Secretary of Oppenheimer
Asset Management Corporation ("OAMC"), an
investment adviser which was a subsidiary of
the OMC.
Michael A. Carbuto, Vice President and Portfolio Manager of
Vice President Oppenheimer Tax-Exempt Cash Reserves,
Centennial California Tax Exempt Trust,
Centennial New York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice President
of Centennial.
William Colbourne, Formerly, Director of Alternative Staffing
Assistant Vice President Resources, and Vice President of Human
Resources, American Cancer Society.
Lynn Coluccy, Vice President Formerly Vice President\Director of Internal
Audit of the Manager.
O. Leonard Darling, Formerly Co-Director of Fixed Income for
Executive Vice President State Street Research & Management Co.
Robert A. Densen, None.
SeniorVice President
Robert Doll, Jr., Vice President and Portfolio Manager of
Executive Vice President Oppenheimer Growth Fund, Oppenheimer
Variable Account Funds and Oppenheimer
Target Fund; Senior Vice President and
Portfolio Manager of Strategic Income &
Growth Fund.
John Doney, Vice President Vice President and Portfolio Manager of
Oppenheimer Equity Income Fund.
Andrew J. Donohue, Secretary of the New York-based
Executive Vice President OppenheimerFunds; Vice President of the
& General Counsel Denver-based OppenheimerFunds; Executive
Vice President, Director and General Counsel
of the Distributor; formerly Senior Vice
President and Associate General Counsel of
the Manager and the Distributor.
Kenneth C. Eich, Treasurer of Oppenheimer Acquisition
Executive Vice President/ Corporation
Chief Financial Officer
George Evans, Vice President Vice President and Portfolio Manager of
Oppenheimer Global Securities Fund.
Scott Farrar, Assistant Treasurer of the OppenheimerFunds;
Assistant Vice President previously a Fund Controller for the
Manager.
Katherine P.Feld Vice President and Secretary of Oppenheimer
Vice President and Funds Distributor, Inc.; Secretary of
Secretary HarbourView, Main Street Advisers, Inc. and
Centennial; Secretary, Vice President and
Director of Centennial Capital Corp.
Jon S. Fossel, President and director of Oppenheimer
Chairman of the Board, Acquisition Corp. ("OAC"), the Manager's
Chief Executive Officer parent holding company; President, CEO and
and Director a director of HarbourView; a director of SSI
and SFSI; President, Director, Trustee, and
Managing General Partner of the Denver-based
OppenheimerFunds; formerly President of the
Manager. President and Chairman of the Board
of Main Street Advisers, Inc.
Robert G. Galli, Trustee of the New York-based
Vice Chairman OppenheimerFunds; 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 OppenheimerFunds and
Executive Vice President & General Counsel
of the Manager and the Distributor.
Linda Gardner, None.
Assistant Vice President
Ginger Gonzalez, Formerly 1st Vice President/Director of
Vice President Creative Services for Shearson Lehman
Brothers.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht, Vice President and Portfolio Manager of
Vice President Oppenheimer Insured Tax-Exempt Bond Fund and
Oppenheimer Intermediate Tax Exempt Bond
Fund; an officer of other OppenheimerFunds;
formerly Vice President of Fixed Income
Portfolio Management at Bankers Trust.
Barbara Hennigar, President and Director of Shareholder
President and Chief Financial Service, Inc.
Executive Officer of
Oppenheimer Shareholder
Services, a division of OMC.
Alan Hoden, Vice President None.
Merryl Hoffman, None.
Vice President
Scott T. Huebl, None.
Assistant Vice President
Jane Ingalls, Formerly a Senior Associate with Robinson,
Assistant Vice President Lake/Sawyer Miller.
Bennett Inkeles, Formerly employed by Doremus & Company, an
Assistant Vice President advertising agency.
Stephen Jobe, None.
Vice President
Heidi Kagan, None.
Assistant Vice President
Avram Kornberg, Formerly a Vice President with Bankers
Vice President Trust.
Paul LaRocco, Portfolio Manager of Oppenheimer Capital
Assistant Vice President Appreciation Fund; Associate Portfolio
Manager of Oppenheimer Discovery Fund and
Oppenheimer Time Fund. Formerly a
Securities Analyst for Columbus Circle
Investors.
Mitchell J. Lindauer, None.
Vice President
Loretta McCarthy, None.
Senior Vice President
Bridget Macaskill, Director of HarbourView; Director of Main
President and Director Street Advisers, Inc.; and Chairman of
Shareholder Services, Inc.
Sally Marzouk, None.
Vice President
Marilyn Miller, Formerly a Director of marketing for
Vice President TransAmerica Fund Management Company.
Denis R. Molleur, None.
Vice President
Kenneth Nadler, None.
Vice President
David Negri, Vice President and Portfolio Manager of
Vice President Oppenheimer Strategic Bond Fund, Oppenheimer
Multiple Strategies Fund, Oppenheimer
Strategic Investment Grade Bond Fund,
Oppenheimer Asset Allocation Fund,
Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Short-Term Income
Fund, Oppenheimer High Income Fund and
Oppenheimer Bond Fund; an officer of other
OppenheimerFunds.
Barbara Niederbrach, None.
Assistant Vice President
Stuart Novek, Formerly a Director Account Supervisor for
Vice President J. Walter Thompson.
Robert A. Nowaczyk, None.
Vice President
Robert E. Patterson, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Main Street California Tax-
Exempt Fund, Oppenheimer Insured Tax-Exempt
Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, Oppenheimer Florida Tax-
Exempt Fund, Oppenheimer New Jersey Tax-
Exempt Fund, Oppenheimer Pennsylvania 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, Chairman and Director of the Distributor.
Executive Vice President
and Director
Jane Putnam, Associate Portfolio Manager of Oppenheimer
Assistant Vice President Growth Fund and Oppenheimer Target Fund and
Portfolio Manager for Oppenheimer Variable
Account Funds-Growth Fund; Senior Investment
Officer and Portfolio Manager with Chemical
Bank.
Russell Read, Formerly an International Finance Consultant
Vice President for Dow Chemical.
Thomas Reedy, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust; an officer of other
OppenheimerFunds; formerly a Securities
Analyst for the Manager.
David Robertson, None.
Vice President
Adam Rochlin, Formerly a Product Manager for Metropolitan
Assistant Vice President Life Insurance Company.
David Rosenberg, Vice President and Portfolio Manager of
Vice President Oppenheimer Limited-Term Government Fund and
Oppenheimer U.S. Government Trust. Formerly
Vice President and Senior Portfolio Manager
for Delaware Investment Advisors.
Richard H. Rubinstein, Vice President and Portfolio Manager of
Vice President Oppenheimer Asset Allocation Fund,
Oppenheimer Fund and Oppenheimer Multiple
Strategies Fund; an officer of other
OppenheimerFunds; formerly Vice President
and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment
adviser.
Lawrence Rudnick, Formerly Vice President of Dollar Dry Dock
Assistant Vice President Bank.
James Ruff, None.
Executive Vice President
Ellen Schoenfeld, None.
Assistant Vice President
Diane Sobin, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, Inc. and
Oppenheimre Variable Account Funds;
formerly a Vice President and Senior
Portfolio Manager for Dean Witter
InterCapital, Inc.
Nancy Sperte, None.
Senior Vice President
Donald W. Spiro, President and Trustee of the New York-based
Chairman Emeritus OppenheimerFunds; formerly Chairman of the
and Director Manager and the Distributor.
Arthur Steinmetz, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond
Fund, Oppenheimer Strategic Short-Term
Income Fund; an officer of other
OppenheimerFunds.
Ralph Stellmacher, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Champion High Yield Fund and
Oppenheimer High Yield Fund; an officer of
other OppenheimerFunds.
John Stoma, Vice President Formerly Vice President of Pension Marketing
with Manulife Financial.
James C. Swain, Chairman, CEO and Trustee, Director or
Vice Chairman of the Managing Partner of the Denver-based
Board of Directors OppenheimerFunds; President and a Director
and 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. Formerly
Managing Director
of Buckingham Capital Management.
Gary Tyc, Vice President, Assistant Treasurer of the Distributor and
Assistant Secretary SFSI.
and Assistant Treasurer
Ashwin Vasan, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust: an officer of other
OppenheimerFunds.
Valerie Victorson, None.
Vice President
Dorothy Warmack, Vice President and Portfolio Manager of
Vice President Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves, Centennial
America Fund, L.P., Centennial Government
Trust and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells, None.
Vice President
William L. Wilby, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Global Fund and Oppenheimer
Global Growth & Income Fund; Vice President
of HarbourView; an officer of other
OppenheimerFunds.
Susan Wilson-Perez, None.
Vice President
Carol Wolf, Vice President and Portfolio Manager of
Vice President 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, Associate General Counsel of the Manager;
Senior Vice President Assistant Secretary of the OppenheimerFunds;
and Assistant Secretary Assistant Secretary of SSI, SFSI; an officer
of other OppenheimerFunds.
Eva A. Zeff, An officer of certain OppenheimerFunds;
Assistant Vice President formerly a Securities Analyst for the
Manager.
Arthur J. Zimmer, Vice President and Portfolio Manager of
Vice President Centennial America Fund, L.P., Oppenheimer
Money Fund, 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
OppenheimerFunds.
</TABLE>
The OppenheimerFunds include the New York-based OppenheimerFunds
and the Denver-based OppenheimerFunds set forth below:
New York-based OppenheimerFunds
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery 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 Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Denver-based OppenheimerFunds
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 High Yield 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 Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
The address of Oppenheimer Management Corporation, the New York-
based OppenheimerFunds, Oppenheimer Funds 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 OppenheimerFunds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
Shareholder Services, Centennial Asset Management Corporation, Centennial
Capital Corp., and Main Street Advisers, Inc. is 3410 South Galena Street,
Denver, Colorado 80231.
Item 29. Principal Underwriter
(a) Oppenheimer Funds 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 Oppenheimer Management
Corporation 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:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Treasurer
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
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
Mary Crooks+ Vice President None
Paul Della Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Secretary
President & Director
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
Wendy Fishler* Vice President - None
Financial Institution Div.
Wayne Flanagan Vice President - None
36 West Hill Road Financial Institution Div.
Brookline, NH 03033
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
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Hans Klehmet II Vice President None
26542 Love Lane
Ramona, CA 92065
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
664 Circuit Road
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
Robert Romano Vice President None
1512 Fallingbrook Drive
Fishers, IN 46038
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
Paul Stickney Vice President None
1314 Log Cabin Lane
St. Louis, MO 63124
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
Dave Thomas Vice President - None
3410 South Galena Street Financial Institution Div.
Executive Suites - 3rd Fl.
Denver, CO 80231
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
Bernard J. Wolocko Vice President None
33915 Grand River
Farmington, MI 48335
William Harvey Young+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act
and rules promulgated thereunder are in possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street,
Denver, Colorado 80231.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 17th day of August, 1995.
OPPENHEIMER ASSET ALLOCATION FUND
By: /s/ Donald W. Spiro*
----------------------------------------
Donald W. Spiro, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Leon Levy* Chairman of the
-------------- Board of Trustees August 17, 1995
Leon Levy
/s/ Donald W. Spiro* Chief Executive
-------------------- Officer and
Donald W. Spiro Trustee August 17, 1995
/s/ George Bowen* Chief Financial
----------------- and Accounting
George Bowen Officer August 17, 1995
/s/ Leo Cherne* Trustee August 17, 1995
---------------
Leo Cherne
/s/ Robert G. Galli* Trustee August 17, 1995
-------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee August 17, 1995
----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee August 17, 1995
--------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee August 17, 1995
-----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee August 17, 1995
--------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee August 17, 1995
-----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee August 17, 1995
----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee August 17, 1995
--------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee August 17, 1995
-----------------------
Clayton K. Yeutter
</TABLE>
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
EXHIBIT INDEX
Exhibit No.
24(b)(1) Amended & Restated Declaration of Trust, dated as of
August 17, 1995
24(b)(4)(ii) Specimen Class B Share Certificate
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Data Calculation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class C Shares
AMENDED AND RESTATED DECLARATION OF TRUST
OF
OPPENHEIMER ASSET ALLOCATION FUND
AMENDED AND RESTATED DECLARATION OF TRUST, made as of August 17, 1995
by and among the individuals executing this Amended and Restated
Declaration of Trust as the Trustees.
WHEREAS, the Trustees established Oppenheimer Asset Allocation Fund,
a trust fund under the laws of the Commonwealth of Massachusetts, for the
investment and reinvestment of funds contributed thereto, under a
Declaration of Trust dated September 29, 1983, under the name "OMC Growth
& Income Trust," as amended by Restated Declarations of Trust dated
October 31, 1983, August 9, 1984, December 6, 1984, November 13, 1986,
November 30, 1986, and April 24, 1987; and by the Amended and Restated
Declaration of Trust dated June 1, 1992;
WHEREAS, the Trustees desire to make permitted changes to said Amended
and Restated Declaration of Trust;
WHEREAS, the principal office of the Trust is Two World Trade Center,
New York, New York 10048-0203, and the Trust's resident agent in the
Commonwealth of Massachusetts is Massachusetts Mutual Life Insurance
Company, located at 1295 State Street, Springfield, Massachusetts 01111,
Attention: Stephen Kuhn, Esq.
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under
this Amended and Restated Declaration of Trust IN TRUST as herein set
forth below.
FIRST: This Trust shall be known as OPPENHEIMER ASSET ALLOCATION
FUND.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust which are defined
in the 1940 Act (defined below) shall have the meanings given to them in
the 1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means the
Board of Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from time
to time.
4. "Class" means a class of a series of shares established and
designated under or in accordance with the provisions of Article FOURTH.
5. "Commission" means the Securities and Exchange Commission.
6. "Declaration of Trust" shall mean this Amended and Restated
Declaration of Trust as it may be amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations of the Commission thereunder, all as amended
from time to time.
8. "Series" refers to series of shares established and designated
under or in accordance with the provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the Trust.
10. "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series or Class of the
Trust (as the context may require) shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust created
by this Declaration of Trust, as amended or restated from time to time.
12. "Trustees" refers to the individual trustees in their capacity
as trustees hereunder of the Trust and their successor or successors for
the time being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are
as follows:
1. To hold, invest or reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, sell short,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon, securities (which term "securities" shall for the
purposes of this Declaration of Trust, without limitation of the
generality thereof, be deemed to include any stocks, shares, bonds,
financial futures contracts, indexes, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests therein,
or in any property or assets) created or issued by any issuer (which term
"issuer" shall for the purposes of this Declaration of Trust, without
limitation of the generality thereof be deemed to include any persons,
firms, associations, corporations, syndicates, business trusts,
partnerships, investment companies, combinations, organizations,
governments, or subdivisions thereof) and in financial instruments
(whether they are considered as securities or commodities); and to
exercise, as owner or holder of any securities or financial instruments,
all rights, powers and privileges in respect thereof; and to do any and
all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial
instruments.
2. To borrow money and pledge assets in connection with any of
the objects or purposes of the Trust, and to issue notes or other
obligations evidencing such borrowings, to the extent permitted by the
1940 Act and by the Trust's fundamental investment policies under the 1940
Act.
3. To issue and sell its Shares in such Series and Classes and
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of the Commonwealth of
Massachusetts and by this Declaration of Trust, as the Trustees may
determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel its Shares, or to classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any
Series or Class into one or more Series or Classes that may have been
established and designated from time to time, all without the vote or
consent of the Shareholders of the Trust, in any manner and to the extent
now or hereafter permitted by this Declaration of Trust.
5. To conduct its business in all its branches at one or more
offices in New York, Colorado and elsewhere in any part of the world,
without restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes
as principal or agent, and alone or with associates or to the extent now
or hereafter permitted by the laws of Massachusetts, as a member of, or
as the owner or holder of any stock of, or share of interest in, any
issuer, and in connection therewith to make or enter into such deeds or
contracts with any issuers and to do such acts and things and to exercise
such powers, as a natural person could lawfully make, enter into, do or
exercise.
7. To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out
or attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to,
or inference from, the terms of any other clause of this or any other
Article of this Declaration of Trust, and shall each be regarded as
independent and construed as powers as well as objects and purposes, and
the enumeration of specific purposes, objects and powers shall not be
construed to limit or restrict in any manner the meaning of general terms
or the general powers of the Trust now or hereafter conferred by the laws
of the Commonwealth of Massachusetts nor shall the expression of one thing
be deemed to exclude another, though it be of like nature, not expressed;
provided, however, that the Trust shall not carry on any business, or
exercise any powers, in any state, territory, district or country except
to the extent that the same may lawfully be carried on or exercised under
the laws thereof.
FOURTH:
1. The beneficial interest in the Trust shall be divided into
Shares, all without par value. The Trustees shall have the authority from
time to time to create one or more Series of Shares (the proceeds of which
may be invested in separate, independently managed portfolios) in addition
to the Series specifically established and designated in Part 3 of this
Article FOURTH, and to divide the shares of any Series into two or more
Classes pursuant to Part 2 of this Article FOURTH, all as they deem
necessary or desirable, to establish and designate such Series and
Classes, and to fix and determine the relative rights and preferences as
between the different Series of Shares or Classes as to right of
redemption and the price, terms and manner of redemption, liabilities and
expenses to be borne by any Series or Class, special and relative rights
as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion on liquidation, conversion rights,
and conditions under which the several Series or Classes shall have
individual voting rights or no voting rights. Except as aforesaid, all
Shares of the different Series shall be identical.
(a) The number of authorized Shares and the number of Shares
of each Series and each Class of a Series that may be issued is unlimited,
and the Trustees may issue Shares of any Series or Class of any Series for
such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on the
terms determined by the Trustees shall be fully paid and non-assessable.
(b) The establishment and designation of any Series or any
Class of any Series in addition to that established and designated in Part
3 of this Article FOURTH shall be effective with the effectiveness of an
instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or such Class of such
Series or as otherwise provided in such instrument. At any time that
there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by
a majority of their number abolish that Series and the establishment and
designation thereof. If and to the extent that the instrument referred
to in this paragraph shall be an amendment to this Declaration of Trust,
the Trustees may make any such amendment without shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold
and dispose of Shares of any Series or Class of any Series of the Trust
to the same extent as if such person were not a Trustee, officer or other
agent of the Trust; and the Trust may issue and sell or cause to be issued
and sold and may purchase Shares of any Series or Class of any Series from
any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Series or Class generally.
2. The Trustees shall have the authority from time to time,
without obtaining shareholder approval, to divide the Shares of any Series
into two or more Classes as they deem necessary or desirable, and to
establish and designate such Classes. In such event, each Class of a
Series shall represent interests in the designated Series of the Trust and
have such voting, dividend, liquidation and other rights as may be
established and designated by the Trustees. Expenses related directly or
indirectly to the Shares of a Class of a Series may be borne solely by
such Class (as shall be determined by the Trustees) and, as provided in
Article FIFTH, a Class of a Series may have exclusive voting rights with
respect to matters relating solely to such Class. The bearing of expenses
solely by a Class of Shares of a Series shall be appropriately reflected
(in the manner determined by the Trustees) in the net asset value,
dividend and liquidation rights of the Shares of such Class of a Series.
The division of the Shares of a Series into Classes and the terms and
conditions pursuant to which the Shares of the Classes of a Series will
be issued must be made in compliance with the 1940 Act. No division of
Shares of a Series into Classes shall result in the creation of a Class
of Shares having a preference as to dividends or distributions or a
preference in the event of any liquidation, termination or winding up of
the Trust, to the extent such a preference is prohibited by Section 18 of
the 1940 Act as to the Trust. The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any
Series into one or more Series or Classes of Series that may be
established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the
Trust.
The relative rights and preferences of Shares of different Classes of
a Series shall be the same in all respects except that, and unless and
until the Board of Trustees shall determine otherwise: (i) when a vote of
Shareholders is required under this Declaration of Trust or when a meeting
of Shareholders is called by the Board of Trustees, the Shares of a Class
shall vote exclusively on matters that affect that Class only; (ii) the
expenses and liabilities related to a Class shall be borne solely by such
Class (as determined and allocated to such Class by the Trustees from time
to time in a manner consistent with Parts 2 and 3 of Article FOURTH); and
(iii) pursuant to paragraph 10 of Article NINTH, the Shares of each Class
shall have such other rights and preferences as are set forth from time
to time in the then-effective prospectus and/or statement of additional
information relating to the Shares. Dividends and distributions on one
Class of Shares may differ from the dividends and distributions on another
Class of Shares of the Series, and the net asset value of one Class of
Shares may differ from the net asset value of another Class of Shares of
the Series.
3. Without limiting the authority of the Trustees set forth in Part
1 of this Article FOURTH to establish and designate any further Series,
the Trustees hereby establish one Series of Shares having the same name
as the Trust, and said Shares shall be divided into such number of Classes
as shall be set forth from time to time in the then-effective prospectus
and/or statement of additional information relating to the Trust. The
Shares of that Series and any Shares of any further Series or Classes that
may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Series or Classes at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series
for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General Items
allocated to that Series as provided in the following sentence, are
herein referred to as "assets belonging to" that Series. In the event
that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more
of the Series established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series for all
purposes. No holder of Shares of any Series shall have any claim on or
right to any assets allocated or belonging to any other Series.
(b) (1)Liabilities Belonging to a Series. The liabilities,
expenses, costs, charges and reserves attributable to each Series shall
be charged and allocated to the assets belonging to each particular
Series. Any general liabilities, expenses, costs, charges and reserves
of the Trust which are not identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one
or more of the Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to each Series are herein referred to
as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the shareholders of all Series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated
as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(2)Liabilities Belonging to a Class. If a Series is divided
into more than one Class, the liabilities, expenses, costs, charges and
reserves attributable to a Class shall be charged and allocated to the
Class to which such liabilities, expenses, costs, charges or reserves are
attributable. Any general liabilities, expenses, costs, charges or
reserves belonging to the Series which are not identifiable as belonging
to any particular Class shall be allocated and charged by the Trustees to
and among any one or more of the Classes established and designated from
time to time in such manner and on such basis as the Trustees in their
sole discretion deem fair and equitable. The liabilities, expenses,
costs, charges and reserves allocated and so charged to each Class are
herein referred to as "liabilities belonging to" that Class. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of all Classes
for all purposes. No holder of Shares of any Class shall have any claim
on or right to any assets allocated or belonging to any other Class.
(c) Dividends. Dividends and distributions on Shares of a
particular Series or Class may be paid to the holders of Shares of that
Series or Class, with such frequency as the Trustees may determine, which
may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
from such of the income, capital gains accrued or realized, and capital
and surplus, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging
to such Series or Class. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the holders
of such Series or Class in proportion to the number of Shares of such
Series or Class held by such holders at the date and time of record
established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure
the Trustees may determine that no dividend or distribution shall be
payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the
Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with paragraph 13 of
Article SEVENTH.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of all Classes of each Series
that has been established and designated shall be entitled to receive, as
a Series or Class, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that
Series or Class. The assets so distributable to the Shareholders of any
particular Class and Series shall be distributed among such Shareholders
in proportion to the number of Shares of such Class of that Series held
by them and recorded on the books of the Trust.
(e) Transfer. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Class and Series
will be recorded on the Share transfer records of the Trust applicable to
such Class of that Series only at such times as Shareholders shall have
the right to require the Trust to redeem Shares of such Class of that
Series and at such other times as may be permitted by the Trustees.
(f) Equality. All Shares of all Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to such Class of that Series), and
each Share of any particular Series shall be equal to each other Share of
that Series; but the provisions of this sentence shall not restrict any
distinctions permissible under this Article FOURTH that may exist with
respect to Shares of the different Classes of a Series. The Trustees may
from time to time divide or combine the Shares of any particular Class or
Series into a greater or lesser number of Shares of that Class or Series
without thereby changing the proportionate beneficial interest in the
assets belonging to that Class or Series or in any way affecting the
rights of Shares of any other Class or Series.
(g) Fractions. Any fractional Share of any Class and Series,
if any such fractional Share is outstanding, shall carry proportionately
all the rights and obligations of a whole Share of that Class and Series,
including those rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the
Trust.
(h) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that (i) holders of Shares of any Series shall have the right to
exchange said Shares into Shares of one or more other Series of Shares,
(ii) holders of shares of any Class shall have the right to exchange said
Shares into Shares of one or more other Classes of the same or a different
Series, and/or (iii) the Trust shall have the right to carry out the
aforesaid exchanges, in each case in accordance with such requirements and
procedures as may be established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of
each Class and Series that has been established and designated. No
certification certifying the ownership of Shares need be issued except as
the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or
any transfer or similar agent, as the case may be, shall be conclusive as
to who are the Shareholders and as to the number of Shares of each Class
and Series held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as
they from time to time authorize. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or other
person to accept orders for the purchase or sale of Shares that conform
to such authorized terms and to reject any purchase or sale orders for
Shares whether or not conforming to such authorized terms.
(k) Shareholders of a Series shall not be entitled to
participate in a derivative or class action with respect to any matter
which only affects another Series or its Shareholders.
FIFTH: The following provisions are hereby adopted with respect to
voting shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the
election of Trustees when that issue is submitted to them, (b) with
respect to the amendment of this Declaration of Trust except where the
Trustees are given authority to amend the Declaration of Trust without
shareholder approval, (c) to the same extent as the shareholders of a
Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders, and (d) with
respect to those matters relating to the Trust as may be required by the
1940 Act or required by law, by this Declaration of Trust, or by the By-
Laws of the Trust or any registration statement of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
2. The Trust shall not hold shareholder meetings unless required
by the 1940 Act, the provisions of this Declaration of Trust, or any other
applicable law. The Trustees may call a meeting of shareholders from time
to time.
3. At all meetings of Shareholders, each Shareholder shall be
entitled to one vote on each matter submitted to a vote of the
Shareholders of the affected Series for each Share standing in his name
on the books of the Trust on the date, fixed in accordance with the By-
Laws, for determination of Shareholders of the affected Series entitled
to vote at such meeting (except, if the Board so determines, for Shares
redeemed prior to the meeting), and each such Series shall vote separately
("Individual Series Voting"); a Series shall be deemed to be affected when
a vote of the holders of that Series on a matter is required by the 1940
Act; provided, however, that as to any matter with respect to which a vote
of Shareholders is required by the 1940 Act or by any applicable law that
must be complied with, such requirements as to a vote by Shareholders
shall apply in lieu of Individual Series Voting as described above. If
the shares of a Series shall be divided into Classes as provided in
Article FOURTH, the shares of each Class shall have identical voting
rights except that the Trustees, in their discretion, may provide a Class
of a Series with exclusive voting rights with respect to matters which
relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having exclusive voting rights with
respect to certain matters, the quorum and voting requirements described
below with respect to action to be taken by the Shareholders of the Class
of such Series on such matters shall be applicable only to the Shares of
such Class. Any fractional Share shall carry proportionately all the
rights of a whole Share, including the right to vote and the right to
receive dividends. The presence in person or by proxy of the holders of
one-third of the Shares, or of the Shares of any Series or Class of any
Series, outstanding and entitled to vote thereat shall constitute a
quorum at any meeting of the Shareholders or of that Series or Class,
respectively; provided however, that if any action to be taken by the
Shareholders or by a Series or Class at a meeting requires an affirmative
vote of a majority, or more than a majority, of the shares outstanding and
entitled to vote, then in such event the presence in person or by proxy
of the holders of a majority of the shares outstanding and entitled to
vote at such a meeting shall constitute a quorum for all purposes. At a
meeting at which is a quorum is present, a vote of a majority of the
quorum shall be sufficient to transact all business at the meeting. If
at any meeting of the Shareholders there shall be less than a quorum
present, the Shareholders or the Trustees present at such meeting may,
without further notice, adjourn the same from time to time until a quorum
shall attend, but no business shall be transacted at any such adjourned
meeting except such as might have been lawfully transacted had the meeting
not been adjourned.
4. Each Shareholder, upon request to the Trust in proper form
determined by the Trust, shall be entitled to require the Trust to redeem
from the net assets of that Series and Class all or any part of the Shares
of such Series and Class standing in the name of such Shareholder. The
method of computing such net asset value, the time at which such net asset
value shall be computed and the time within which the Trust shall make
payment therefor, shall be determined as hereinafter provided in Article
SEVENTH of this Declaration of Trust. Notwithstanding the foregoing, the
Trustees, when permitted or required to do so by the 1940 Act, may suspend
the right of the Shareholders to require the Trust to redeem Shares.
5. No Shareholder shall, as such holder, have any right to
purchase or subscribe for any Shares of the Trust which it may issue or
sell, other than such right, if any, as the Trustees, in their discretion,
may determine.
6. All persons who shall acquire Shares shall acquire the same
subject to the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be
allowed.
SIXTH:
1. The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualified are the
initial Trustees executing this Declaration of Trust or any counterpart
thereof. However, the By-Laws of the Trust may fix the number of Trustees
at a number greater or lesser than the number of initial Trustees and may
authorize the Trustees to increase or decrease the number of Trustees, to
fill any vacancies on the Board which may occur for any reason including
any vacancies created by any such increase in the number of Trustees, to
set and alter the terms of office of the Trustees and to lengthen or
lessen their own terms of office or make their terms of office of
indefinite duration, all subject to the 1940 Act. Unless otherwise
provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
2. A Trustee at any time may be removed either with or without
cause by resolution duly adopted by the affirmative vote of the holders
of two-thirds of the outstanding Shares, present in person or by proxy at
any meeting of shareholders called for such purpose; such a meeting shall
be called by the Trustees when requested in writing to do so by the
recordholders of not less than ten per centum of the outstanding Shares.
A Trustee may also be removed by the Board of Trustees as provided in the
By-Laws of the Trust.
3. The Trustees shall make available a list of names and
addresses of all Shareholders as recorded on the books of the Trust, upon
receipt of the request in writing signed by not less than ten Shareholders
(who have been shareholders for at least six months) holding in the
aggregate shares of the Trust valued at not less than $25,000 at current
offering price (as defined in the Trust's Prospectus and/or Statement of
Additional Information) or holding not less than 1% in amount of the
entire amount of Shares issued and outstanding; such request must state
that such Shareholders wish to communicate with other Shareholders with
a view to obtaining signatures to a request for a meeting to take action
pursuant to Part 2 of this Article SIXTH and accompanied by a form of
communication to the Shareholders. The Trustees may, in their discretion,
satisfy their obligation under this Part 3 by either making available the
Shareholder list to such Shareholders at the principal offices of the
Trust, or at the offices of the Trust's transfer agent, during regular
business hours, or by mailing a copy of such communication and form of
request, at the expense of such requesting Shareholders, to all other
Shareholders. If and when the Trust has outstanding two or more series
of Shares pursuant to Article FOURTH of this Declaration of Trust, each
series shall be considered as if it were a separate common law trust
covered by Section 16(c) of the 1940 Act and Parts 2 and 3 of this Article
SIXTH.
The Trust may at any time or from time to time apply to the Commission
for one or more exemptions from all or part of said Section 16(c) and, if
an exemptive order or orders are issued by the Commission, such order or
orders shall be deemed part of Section 16(c) for the purposes of Parts 2
and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Trust and of the
Trustees and Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or
the Trustees and shall have accepted this trust, the Trust estate shall
vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed
a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them shall not operate to annul
or terminate the Trust but the Trust shall continue in full force and
effect pursuant to the terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets
of the Trust shall at all times be considered as vested in the Trustees.
No Shareholder shall have, as such holder of beneficial interest in the
Trust, any authority, power or right whatsoever to transact business for
or on behalf of the Trust, or on behalf of the Trustees, in connection
with the property or assets of the Trust, or in any part thereof.
4. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute, and to authorize the officers and agents of the Trust to make and
execute, any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in this Declaration of
Trust or by the By-Laws of the Trust, the Trustees shall have power and
authority:
(a) to adopt By-Laws not inconsistent with this Declaration of
Trust providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint and terminate
such officers as they consider appropriate with or without cause, and to
appoint and designate from among the Trustees such committees as the
Trustees may determine, and to terminate any such committee and remove any
member of such committee;
(c) to employ as custodian of any assets of the Trust a bank or
trust company or any other entity qualified and eligible to act as a
custodian, subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;
(d) to retain a transfer agent and shareholder servicing agent,
or both;
(e) to provide for the distribution of Shares either through a
principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-
Laws of the Trust;
(g) to delegate such authority as they consider desirable to any
officers of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property held in Trust
hereunder; and to execute and deliver powers of attorney to such person
or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or property
as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities held in trust
hereunder;
(j) to hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form,
either in its own name or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the
usual practice of Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern,
and to pay calls or subscriptions with respect to any security held in the
Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but
not limited to, claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted
by the 1940 Act and the Trust's fundamental policy thereunder as to
borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons;
(p) to change the name of the Trust or any Class or Series of
the Trust as they consider appropriate without prior Shareholder approval;
(q) to establish Officers' and Trustees' fees or compensation
and fees or compensation for committees of the Trustees to be paid by the
Trust or each Series thereof in such manner and amount as the Trustees may
determine;
(r) to invest all or substantially all of the Trust's assets in
another registered investment company; and
(s) to determine whether a minimum and/or maximum value should
apply to accounts holding Shares, to fix such values and the terms,
procedures, and other conditions to cause the involuntary redemption of
accounts that do not satisfy such criteria.
5. No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to see
to the application of any payments made or property transferred to the
Trustees or upon their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription to any Shares or
otherwise. This paragraph shall not limit the right of the Trustees to
asset claims against any shareholder based upon the acts or omissions of
such shareholder or for any other reason. There is hereby expressly
disclaimed shareholder and Trustee liability for the acts and obligations
of the Trust. Every note, bond, contract or other undertaking issued by
or on behalf of the Trust or the Trustees relating to the Trust shall
include a notice and provision limiting the obligation represented thereby
to the Trust and its assets (but the omission of such notice and provision
shall not operate to impose any liability or obligation on any
Shareholder).
(b) Whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a quorum of
Trustees as set forth from time to time in the By-Laws of the Trust or as
required by the 1940 Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein
contained such as may be necessary or convenient in the conduct of any
business or enterprise of the Trust, to do and perform anything necessary,
suitable, or proper for the accomplishment of any of the purposes, or the
attainment of any one or more of the objects, herein enumerated, or which
shall at any time appear conducive to or expedient for the protection or
benefit of the Trust, and to do and perform all other acts and things
necessary or incidental to the purposes herein before set forth, or that
may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not
inconsistent with the 1940 Act, to determine conclusively whether any
moneys, securities, or other properties of the Trust are, for the purposes
of this Trust, to be considered as capital or income and in what manner
any expenses or disbursements are to be borne as between capital and
income whether or not in the absence of this provision such moneys,
securities, or other properties would be regarded as capital or income and
whether or not in the absence of this provision such expenses or
disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into Classes
and prescribe the tenure of office of the several Classes, but no Class
shall be elected for a period shorter than that from the time of the
election following the division into classes until the next meeting and
thereafter for a period shorter than the interval between meetings or for
a period longer than five years, and the term of office of at least one
Class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable
regulations of the Trustees, not contrary to Massachusetts law, as to
whether and to what extent, and at what times and places, and under what
conditions and regulations, such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the
Shareholders or otherwise, may be removed at any time, with or without
cause, in such lawful manner as may be provided in the By-Laws of the
Trust.
10. The Trustees shall have power to hold their meetings, to have
an office or offices and, subject to the provisions of the laws of
Massachusetts, to keep the books of the Trust outside of said Commonwealth
at such places as may from time to time be designated by them. Action may
be taken by the Trustees without a meeting by unanimous written consent
or by telephone or similar method of communication.
11. Securities held by the Trust shall be voted in person or by
proxy by the President or a Vice-President, or such officer or officers
of the Trust as the Trustees shall designate for the purpose, or by a
proxy or proxies thereunto duly authorized by the Trustees, except as
otherwise ordered by vote of the holders of a majority of the Shares
outstanding and entitled to vote in respect thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee,
officer or employee, individually, or any partnership of which any
Trustee, officer or employee may be a member, or any corporation or
association of which any Trustee, officer or employee may be an officer,
partner, director, trustee, employee or stockholder, or otherwise may have
an interest, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Trust, and in the
absence of fraud no contract or other transaction shall be thereby
affected or invalidated; provided that in such case a Trustee, officer or
employee or a partnership, corporation or association of which a Trustee,
officer or employee is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed or shall have
been known to the Trustees including those Trustees who are not so
interested and who are neither "interested" not "affiliated" persons as
those terms are defined in the 1940 Act, or a majority thereof; and any
Trustee who is so interested, or who is also a director, officer, partner,
trustee, employee or stockholder of such other corporation or a member of
such partnership or association which is so interested, may be counted in
determining the existence of a quorum at any meeting of the Trustees which
shall authorize any such contract or transaction, and may vote thereat to
authorize any such contract or transaction, with like force and effect as
if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do
business with any manager or investment adviser for the Trust and/or
principal underwriter of the Shares of the Trust or any subsidiary or
affiliate of any such manager or investment adviser and/or principal
underwriter and may permit any such firm or corporation to enter into any
contracts or other arrangements with any other firm or corporation
relating to the Trust notwithstanding that the Trustees of the Trust may
be composed in part of partners, directors, officers or employees of any
such firm or corporation, and officers of the Trust may have been or may
be or become partners, directors, officers or employees of any such firm
or corporation, and in the absence of fraud the Trust and any such firm
or corporation may deal freely with each other, and no such contract or
transaction between the Trust and any such firm or corporation shall be
invalidated or in any way affected thereby, nor shall any Trustee or
officer of the Trust be liable to the Trust or to any Shareholder or
creditor thereof or to any other person for any loss incurred by it or him
solely because of the existence of any such contract or transaction;
provided that nothing herein shall protect any director or officer of the
Trust against any liability to the trust or to its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) As used in this paragraph the following terms shall have
the meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present
or former Trustee, partner, Director or officer of
another trust, partnership, corporation or association
whose securities are or were owned by the Trust or of
which the Trust is or was a creditor and who served or
serves in such capacity at the request of the Trust,
and the heirs, executors, administrators, successors
and assigns of any of the foregoing; however, whenever
conduct by an indemnitee is referred to, the conduct
shall be that of the original indemnitee rather than
that of the heir, executor, administrator, successor
or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, to which an indemnitee is or was a
party or is threatened to be made a party by reason of
the fact or facts under which he or it is an
indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably
incurred by an indemnitee in connection with a covered
proceeding; and
(v) the term "adjudication of liability" shall mean, as to
any covered proceeding and as to any indemnitee, an
adverse determination as to the indemnitee whether by
judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly based on a
finding of disabling conduct.
(e) Except as set forth in paragraph (d) above, the Trust
shall indemnify any indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of liability as to
such indemnitee, if a determination has been made that the indemnitee was
not liable by reason of disabling conduct by (i) a final decision on the
merits of the court or other body before which the covered proceeding was
brought; or (ii) in the absence of such decision, a reasonable
determination, based on a review of the facts, by either (a) the vote of
a majority of a quorum of Trustees who are neither "interested persons,"
as defined in the 1940 Act nor parties to the covered proceedings or (b)
an independent legal counsel in a written opinion; provided that such
Trustees or counsel, in reaching such determination, may but need not
presume the absence of disabling conduct on the part of the indemnitee by
reason of the manner in which the covered proceeding was terminated, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-Laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of
Trustees may adopt By-Law provisions to implement sub-paragraphs (c), (d)
and (e) hereof.
(f) Covered expenses incurred by an indemnitee in connection
with a covered proceeding shall be advanced by the Trust to an indemnitee
prior to the final disposition of a covered proceeding upon the request
of the indemnitee for such advance and the undertaking by or on behalf of
the indemnitee to repay the advance unless it is ultimately determined
that the indemnitee is entitled to indemnification thereunder, but only
if one or more of the following is the case: (i) the indemnitee shall
provide a security for such undertaking; (ii) the Trust shall be insured
against losses arising out of any lawful advances; or (iii) there shall
have been a determination, based on a review of the readily available
facts (as opposed to a full trial-type inquiry) that there is a reason to
believe that the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a written opinion
or by the vote of a majority of a quorum of trustees who are neither
"interested persons" as defined in the 1940 Act nor parties to the covered
proceeding.
(g) Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering
any or all indemnitees to the extent permitted by applicable law or to
affect any other indemnification rights to which any indemnitee may be
entitled to the extent permitted by applicable law. Such rights to
indemnification shall not, except as otherwise provided by law, be deemed
exclusive of any other rights to which such indemnitee may be entitled
under any statute now or hereafter enacted, By-Law, contract or otherwise.
13. The Trustees are empowered, in their absolute discretion, to
establish bases or times, or both, for determining the net asset value per
Share of any Class and Series in accordance with the 1940 Act and to
authorize the voluntary purchase by any Class and Series, either directly
or through an agent, of Shares of any Class and Series upon such terms and
conditions and for such consideration as the Trustees shall deem advisable
in accordance with the 1940 Act.
14. Payment of the net asset value per Share of any Class and
Series properly surrendered to it for redemption shall be made by the
Trust within seven days, or as specified in any applicable law or
regulation, after tender of such stock or request for redemption to the
Trust for such purpose plus any period of time during which the right of
the holders of the shares of such Class of that Series to require the
Trust to redeem such shares has been suspended. Any such payment may be
made in portfolio securities of such Class of that Series and/or in cash,
as the Trustees shall deem advisable, and no Shareholder shall have a
right, other than as determined by the Trustees, to have Shares redeemed
in kind.
15. The Trust shall have the right, at any time and without prior
notice to the Shareholder, to redeem Shares of the Class and Series held
by such Shareholder held in any account registered in the name of such
Shareholder for its current net asset value, if and to the extent that
such redemption is necessary to reimburse either that Series of the Trust
or the distributor (i.e., principal underwriter) of the Shares for any
loss either has sustained by reason of the failure of such Shareholder to
make timely and good payment for Shares purchased or subscribed for by
such Shareholder, regardless of whether such Shareholder was a Shareholder
at the time of such purchase or subscription; subject to and upon such
terms and conditions as the Trustees may from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and
of any Series shall be used pursuant to a royalty-free, non-exclusive
license from Oppenheimer Management Corporation ("OMC"), incidental to and
as part of any one or more advisory, management or supervisory contract
which may be entered into by the Trust with OMC. Such license shall allow
OMC to inspect and subject to the control of the Board of Trustees to
control the nature and quality of services offered by the Trust under such
name. The license may be terminated by OMC upon termination of such
advisory, management or supervisory contract or without cause upon 60
days' written notice, in which case neither the Trust nor any Series or
Class shall have any further right to use the name "Oppenheimer" in its
name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change
its name accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held to
be personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or the Shareholders, heirs,
executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the Trust estate to be held harmless
from and indemnified against all loss and expense arising from such
liability. This Trust shall, upon request by the Shareholder, assume the
defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a
partnership is created hereby. No individual Trustee hereunder shall have
any power to bind the Trust, the Trust's officers or any Shareholder. All
persons extending credit to, during business with, contracting with or
having or asserting any claim against the Trust or the Trustees shall look
only to the assets of the Trust for payment under such credit,
transaction, contract or claim; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall
be personally liable therefor; notice of such disclaimer shall be given
in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall
protect a Trustee against any liability to which such Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to
the provisions of paragraph 2 of this Article NINTH, the Trustees shall
not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operations of this Declaration of Trust, applicable laws,
contracts, obligations, transactions or any other business the Trust may
enter into, and subject to the provisions of paragraph 2 of this Article
NINTH, shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The Trustees shall
not be required to give any bond as such, nor any surety if a bond is
required.
4. This Trust shall continue without limitation of time but subject
to the provisions of sub-sections (a), (b), and (c) of this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of
a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may sell and convey the
assets of that Series (which sale may be subject to the retention of
assets for the payment of liabilities and expenses) to another issuer for
a consideration which may be or include securities of such issuer. Upon
making provision for the payment of liabilities, by assumption by such
issuer or otherwise, the Trustees shall distribute the remaining proceeds
ratably among the holders of the outstanding Shares of the Series the
assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders of
a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may at any time sell and
convert into money all the assets of that Series. Upon making provisions
for the payment of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of that Series, the Trustees shall
distribute the remaining assets of that Series ratably among the holders
of the outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of
a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may otherwise alter,
convert or transfer the assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections (a) and (b),
and in subsection (c) where applicable, the Series the assets of which
have been so transferred shall terminate, and if all the assets of the
Trust have been so transferred, the Trust shall terminate and the Trustees
shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties shall be
cancelled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at
the office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each supplemental or restated declaration
of trust shall be filed with the Secretary of the Commonwealth of
Massachusetts, as well as any other governmental office where such filing
may from time to time be required. Anyone dealing with the Trust may rely
on a certificate by an officer of the Trust as to whether or not any such
supplemental or restated declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and, with the same
effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such
supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as amended or affected by any
such supplemental or restated declaration of trust. This instrument may
be executed in any number of counterparts, each of which shall be deemed
as original.
6. The Trust set forth in this instrument is created under and is
to be governed by and construed and administered according to the laws of
the Commonwealth of Massachusetts. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such Shares
(taken at cost or value, as determined by the Board) has been reduced to
$500 or less upon such notice to the shareholder in question, with such
permission to increase the investment in question and upon such other
terms and conditions as may be fixed by the Board of Trustees in
accordance with the 1940 Act.
8. In the event that any person advances the organizational expenses
of the Trust, such advances shall become an obligation of the Trust
subject to such terms and conditions as may be fixed by, and on a date
fixed by, or determined with criteria fixed by the Board of Trustees, to
be amortized over a period or periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust
including action which is required or permitted by the 1940 Act or any
other applicable law, such action shall be deemed to have been properly
taken if such action is in accordance with the construction of the 1940
Act or such other applicable law then in effect as expressed in "no
action" letters of the staff of the Commission or any release, rule,
regulation or order under the 1940 Act or any decision of a court of
competent jurisdiction, notwithstanding that any of the foregoing shall
later be found to be invalid or otherwise reversed or modified by any of
the foregoing.
10. Any action which may be taken by the Board of Trustees under
this Declaration of Trust or its By-Laws may be taken by the description
thereof in the then-effective Prospectus and/or Statement of Additional
Information relating to the Shares under the Securities Act of 1933 or in
any proxy statement of the Trust rather than by formal resolution of the
Board.
11. Whenever under this Declaration of Trust, the Board of
Trustees is permitted or required to place a value on assets of the Trust,
such action may be delegated by the Board, and/or determined in accordance
with a formula determined by the Board, to the extent permitted by the
1940 Act.
12. If authorized by vote of the Trustees and the favorable vote
of the holders of a majority of the outstanding voting securities, as
defined in the 1940 Act, entitled to vote, or by any larger vote which may
be required by applicable law in any particular case, the Trustees shall
amend or otherwise supplement this instrument, by making a Restated
Declaration of Trust or a Declaration of Trust supplemental hereto, which
thereafter shall form a part hereof; any such Supplemental or Restated
Declaration of Trust may be executed by and on behalf of the Trust and the
Trustees by an officer or officers of the Trust.
ORGZN/240#3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of this 17th day of August, 1995.
/s/ Leo Cherne /s/ Benjamin Lipstein
_______________________ ______________________________
Leo Cherne Benjamin Lipstein
50 East 79 Street 591 Breezy Hill Road
New York, NY 10021 Hillsdale, NY 12529
/s/ Robert G. Galli /s/ Donald W. Spiro
_______________________ ______________________________
Robert G. Galli Donald W. Spiro
11-54 Shearwater Court 399 Ski Trail
Jersey City, NJ 07305 Kinnelon, NJ 07405
/s/ Leon Levy /s/ Pauline Trigere
_______________________ ______________________________
Leon Levy Pauline Trigere
One Sutton Place South 525 Park Avenue
New York, NY 10022 New York, NY 10021
/s/ Sidney M. Robbins /s/ Kenneth A. Randall
_______________________ ______________________________
Sidney M. Robbins Kenneth A. Randall
50 Overlook Road 6 Whittaker's Mill
Ossining, NY 10562 Williamsburg, VA 23185
/s/ Russell S. Reynolds, Jr. /s/ Elizabeth B. Moynihan
_______________________ ______________________________
Russell S. Reynolds, Jr. Elizabeth B. Moynihan
39 Clapboard Ridge Road 801 Pennsylvania Avenue
Greenwich, CT 06830 Washington, D.C. 20004
/s/ Edward V. Regan /s/ Clayton K. Yeutter
_______________________ ______________________________
Edward V. Regan Clayton K. Yeutter
40 Park Avenue 1325 Merrie Ridge Road
New York, NY 10016 McLean, VA 22101
ORGZN/240#3
Exhibit 24(b)(4)(ii)
OPPENHEIMER ASSET ALLOCATION FUND
Class B Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within 8-1/4"
x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.] XX-000000
(upper right box, CLASS B SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER ASSET ALLOCATION FUND
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 68379P302
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST
OPPENHEIMER ASSET ALLOCATION FUND
(hereinafter called the "Fund"), transferable only on the
books of the Fund By the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by acceptance
hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures
of its duly authorized officers.
(at left Dated: (at right
of seal) of seal)
(signature) (signature)
/s/ Andrew J. Donohue /s/ Donald W. Spiro
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER ASSET ALLOCATION FUND
SEAL
1983
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
[A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class B Shares of
beneficial interest represented by the within certificate, and do hereby
irrevocably constitute and appoint ___________________________ Attorney
to transfer the said shares on the books of the within named Fund with
full power of substitution in the premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
______________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
CERTIFIC\240CERTB
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Asset Allocation Fund:
We consent to the use of our report dated January 23, 1995 included herein
and the reference to our Firm under the heading "Financial Highlights" in
Part A of the registration statement.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
August 18, 1995
Oppenheimer Asset Allocation 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 Reinvestment
Distribution Amount From Long or Price
Reinvestment Investment Short-Term
(Ex) Date Income Capital Gains
---------------- ----------- --------------- --------------
Class A Shares
07/31/87 0.1200 0.0000 10.620
10/23/87 0.0900 0.0000 8.590
12/24/87 0.0500 0.0050 8.960
03/25/88 0.0700 0.0000 9.550
06/24/88 0.0750 0.0000 9.870
09/23/88 0.1350 0.0000 9.800
12/23/88 0.1200 0.1900 9.660
03/23/89 0.1200 0.0000 10.130
06/23/89 0.1200 0.0000 10.670
09/22/89 0.1200 0.0000 10.930
12/22/89 0.1200 0.2900 10.560
03/23/90 0.1100 0.0000 10.380
06/22/90 0.1200 0.0550 10.340
09/21/90 0.1200 0.0000 10.120
12/21/90 0.1650 0.0000 10.130
03/22/91 0.1200 0.0000 10.440
06/19/91 0.1200 0.0000 10.430
09/20/91 0.1000 0.0000 10.680
12/20/91 0.0900 0.0000 10.710
03/27/92 0.0900 0.0000 11.130
06/26/92 0.0900 0.0000 11.120
09/25/92 0.0900 0.0000 11.300
12/30/92 0.1490 0.0000 11.620
03/26/93 0.0700 0.0000 11.990
06/25/93 0.1400 0.0000 12.230
09/24/93 0.1000 0.0000 12.650
12/28/93 0.1280 0.0120 13.030
03/25/94 0.0880 0.0000 12.920
06/24/94 0.1000 0.0000 12.300
09/23/94 0.1200 0.0000 12.750
12/28/94 0.2240 0.7870 11.470
Class C Shares
12/28/93 0.1200 0.0120 13.030
03/25/94 0.0700 0.0000 12.900
06/24/94 0.0790 0.0000 12.270
09/23/94 0.0960 0.0000 12.720
12/28/94 0.1980 0.7870 11.440
1. Average Annual Total Returns for the Periods Ended 12/31/94:
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
$ 927.56 1 $1,342.50 .2
(---------) - 1 = -7.24% (---------) - 1 = 6.07%
$1,000 $1,000
Inception
$1,690.96 .1301
(---------) - 1 = 7.07%
$1,000
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00%
for the first year, and 0.00% for the inception year:
One Year Inception
$ 966.15 1 $ 996.28 .9217
(---------) - 1 = -3.39% (---------) - 1 = -0.34%
$1,000 $1,000
1. Average Annual Total Returns for the Periods Ended 12/31/94
(Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$ 984.15 1 $1,424.40 .2
(---------) - 1 = -1.59% (---------) - 1 = 7.33%
$1,000 $1,000
Inception
$1,794.12 .1301
(---------) - 1 = 7.90%
$1,000
Class C Shares
One Year Inception
$ 974.95 1 $ 996.28 .9217
(---------) - 1 = -2.50% (---------) - 1 = -0.34%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 12/31/94:
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
$ 927.56 - $1,000 $1,342.50 - $1,000
------------------ = -7.24% ------------------ = 34.25%
$1,000 $1,000
Inception
$1,690.96 - $1,000
------------------ = 69.10%
$1,000
2. Cumulative Total Returns for the Periods Ended 12/31/94
(Continued):
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00%
for the first year, and 0.00% for the inception year:
One Year Inception Year
$ 966.15 - $1,000 $ 996.28 - $1,000
------------------ = -3.39% ------------------ = -0.37%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 984.15 - $1,000 $1,424.40 - $1,000
------------------ = -1.59% ------------------ = 42.44%
$1,000 $1,000
Inception
$1,794.12 - $1,000
------------------ = 79.41%
$1,000
Class C Shares
One Year Inception Year
$ 974.95 - $1,000 $ 996.28 - $1,000
------------------ = -2.50% ------------------ = -0.37%
$1,000 $1,000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> OPPENHEIMER ASSET ALLOCATION FUND
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<NAME> OPPENHEIMER ASSET ALLOCATION FUND
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