As filed with the Securities and Exchange Commission on March 24,
1997
Registration No. 811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
OPPENHEIMER MULTIPLE STRATEGIES FUND
(formerly named "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.
Executive Vice President & General Counsel
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
- - -------------------------------------------------------------------
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes
effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on April 23,
1997, pursuant to Rule 488.
No filing fee is due because the Registrant has previously
registered an indefinite number of shares under Rule 24f-2; a Rule
24f-2 notice for the year ended September 30, 1996 was filed on
November 27, 1996.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and
documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Oppenheimer Fund
Prospectus for Oppenheimer Multiple Strategies Fund
and
Proxy Statement for Oppenheimer Strategic Income & Growth Fund
Prospectus for Oppenheimer Multiple Strategies Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
<PAGE>
FORM N-14
OPPENHEIMER MULTIPLE STRATEGIES FUND ( OMSF )
Cross Reference Sheet
<TABLE>
<S> <C>
Part A of
Form N-14 Proxy Statement and Prospectus of Oppenheimer Fund
Item No. Heading and/or Title of Document
- - --------- --------------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison
between OMSF and Oppenheimer Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between OMSF and
Oppenheimer Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of Oppenheimer Fund; Annual Report of
Oppenheimer Fund; Comparison Between OMSF and
Oppenheimer Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *
Part A of Proxy Statement and Prospectus of
Form N-14 Oppenheimer Strategic Income & Growth Fund
Item No. Heading and/or Title of Document
- - --------- ------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison
between OMSF and Oppenheimer Strategic Income & Growth
Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between OMSF and
Oppenheimer Income & Growth Fund Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of Oppenheimer Income & Growth Fund; Annual
Report of Oppenheimer Income & Growth Fund; Comparison
Between OMSF and Oppenheimer Income & Growth Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
- - --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about Oppenheimer
Fund and Oppenheimer Strategic Income & Growth Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information;
Statement of Additional Information about Oppenheimer
Fund; Statement of Additional Information about
Oppenheimer Strategic Income & Growth Fund; Annual
Report of Oppenheimer Fund at 6/30/96; Annual Report
of Oppenheimer Strategic Income & Growth Fund at
9/30/96; Registrant's Annual Report at 9/30/96
Part C of
Form N-14
Item No. Other Information Heading
- - --------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
- - ----------------
* Not Applicable or negative answer
</TABLE>
<PAGE>
Preliminary Copy
OPPENHEIMER FUND
Two World Trade Center, New York, NY 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 1997
To the Shareholders of Oppenheimer Fund:
Notice is hereby given that a Special Meeting of the Shareholders
of Oppenheimer Fund, an open-end, management investment company,
will be held at 6803 South Tucson Way, Englewood, Colorado 80112,
at 10:00 A.M., Denver time, on June 17, 1997, and any adjournments
thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon approval of the Agreement and Plan
of Reorganization dated as of October 10, 1996 (the
"Reorganization Agreement") by and among Oppenheimer Multiple
Strategies Fund ("OMSF"), and Oppenheimer Fund, and the
transactions contemplated thereby (the "Reorganization"),
including (i) the transfer of substantially all the assets of
Oppenheimer Fund to OMSF in exchange for Class A, Class B and
Class C shares of OMSF, (ii) the distribution of such shares
of OMSF to shareholders of the Fund in complete liquidation of
the Fund, and (iii) the cancellation of the outstanding shares
of the Fund (the "Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying
Proxy Statement and Prospectus and a copy of the Reorganization
Agreement is attached as Exhibit A thereto. Shareholders of record
at the close of business on April 11, 1997 are entitled to notice
of, and to vote at, the Meeting. Please read the Proxy Statement
and Prospectus carefully before telling us, through your proxy or
in person, how you wish your shares to be voted. The Board of
Trustees of the Trust recommends a vote in favor of the
Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED
PROXY PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
April 30, 1997
Shareholders who do not expect to attend the Meeting are requested
to indicate voting instructions on the enclosed proxy and to date,
sign and return it in the accompanying postage-paid envelope. To
avoid unnecessary duplicate mailings, we ask your cooperation in
promptly mailing your proxy no matter how large or small your
holdings may be.
<PAGE>
Preliminary Copy
OPPENHEIMER FUND
Two World Trade Center, New York, NY 10048-0203
1-800-525-7048
PROXY STATEMENT
--------------------------
OPPENHEIMER MULTIPLE STRATEGIES FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to
shareholders of Oppenheimer Fund, an open-end, management
investment company, in connection with the solicitation by the
Board of Trustees of Oppenheimer Fund (the "Board") of proxies to
be used at the Special Meeting of Shareholders of Oppenheimer Fund,
to be held at 6803 South Tucson Way, Englewood, Colorado 80112 at
10:00 A.M., Denver time, on June 17, 1997, and any adjournments
thereof (the "Meeting"). It is expected that this Proxy Statement
and Prospectus will be mailed to shareholders on or about April 30,
1997.
At the Meeting, shareholders of Oppenheimer Fund will be asked to
consider and vote upon approval of the Agreement and Plan of
Reorganization, dated as of October 10, 1996 (the "Reorganization
Agreement"), between Oppenheimer Multiple Strategies Fund
("OMSF"), an open-end, management investment company, and
Oppenheimer Fund, and the transactions contemplated by the
Reorganization Agreement (the "Reorganization"). The
Reorganization Agreement provides for the transfer of substantially
all the assets of Oppenheimer Fund to OMSF in exchange for Class A,
Class B and Class C shares of OMSF and the assumption by OMSF of
certain liabilities of the Fund, the distribution of such shares of
OMSF to shareholders of the Fund in complete liquidation of the
Fund and the cancellation of the outstanding shares of the Fund.
A copy of the Reorganization Agreement is attached hereto as
Exhibit A and is incorporated by reference herein. As a result of
the proposed Reorganization, each shareholder of Oppenheimer Fund
will receive that number of Class A, Class B and Class C shares of
OMSF having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of Oppenheimer Fund. This
transaction is being structured as a tax-free reorganization. See
"Approval of the Reorganization."
Concurrently with this proxy statement, the shareholders of
Oppenheimer Strategic Income & Growth Fund ("OSI&GF") are being
asked to approve a reorganization of Oppenheimer Strategic Income
& Growth Fund into OMSF. The implementation of the proposed
Reorganization of Oppenheimer Fund into OMSF is not contingent upon
approval of the proposed OSI&GF Reorganization. Similarly,
implementation of the proposed reorganization of OSI&GF into OMSF
is not contingent upon approval of the proposed Reorganization of
Oppenheimer Fund. Your vote is independent of that of the
shareholders of OSI&GF.
OMSF currently offers Class A, Class B and Class C shares. Class
A shares are sold with a sales charge imposed at the time of
purchase (certain purchases aggregating $1.0 million or more are
not subject to a sales charge, but may be subject to a contingent
deferred sales charge ("CDSC") if redeemed within 18 months from
the end of the calendar month when purchased); Class B shares are
sold without a front-end sales charge but may be subject to a CDSC
if redeemed within six years of the date of purchase; and Class C
shares are sold without a front end sales charge but may be subject
to a CDSC if not held for one year. Shareholders of the Fund will
receive Class A shares of OMSF and no sales charge will be imposed
on the OMSF Class A shares received by the Fund's shareholders.
OMSF is a mutual fund that seeks high total investment return
consistent with preservation of principal. 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. The Fund may
invest up to 35% of its total assets in lower-rated, high yield
debt securities commonly known as "junk bonds."
OMSF has filed with the U.S. Securities and Exchange Commission
(the "SEC") a Registration Statement on Form N-14 (the
"Registration Statement") relating to the registration of shares of
OMSF to be offered to the shareholders of the Fund pursuant to the
Reorganization Agreement. This Proxy Statement and Prospectus
relating to the Reorganization also constitutes a Prospectus of
OMSF filed as part of such Registration Statement. Information
contained or incorporated by reference herein relating to OMSF has
been prepared by and is the responsibility of OMSF. Information
contained or incorporated by reference herein relating to the Fund
has been prepared by and is the responsibility of the Fund.
This Proxy Statement and Prospectus sets forth concisely
information about OMSF that a prospective investor should know
before voting on the Reorganization.
The following documents have been filed with the SEC, are
incorporated by reference herein, and are available without charge
upon written request to the transfer and shareholder servicing
agent for OMSF, OppenheimerFunds Services ("OFS"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the toll-free number for OMSF
shown above: (i) a Prospectus for OMSF dated January 15, 1997,
revised March 6, 1997; (ii) a Statement of Additional Information
about OMSF, dated January 15, 1997, revised March 6, 1997 (the
"OMSF Additional Statement"), which contains more detailed
information about OMSF and its management, and (iii) a Statement of
Additional Information relating to the Reorganization described in
this Proxy Statement and Prospectus (the "Additional Statement"),
dated April 23, 1997 filed as part of the OMSF Registration
Statement on Form N-14.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of OMSF or Oppenheimer Fund are not deposits or obligations
of any bank, are not guaranteed by any bank, are not insured by the
FDIC or any other agency, and involve investment risks, including
the possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement and Prospectus is dated April 23, 1997.
Page>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<S> <C>
Page
COMPARATIVE FEE TABLES . . . . . . . . . . . . . . . . .
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . .
Parties to the Reorganization. . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . .
Tax Consequences of the Reorganization . . . . . . . .
Investment Objectives and Policies . . . . . . . . . .
Investment Advisory and Distribution Plan Fees . . . .
Purchases, Exchanges and Redemptions . . . . . . . . .
PRINCIPAL RISK FACTORS . . . . . . . . . . . . . . . . .
APPROVAL OF THE REORGANIZATION (The Proposal). . . . . .
Board Approval of the Reorganization . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . .
Tax Aspects of the Reorganization. . . . . . . . . . .
Capitalization Table (Unaudited) . . . . . . . . . . .
COMPARISON BETWEEN OMSF AND OPPENHEIMER FUND . . . . . .
Comparison of Investment Objectives, Policies
and Restrictions. . . . . . . . . . . . . . . . . .
Special Investment Methods . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . .
Additional Comparative Information . . . . . . . . . .
INFORMATION CONCERNING THE MEETING . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . . .
Record Date; Vote Required; Share Information. . . . .
Proxies. . . . . . . . . . . . . . . . . . . . . . . .
Costs of the Solicitation and the Reorganization . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . .
Financial Information. . . . . . . . . . . . . . . . .
Public Information . . . . . . . . . . . . . . . . . .
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A - Agreement and Plan of Reorganization, dated
as of October 10, 1996, by and among
Oppenheimer Multiple Strategies Fund and
Oppenheimer Fund . . . . . . . . . . . . . . A-1
</TABLE>
<PAGE>
COMPARATIVE FEE TABLES
OMSF and Oppenheimer Fund each pay a variety of expenses for
management of their assets, administration, distribution of their
shares and other services, and those expenses are reflected in each
fund's net asset value per share. Shareholders pay other expenses
directly, such as sales charges. The following tables show the
direct expenses of investing in each class of either Oppenheimer
Fund, OMSF, or OMSF as the surviving fund after giving effect to
the reorganization:(1)
<TABLE>
<CAPTION>
Oppenheimer Fund/
Oppenheimer Multiple Strategies Fund/
OMSF as the surviving Fund(1)
Class A Class B Class C
Transaction Charges
<S> <C> <C> <C>
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
Maximum Deferred Sales None(2) 5.0% in the 1% if shares
Charge (as a % of the first year, redeemed within
lower of the original declining to 12 months of
offering price or 1% in the purchase
redemption proceeds) sixth year and
eliminated
thereafter
Maximum Sales Charge None None None
on Reinvested Dividends
Exchange Fee None None None
</TABLE>
(1)These direct expenses of OMSF as the surviving fund are the same
for the combined fund (Oppenheimer Fund with OMSF), and the
combined funds (Oppenheimer Fund and OSI&GF with OMSF).
(2)If you invest $1 million or more ($500,000 or more for purchases
by Retirement Plans) in Class A shares, you may have to pay a sales
charge of up to 1.0% if you sell your shares within 18 calendar
months from the end of the calendar month during which you
purchased those shares. This deferred sales charge will be waived
for shares acquired in the Reorganization.
Expenses of Oppenheimer Fund and OMSF; Pro Forma Expenses
Oppenheimer Fund and OMSF each pay a variety of expenses directly
for management of their assets, administration, distribution of
their shares and other services, and those expenses are reflected
in the net asset value per share of each of Oppenheimer Fund and
OMSF. The following calculations are based on the expenses of
Class A, Class B and Class C shares of Oppenheimer Fund and OMSF
for the 12 months ended September 30, 1996. These amounts are
shown as a percentage of the average net assets of each class of
each of the funds. The pro forma fees reflect what the fee
schedule would have been at September 30, 1996 if the
Reorganization had occurred on either of those dates.
Oppenheimer Fund
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.13% 1.00% 1.00%
Other Expenses 0.36% 0.44% 0.37%
Total Fund Operating Expenses 1.23% 2.18% 2.11%
</TABLE>
Oppenheimer Multiple Strategies Fund
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.18% 1.00% 1.00%
Other Expenses 0.29% 0.39% 0.32%
Total Fund Operating Expenses 1.21% 2.13% 2.06%
</TABLE>
Pro Forma Combined Fund (Oppenheimer Fund with OMSF)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.15% 1.00% 1.00%
Other Expenses 0.33% 0.42% 0.35%
Total Fund Operating Expenses 1.22% 2.16% 2.09%
</TABLE>
Pro Forma Combined Funds (Oppenheimer Fund and
Oppenheimer Strategic Income & Growth Fund with OMSF)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.16% 1.00% 1.00%
Other Expenses 0.34% 0.36% 0.37%
Total Fund Operating Expenses 1.24% 2.10% 2.11%
</TABLE>
The 12b-1 fees for Class A shares of Oppenheimer Fund and
Oppenheimer Multiple Strategies Fund are service plan fees. The
service plan fees are a maximum of 0.25% of average annual net
assets of Class A shares of both funds. The 12b-1 fees for Class
B and Class C shares of both funds are Distribution and Service
Plan fees which include a service fee of 0.25% and an asset-based
sales charge of 0.75%. Oppenheimer Fund's Class C service fee is
a maximum of 0.25%; Oppenheimer Fund's Class B and OMSF's Class B
and Class C service fee is 0.25%.
Hypothetical Expenses
To attempt to show the effect of these expenses on an investment
over time, the hypotheticals shown below have been created. Assume
that you make a $1,000 investment in either Oppenheimer Fund, OMSF,
or the combined fund or combined funds (both funds merged into
OMSF), and that the annual return is 5% and that the operating
expenses for each fund are the ones shown in the chart above.
For the 12 months ended September 30, 1996, 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 each period shown:
<TABLE>
<CAPTION>
12 months ended September 30, 1996
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Oppenheimer Fund
Class A Shares $69 $94 $121 $198
Class B Shares $72 $98 $137 $205
Class C Shares $31 $66 $113 $244
Oppenheimer Multiple
Strategies Fund
Class A Shares $69 $94 $120 $196
Class B Shares $72 $97 $134 $201
Class C Shares $31 $65 $111 $239
Pro Forma Combined
Fund (Oppenheimer
Fund with OMSF)
Class A Shares $69 $94 $121 $197
Class B Shares $72 $98 $136 $203
Class C Shares $31 $65 $112 $242
Pro Forma Combined Funds
(Oppenheimer Fund and
OSI&GF with OMSF)
Class A Shares $69 $95 $122 $199
Class B Shares $71 $96 $133 $201
Class C Shares $31 $66 $113 $244
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
12 months ended September 30, 1996
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Oppenheimer Fund
Class A Shares $69 $94 $121 $198
Class B Shares $22 $68 $117 $205
Class C Shares $21 $66 $113 $244
Oppenheimer Multiple
Strategies Fund
Class A Shares $69 $94 $120 $196
Class B Shares $22 $67 $114 $201
Class C Shares $21 $65 $111 $239
Pro Forma Combined Fund
(Oppenheimer Fund with OMSF)
Class A Shares $69 $94 $121 $197
Class B Shares $22 $68 $116 $203
Class C Shares $21 $65 $112 $242
Pro Forma Combined Funds
(Oppenheimer Fund and
OSI&GF with OMSF)
Class A Shares $69 $95 $122 $199
Class B Shares $21 $66 $113 $201
Class C Shares $21 $66 $113 $244
</TABLE>
*In the first set of examples (i.e., assuming you redeem at the end
of each period shown), expenses include the Class A initial sales
charge and the applicable Class B and Class C contingent deferred
sales charge. In the second set of examples (i.e., assuming you do
not redeem your investment), Class A expenses include the initial
sales charge, but Class B and Class C expenses do not include the
contingent deferred sales charge. The Class B expenses in years
seven through ten are based on the respective Class A expenses
shown above, because each fund automatically converts Class B
shares into Class A shares after six years. Long-term Class B and
Class C shareholders could pay the economic equivalent of more than
the maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge
and contingent deferred sales charge. The automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur.
SYNOPSIS
The following is a synopsis of certain information contained or
incorporated by reference in this Proxy Statement and Prospectus
and presents key considerations for shareholders of Oppenheimer
Fund to assist them in determining whether to approve the
Reorganization. This synopsis is only a summary and is qualified
in its entirety by the more detailed information contained or
incorporated by reference in this Proxy Statement and Prospectus
and the Exhibits hereto. Shareholders should carefully review this
Proxy Statement and Prospectus and the Exhibits hereto in their
entirety and, in particular, the current Prospectus of OMSF which
accompanies this Proxy Statement and Prospectus and is incorporated
by reference herein.
Parties to the Reorganization
OMSF (formerly named "Oppenheimer Asset Allocation Fund") is a
diversified, open-end, management investment company organized as
a Massachusetts business trust in 1987 as the result of the
combination of three series of a mutual fund managed by
OppenheimerFunds, Inc. into a single fund, with a new investment
objective and policies. Oppenheimer Asset Allocation Fund was
renamed OMSF on March 6, 1997, following a shareholders meeting at
which certain investment policy changes were approved. One of
those investment policy changes was a change in the fund's
investment objective from "high total investment return" to "high
total investment return consistent with preservation of principal."
Those investment policy changes and the fund's new name -
Oppenheimer Multiple Strategies Fund - better reflect the way OMSF
is managed.
Oppenheimer Fund is an open-end management investment company
organized in 1958 as a New York corporation and reorganized in 1985
as a Massachusetts business trust. OMSF and Oppenheimer Fund are
each located at Two World Trade Center, New York, New York 10048-
0203. OppenheimerFunds, Inc. (the "Manager") acts as investment
adviser to OMSF and Oppenheimer Fund. OppenheimerFunds
Distributor, Inc. (the "Distributor"), a subsidiary of the Manager,
acts as the distributor of shares of OMSF and Oppenheimer Fund.
Additional information about OMSF and Oppenheimer Fund are set
forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of
substantially all the assets of Oppenheimer Fund to OMSF in
exchange for Class A, Class B and Class C shares of OMSF and the
assumption by OMSF of certain liabilities of the Fund. Following
the Closing of the Reorganization, presently scheduled for June 20,
1997, Oppenheimer Fund will distribute the Class A, Class B and
Class C shares of OMSF received by Oppenheimer Fund on the Closing
Date to holders of Class A, Class B and Class C shares of
Oppenheimer Fund, respectively. As a result of the Reorganization,
each Oppenheimer Fund shareholder will receive that number of full
and fractional OMSF Class A, Class B and Class C shares equal in
value to such shareholder's pro rata interest in the net assets
transferred to OMSF as of the Valuation Date (as hereinafter
defined). For further information about the Reorganization, see
"Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the
Reorganization - Reasons for the Reorganization," the Board,
including the Trustees who are not "interested persons" of the
Trust (the "Independent Trustees"), as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), has
concluded that the Reorganization is in the best interests of
Oppenheimer Fund and its shareholders and that the interests of
existing Oppenheimer Fund shareholders will not be diluted as a
result of the Reorganization, and recommends approval of the
Reorganization by Oppenheimer Fund shareholders. The Board of
Trustees of OMSF has also approved the Reorganization and
determined that the interests of existing OMSF shareholders will
not be diluted as a result of the Reorganization. If the
Reorganization is not approved, Oppenheimer Fund will continue in
existence and the Board will determine whether to pursue
alternative actions.
Approval of the Reorganization will require the affirmative vote of
a "majority" (as defined in the Investment Company Act of 1940) of
the outstanding shares of Oppenheimer Fund. See "Information
Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, Oppenheimer
Fund and OMSF will have received an opinion to the effect that the
Reorganization will qualify as a tax-free reorganization for
Federal income tax purposes. As a result of such tax-free
reorganization, no gain or loss would be recognized by either fund,
or the shareholders of either fund, for Federal income tax purposes
as a result of the Reorganization. For further information about
the tax consequences of the Reorganization, see "Approval of the
Reorganization -Tax Aspects of the Reorganization" below.
Investment Objectives and Policies
Oppenheimer Multiple Strategies Fund
Oppenheimer Multiple Strategies Fund seeks its investment objective
by investing its assets in a variety of different types of
securities, including common stocks and other equity securities,
bonds and other debt securities, and money market securities. OMSF
may also use hedging instruments to manage or "hedge" against
investment risks. OMSF's hedging instruments may include put and
call options, forward contracts, certain futures and options on
futures.
As a matter of non-fundamental investment policy (which may be
changed by the Board of Trustees without shareholder approval),
OMSF: (1) will invest at least 25% of its total assets in equity
securities, and (2) will invest at least 25% of its total assets in
fixed-income senior securities. The Fund may not invest more than
35% of its total assets in non-investment grade securities. The
Manager does not rely solely on ratings of securities in making
investment decisions, but evaluates other business and economic
factors affecting the issuer as well. OMSF does not have any limit
on the amount of foreign securities it may purchase. However, OMSF
does not expect have more than 50% of its total assets invested in
foreign securities.
From time to time the Manager reallocates OMSF'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, OMSF may reallocate its assets to debt securities, with
emphasis on money market instruments. Using this "asset
allocation" approach, the proportion of OMSF's assets invested in
any one type of investment will vary from time to time.
Oppenheimer Fund
Oppenheimer Fund, in seeking its primary investment objective of
capital appreciation, invests principally in common stocks that the
Manager believes offer growth possibilities. However, the Manager
follows a flexible approach to investment at all times.
Investments may also include preferred stocks, convertible
securities, and rights or warrants. To achieve its secondary
objective of income consistent with capital growth, Oppenheimer
Fund invests in dividend-paying common stocks and may also invest
in domestic and foreign corporate debt securities and obligations
of the U.S. and foreign governments. Oppenheimer Fund may try to
hedge against losses in the value of its portfolio securities by
using hedging instruments, including put and call options, forward
contracts, certain futures and options on futures.
Investment Advisory and Distribution Plan Fees
OMSF and Oppenheimer Fund obtain investment management services
from OppenheimerFunds, Inc. pursuant to the terms of their
respective investment advisory agreements. The management fee,
which declines on additional assets as each fund grows, is payable
to OppenheimerFunds, Inc. monthly and is computed on the net asset
value of each fund as of the close of business each day.
OMSF and Oppenheimer Fund each pay a management fee at the rate of
0.75% of the first $200 million of their respective average annual
net assets, 0.72% of the next $200 million, 0.69% of the next $200
million, 0.66% of the next $200 million, and 0.60% of average
annual net assets over $800 million.
OMSF and Oppenheimer Fund, for each of their Class A, Class B and
Class C shares, have adopted separate service and/or distribution
plans pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the
12b-1 plans, Class A shares of OMSF and Class A and Class C shares
of Oppenheimer Fund are authorized to reimburse or, as to Class B
and Class C shares of OMSF and Class B shares of Oppenheimer Fund,
to compensate, OFDI, respectively, for costs incurred in connection
with the distribution of shares and the servicing of shareholder
accounts that hold the fund's shares.
The current maximum annual fee payable by shares of OMSF and
Oppenheimer Fund pursuant to their service and/or distribution
plans is: (i) as to Class A shares of OMSF, an annual service fee
of 0.25%, and for Oppenheimer Fund shares sold on or after April 1,
1991, an annual service fee of 0.25% and for Oppenheimer Fund
shares sold before April 1, 1991, an annual service fee of 0.15%,
(ii) as to Class C shares of Oppenheimer Fund, a maximum annual
1.00% (consisting of a 0.25% maximum service fee and 0.75% "asset-
based sales charge") and (iii) as to Class B and Class C shares of
OMSF and Class B shares of Oppenheimer Fund, an annual 1.00%
(consisting of a 0.25% service fee and 0.75% "asset-based sales
charge"), respectively, of average annual net assets.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of both OMSF and Oppenheimer Fund
may be made through OppenheimerFunds Distributor, Inc. ("OFDI"),
the distributor for OMSF and Oppenheimer Fund, or through any
dealer, broker or financial institution that has a sales agreement
with OFDI. In addition, a shareholder of both funds may purchase
shares automatically from an account at a domestic bank or other
financial institution under the "OppenheimerFunds AccountLink"
service. Class A shares of both OMSF and Oppenheimer Fund are sold
subject to an initial sales charge. Class B and Class C shares of
both funds are generally sold without a front-end sales charge but
may be subject to a CDSC upon redemption as described below. See
"Comparative Fee Tables -- Transaction Charges," above for a
complete description of such sales charges.
The Class A shares of OMSF to be issued under the Reorganization
Agreement will be issued by OMSF at net asset value without a sales
charge. The sales charge on Class A shares of OMSF will only
affect shareholders of the Fund to the extent that they desire to
make additional purchases of Class A shares of OMSF in addition to
the shares which they will receive as a result of the
Reorganization. Future dividends and capital gain distributions of
OMSF, if any, may be reinvested without sales charge into Class A
shares of OMSF or of any other fund within the OppenheimerFunds
family.
Exchanges. Shareholders of OMSF and Oppenheimer Fund may exchange
their shares at net asset value for shares of the same class of
mutual funds distributed by OFDI, subject to certain conditions.
For purposes of the exchange privilege, shares without a class
designation are considered as "Class A" shares. OMSF offers
automatic exchange plans providing for systematic exchanges from
OMSF of a specified amount for shares of other funds within the
OppenheimerFunds family.
Redemptions. Shares of OMSF and shares of Oppenheimer Fund may be
redeemed without charge at their respective net asset values per
share calculated after the redemption order is received and
accepted. Certain large investments in Class A shares of OMSF and
Oppenheimer Fund that were exempt from the front-end sales charge
upon purchase may be subject to a CDSC upon redemption. See
"Comparative Fee Tables - Transaction Charges," above. Class B
shares of OMSF and Oppenheimer Fund may be redeemed at their net
asset value per share, subject to a maximum CDSC of 5.0% for
redemptions occurring within six years of purchase. Class C shares
of OMSF and Oppenheimer Fund may be redeemed at their net asset
value per share, subject to a CDSC of 1% if such shares are
redeemed during the first 12 months following their purchase. Any
applicable CDSC will be waived for shares issued pursuant to the
Reorganization.
Shareholders of OMSF and Oppenheimer Fund may reinvest redemption
proceeds of Class A shares on which an initial sales charge was
paid, or Class B shares that were purchased by reinvesting
dividends or distributions or that were subject to the Class B CDSC
when redeemed, within six months of a redemption at net asset value
in Class A shares of OMSF or Oppenheimer Fund or any of numerous
mutual funds within the OppenheimerFunds family. This reinvestment
privilege is not available for Class C shares of OMSF or
Oppenheimer Fund.
Shareholders of the funds may redeem their shares by written
request or by telephone request in certain stated amounts.
Shareholders of Oppenheimer Fund may also arrange to have share
redemption proceeds wired, for a fee, to a pre-designated account
at a U.S. bank or other financial institution that is an automated
clearing house ("ACH") member. OMSF and Oppenheimer Fund may
redeem accounts valued at less than $500 or $200, respectively, if
the account has fallen below such stated amount for reasons other
than market value fluctuations. OMSF and Oppenheimer Fund offer
automatic withdrawal plans providing for systematic withdrawals of
a specified amount from the fund account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
OMSF, shareholders should carefully consider the following summary
of risk factors relating to both OMSF and the Fund, in addition to
the other information set forth in this Proxy Statement and
Prospectus. A more complete description of risk factors for each
fund is set forth in the documents incorporated by reference
herein, including the Prospectuses of the funds and their
respective Statements of Additional Information. As a general
matter, OMSF and the Fund are intended for investors seeking
capital appreciation. There is no assurance that either OMSF or
the Fund will achieve its investment objective and investment in
the funds is subject to investment risks, including the possible
loss of the principal amount invested.
Stock Investment Risks
Since OMSF and Oppenheimer Fund each normally invest a substantial
portion of their assets in stocks, the value of each fund's
portfolio will be affected by changes in the stock markets. As a
matter of non-fundamental investment policy, OMSF will invest at
least 25% of its total assets in equity securities, including
common stocks, preferred stocks and securities convertible into
common stock. Both funds attempt to limit certain market risks by
diversifying their 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.
Interest Rate Risks
Both OMSF and Oppenheimer Fund may invest in corporate debt
securities issued by domestic or foreign companies, and in
obligations issued by the U.S. Government, its agencies or
instrumentalities, or by foreign governments. As a matter of non-
fundamental investment policy, OMSF will invest at least 25% of its
total assets in fixed-income senior securities. 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 debt securities held by OMSF or Oppenheimer
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.
Foreign Securities
Neither OMSF nor Oppenheimer Fund has any limit on the amount of
foreign securities it may purchase. However, normally OMSF does
not expect to have more than 50% of its assets invested in foreign
securities.
Investing in foreign securities involves considerations and risks
not associated with investments in securities of U.S. issuers. 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 listed only on a U.S. securities
exchange, or are traded only 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 that apply
to foreign securities traded and held abroad.
Special Risks of Investing in Lower-Grade Securities
OMSF may invest up to 35% of its total assets in domestic and
foreign high-yield, "lower-grade" debt securities (including both
rated and unrated securities). "Lower-grade" debt securities
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 below "Baa" by Moody's Investors
Service, Inc. or similar ratings by other nationally-recognized
rating organizations, or, if unrated, are judged by the Manager to
be comparable to such lower-rated securities.
High yield, lower-grade securities, whether rated or unrated, may
be subject to greater market fluctuations and risk of loss of
income and principal than lower yielding, investment grade
securities, and may be considered to have certain speculative
risks. 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," above.
These risks mean that OMSF may not achieve the income it expects
from lower-grade securities, and that the Fund's net asset values
per share may be affected by declines in value of these securities.
However, OMSF'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.
Derivative Investments
OMSF and Oppenheimer Fund can invest in a number of different kinds
of derivative investments. In general, a "derivative investment"
is a specially designed investment. Its performance is linked to
the performance of another investment or security, such as an
option, future, index, currency or commodity. In the broadest
sense, exchange-traded options and futures contracts may be
considered "derivative investments." Neither OMSF or Oppenheimer
Fund may purchase or sell physical commodities; however, both funds
may buy and sell foreign currency in hedging transactions. OMSF
may buy or sell options and futures contracts or invest in
securities or other instruments backed by, or the investment return
from which is linked to changes in the price of, physical
commodities. Oppenheimer Fund cannot invest in commodities
contracts other than the hedging instruments permitted by its other
fundamental investment policies.
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, and the derivative
itself, may not perform the way the Manager expected it to
perform. The 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 funds may trade in the over-the-
counter market and may be illiquid.
Concentration of Investments
Oppenheimer Fund reserves the right to concentrate up to 50% of its
assets in any one industry and may do so when the Manager deems it
appropriate to seek to achieve the Fund's investment objectives.
Such concentration would possibly occur only when trends in the
market as a whole were considered unfavorable but at the same time
a particular industry was believed to afford better-than-average
prospects. Except in that case, it is not the intention of the
Fund to concentrate more than 25% of the value of its total assets
in any one industry.
APPROVAL OF THE REORGANIZATION (THE PROPOSAL)
Board Approval
At its meeting on October 16, 1996, the Board, including the
Independent Trustees, unanimously approved the Reorganization and
the Reorganization Agreement, determined that the Reorganization is
in the best interests of Oppenheimer Fund and its shareholders and
resolved to recommend that Oppenheimer Fund shareholders vote for
approval of the Reorganization. The Board further determined that
the Reorganization would not result in dilution of Oppenheimer
Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed,
with the assistance of independent legal counsel, materials
furnished by OFI. These materials included financial statements as
well as other written information regarding OFI and its personnel,
operations, and financial condition. Consideration was given to
comparative information concerning other mutual funds with similar
investment objectives, including information prepared by Lipper
Analytical Services, Inc. The Board also considered information
with respect to the relative performance of the funds.
The Board also considered that the annual operating expenses of
OMSF are lower than Oppenheimer Fund's, as a percentage of assets,
and would be lower on a pro forma basis after giving effect to the
Reorganization, than the operating expenses of Oppenheimer Fund,
resulting in a savings to Fund shareholders. Refer to "Expenses of
Oppenheimer Fund and OMSF; Pro Forma Expenses" on page ___.
In addition, the Board determined that the purchase, exchange and
redemption procedures and privileges provided by OMSF are
comparable to those of Oppenheimer Fund, and that Oppenheimer Fund
shareholders currently exempt from payment of certain transaction-
based sales charges will continue to be so exempt as shareholders
of OMSF.
The OMSF Board of Trustees, including the Trustees who are not
"interested persons" of OMSF, unanimously approved the
Reorganization and the Reorganization Agreement and determined that
the Reorganization is in the best interests of OMSF and its
shareholders. The OMSF Board further determined that the
Reorganization would not result in dilution of the OMSF's
shareholders' interests. The OMSF Board considered, among other
things, that an increase in OMSF's asset base as a result of the
Reorganization should benefit OMSF shareholders due to the
economies of scale available to a larger fund. These economies of
scale should result in lower costs per account for each OMSF
shareholder through lower operating expenses and transfer agency
expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified
in its entirety by reference to the Reorganization Agreement (a
copy of which is set forth in full as Exhibit A to this Proxy
Statement and Prospectus). The Reorganization Agreement
contemplates a reorganization under which (i) substantially all of
the assets of Oppenheimer Fund would be transferred to OMSF in
exchange for Class A, Class B and Class C shares of OMSF and the
assumption by OMSF of certain liabilities of the Fund, (ii) these
shares would be distributed among shareholders of Oppenheimer Fund
in complete liquidation of Oppenheimer Fund and (iii) the
outstanding shares of Oppenheimer Fund would be cancelled.
Prior to the Closing Date (as hereinafter defined), Oppenheimer
Fund will endeavor to discharge all of its liabilities and
obligations when and as due prior to such date. OMSF will not
assume any liabilities or obligations of Oppenheimer Fund other
than those reflected on an unaudited statement of assets and
liabilities of Oppenheimer Fund prepared as of the Valuation Date
and that are agreed to by OMSF. In this regard, Oppenheimer Fund
will retain a cash reserve (the "Cash Reserve") in an amount which
is deemed sufficient in the discretion of the Board for the payment
of (a) Oppenheimer Fund's expenses of liquidation and (b) its
liabilities, other than those assumed by OMSF. The number of full
and fractional Class A, Class B and Class C shares of OMSF to be
issued to the Fund will be determined on the basis of their
relative net asset values per share, computed as of the close of
business of the New York Stock Exchange, Inc. on June 19, 1997 or
at such time on such earlier or later date as may be mutually
agreed upon in writing (the "Valuation Date"). The Closing Date
for the Reorganization will be the next business day following the
Valuation Date.
OFI will utilize the valuation procedures set forth in the
Prospectus and Statement of Additional Information of OMSF to
determine the value of Oppenheimer Fund's assets to be transferred
to OMSF pursuant to the Reorganization, the value of OMSF's assets
and the net asset value of Class A, Class B and Class C shares of
OMSF. Such values will be computed by OFI as of the Valuation Date
in a manner consistent with its regular practice in pricing OMSF.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, after the closing,
OMSF will be in compliance with all of its investment policies and
restrictions. Oppenheimer Fund will recognize capital gain or loss
on any sales made pursuant to this condition. As noted in "Tax
Aspects of the Reorganization" below, if Oppenheimer Fund realizes
net gain from the sale of securities, such gain, to the extent not
offset by capital loss carry-forwards, will be distributed to
shareholders prior to the Closing Date and will be taxable to
shareholders as capital gain.
Contemporaneously with the closing or as soon thereafter as is
practicable, Oppenheimer Fund will be liquidated and Oppenheimer
Fund will distribute or cause to be distributed pro rata to Fund
shareholders of record as of the close of business on the Valuation
Date the full and fractional Class A, Class B and Class C shares of
OMSF received by Oppenheimer Fund. Upon such liquidation, all
issued and outstanding shares of Oppenheimer Fund will be cancelled
on Oppenheimer Fund's books and Oppenheimer Fund shareholders will
have no further rights as shareholders of Oppenheimer Fund. To
assist Oppenheimer Fund in the distribution of OMSF shares, OMSF
will, in accordance with a shareholder list supplied by Oppenheimer
Fund, cause its transfer agent to credit and confirm an appropriate
number of Class A, Class B and Class C shares of OMSF to each
shareholder of Oppenheimer Fund.
Certificates for shares of OMSF will be issued upon written request
of a former shareholder of Oppenheimer Fund but only for whole
shares with fractional shares credited to the name of the
shareholder on the books of OMSF. Former shareholders of
Oppenheimer Fund who wish certificates representing their shares of
OMSF must, after receipt of their confirmations, make a written
request to OppenheimerFunds Services, P.O. Box 5270, Denver,
Colorado 80217. Shareholders of Oppenheimer Fund holding
certificates representing their shares will not be required to
surrender their certificates to anyone in connection with the
Reorganization. After the Reorganization, however, it will be
necessary for such shareholders to surrender such certificates in
order to redeem, transfer or exchange any shares of OMSF. After
the closing of the Reorganization, Oppenheimer Fund will not
conduct any business expect in connection with the winding up of
its affairs.
Under the Reorganization Agreement, within one year after the
Closing Date, Oppenheimer Fund shall: either (i) transfer any
remaining amount of the Cash Reserve to OMSF, if such remaining
amount is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of Oppenheimer Fund who were
such on the Valuation Date. Such remaining amount shall be deemed
to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent
per share of the number of Oppenheimer Fund shares outstanding on
the Valuation Date.
Approval of the Reorganization will require the affirmative vote of
a "majority" (as defined in the Investment Company Act) of the
outstanding shares of Oppenheimer Fund represented in person or by
proxy at the Meeting and entitled to vote at the Meeting. See
"Information Concerning the Meeting - Record Date; Vote Required;
Share Information." If the Reorganization is not approved by the
shareholders of Oppenheimer Fund, the trustees of the Trust will
consider other possible courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, Oppenheimer Fund will declare a
dividend in an amount large enough so that it will have declared a
dividend of all of its investment company taxable income and net
capital gain, if any, for the taxable period ending with its
dissolution (determined without regard to any deduction for
dividends paid). Such dividends will be included in the taxable
income of Oppenheimer Fund's shareholders as ordinary income and
capital gain, respectively.
The exchange of the assets of Oppenheimer Fund for Class A, Class
B and Class C shares of OMSF and the assumption by OMSF of certain
liabilities of the Fund is intended to qualify for Federal income
tax purposes as a tax-free reorganization under Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code").
Oppenheimer Fund has represented to KPMG Peat Marwick LLP, its
auditors and special tax adviser to Oppenheimer Fund for purposes
of the Reorganization, that to Oppenheimer Fund's best knowledge,
there is no plan or intention by any Fund shareholder who owns 5%
or more of the Fund's outstanding shares, and, to the Fund's best
knowledge, there is no plan or intention on the part of the
remaining Oppenheimer Fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of OMSF shares received in the
transaction that would reduce Oppenheimer Fund shareholders'
ownership of OMSF shares to a number of shares having a value, as
of the Closing Date, of less than 50% of the value of all the
formerly outstanding Oppenheimer Fund shares as of the same date.
Oppenheimer Fund and OMSF have each further represented to the fact
that, as of the Closing Date, Oppenheimer Fund and OMSF will
qualify as regulated investment companies or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, OMSF and
Oppenheimer Fund will receive the opinion of KPMG Peat Marwick
LLP to the effect that, based on the Reorganization Agreement, the
above representations, existing provisions of the Code, Treasury
Regulations issued thereunder, current Revenue Rulings, Revenue
Procedures and court decisions, for Federal income tax purposes:
1. The transactions contemplated by the Agreement will
qualify as a tax-free "reorganization" within the meaning
of Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code").
2. Oppenheimer Fund and OMSF will each qualify as a "party
to a reorganization" within the meaning of Section
368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of
Oppenheimer Fund upon the distribution of shares of
beneficial interest in OMSF to the shareholders of the
Fund, pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by Oppenheimer Fund by reason of the transfer
of its assets solely in exchange for Class A, Class B and
Class C shares of OMSF, respectively.
5. Under Section 1032 of the Code no gain or loss will be
recognized by OMSF by reason of the transfer of
Oppenheimer Fund's assets solely in exchange for Class A,
Class B and Class C shares of OMSF, respectively.
6. The stockholders of Oppenheimer Fund will have the same
tax basis and holding period for the shares of beneficial
interest in OMSF that they receive as they had for the
stock of Oppenheimer Fund that they previously held,
pursuant to Sections 358(a) and 1223(1), respectively, of
the Code.
7. The securities transferred by Oppenheimer Fund to OMSF
will have the same tax basis and holding period in the
hands of OMSF as they had for Oppenheimer Fund, pursuant
to Sections 362(b) and 1223(1), respectively, of the
Code.
Shareholders of Oppenheimer Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Since the foregoing discussion
only relates to the Federal income tax consequences of the
Reorganization, shareholders of Oppenheimer Fund should also
consult their tax advisers as to state and local tax consequences,
if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of OMSF and
Oppenheimer Fund and indicates the pro forma combined
capitalization as of September 30, 1996 as if the Reorganization
had occurred on that date.
<TABLE>
<CAPTION>
Net Asset
Shares Value
September 30, 1996 Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer Fund
Class A Shares $276,725,396 22,168,406 $12.48
Class B Shares $ 2,039,515 164,776 $12.38
Class C Shares $ 4,311,747 352,590 $12.23
Oppenheimer Multiple
Strategies Fund
Class A Shares $264,358,580 18,756,434 $14.09
Class B Shares $ 5,996,160 428,130 $14.01
Class C Shares $21,087,007 1,503,813 $14.02
Pro Forma Combined
Fund (Oppenheimer Fund
with OMSF)*
Class A Shares $541,083,976 38,396,278 $14.09
Class B Shares $ 8,035,675 573,706 $14.01
Class C Shares $ 25,398,754 1,811,356 $14.02
Pro Forma Combined Funds
(Oppenheimer Fund &
Oppenheimer Strategic
Income & Growth Fund
with OMSF)**
Class A Shares $587,830,904 41,714,016 $14.09
Class B Shares $ 36,968,973 2,638,895 $14.01
Class C Shares $ 26,505,099 1,890,267 $14.02
</TABLE>
- - ------------------
* Reflects issuance of 19,639,844 of Class A shares, 145,576 of
Class B shares and 352,590 of Class C shares of OMSF in a tax-free
exchange for the net assets of Oppenheimer Fund, aggregating
$283,076,658 for shares of OMSF.
**Reflects issuance of 22,957,582 of Class A shares, 2,210,765 of
Class B shares and 386,454 of Class C shares of OMSF in a tax-free
exchange for the net assets of Oppenheimer Fund and Oppenheimer
Strategic Income & Growth Fund, aggregating $359,863,229 for shares
of OMSF.
The pro forma ratio of expenses to average annual net assets of the
combined funds at September 30, 1996 would have been 1.24% with
respect to Class A shares, 2.10% with respect to Class B shares and
2.11% with respect to Class C shares.
COMPARISON BETWEEN OMSF AND OPPENHEIMER FUND
Comparative information about OMSF and Oppenheimer Fund is
presented below. Refer also to "Synopsis - Investment Objectives
and Policies" and "Principal Risk Factors," above. Complete
information about OMSF and Oppenheimer Fund is set forth in their
respective Prospectuses (which, as to OMSF, accompanies this Proxy
Statement and Prospectus) and which are incorporated herein by
reference. To obtain additional copies, see "Miscellaneous -
Public Information."
Because of the types of securities OMSF and Oppenheimer Fund invest
in and the investment techniques they use, both funds are designed
for investors who are investing for the long term. They are not
intended for investors seeking assured income or preservation of
capital. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time, and because the
income earned on securities is subject to change, there is no
assurance that either OMSF or Oppenheimer Fund will achieve its
investment objective. Shares, when redeemed, may be worth more or
less than what the investor paid for them.
Comparison of Investment Objectives, Policies and Restrictions
Oppenheimer Multiple Strategies Fund
OMSF seeks its investment objective of high total investment return
consistent with preservation of principal by investing its assets
in a variety of different types of securities.
As a matter of non-fundamental investment policy (which may be
changed by the Board of Trustees without shareholder approval),
OMSF: (1) will invest at least 25% of its total assets in equity
securities, and (2) will invest at least 25% of its total assets in
fixed-income senior securities. OMSF has no limitations on the
maturity, capitalization of the issuer or credit rating of the debt
securities in which it invests other than OMSF may not invest more
than 35% of its total assets in non-investment grade securities.
Refer to "Principal Risk Factors - Special Risks of Investing in
Lower-Grade Securities" for further details. OMSF does not have
any limit on the amount of foreign securities it may purchase.
However, OMSF does not expect have more than 50% of its total
assets invested in foreign securities.
In general, OMSF's investments include the categories listed below.
Equity securities. Equity securities are generally 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.
Preferred Stock. Generally, preferred stock is an equity
security that has a specified dividend and ranks after bonds and
before common stocks in its claim on income for dividend payments
and on assets should the issuing company be liquidated or enter
bankruptcy proceedings. While most preferred stocks pay a
dividend, OMSF -- and Oppenheimer Fund -- may purchase preferred
stock where the issuer has omitted, or is in danger of omitting,
payment of its dividend. Such investments would be made primarily
for their capital appreciation potential. Certain preferred stock
may be convertible into or exchangeable for a given number of
common shares. Such preferred stock tends to be more volatile than
nonconvertible preferred stock, which behaves more like a fixed-
income security.
Convertible Securities. Convertible securities are bonds,
preferred stocks and other securities that normally pay a fixed
rate of interest or dividend and give the owner the option to
convert the security into common stock. While the value of
convertible securities depends in part on interest rate changes and
the credit quality of the issuer, the price will also change based
on the price of the underlying stock. While convertible securities
generally have less potential for gain than common stock, their
income provides a cushion against the stock price's declines. They
generally pay less income than non-convertible bonds. The Manager
generally analyzes these investments from the perspective of the
growth potential of the underlying stock and treats them as "equity
substitutes."
Warrants and Rights. Warrants are options to purchase stock at
set prices that are valid for a limited period of time. Rights are
similar to warrants but normally have a short duration and are
distributed by the issuer to its shareholders. OMSF -- and
Oppenheimer Fund -- may invest up to 5% of their total assets in
warrants and rights. That 5% does not apply to warrants and rights
acquired as part of units with other securities or that were
attached to other securities. No more than 2% of total assets may
be invested in warrants and rights that are not listed on the New
York or American Stock Exchanges.
Debt Securities. Debt securities in which OMSF -- and Oppenheimer
Fund -- may invest 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 and by foreign
governments.
OMSF may also invest in the following particular types of debt
securities.
Asset-Backed Securities. OMSF 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 OMSF. 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. OMSF 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 OMSF.
OMSF 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 payments. 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), OMSF will lose the anticipated cash
flow from the interest on the mortgages that were prepaid.
Zero Coupon Securities. OMSF 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 OMSF does not receive cash payments of interest on zero
coupon securities, it does accrue taxable income on these
securities. As a result, OMSF may be forced to sell portfolio
securities to pay cash dividends or meet redemptions.
Participation Interests. OMSF may purchase participation
interests in loans that are made to U.S. or foreign companies.
OMSF can invest up to 5% of its total assets in participation
interests of the same borrower. Participation interests are
primarily dependent upon the creditworthiness of the borrower for
payment of interest and principal. Participation interests may
backed by letters of credit or guarantees to assure repayment of
principal, or may be collateralized by U.S. Government securities.
Money Market Instruments. Money market instruments 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. OMSF'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).
Hedging Instruments. Hedging instruments are instruments used by
OMSF -- and Oppenheimer Fund -- primarily to manage or "hedge"
against investment risks. The funds' hedging instruments may
include put and call options, futures contracts relating to
broadly-based securities indices or interest rates ("Futures"),
futures contracts on foreign currencies ("Forward Contracts"), and
options on Futures, broadly-based securities indices or foreign
currencies. See "Special Investment Methods - Hedging," below.
Oppenheimer Fund
Oppenheimer Fund, in seeking its primary investment objective of
capital appreciation, invests principally in common stocks that the
Manager believes offer growth possibilities. However, the Manager
follows a flexible approach to investment at all times.
Investments may also include preferred stocks, convertible
securities, and rights or warrants, discussed in more detail,
above, on pages __ to __.
To achieve its secondary objective of income consistent with
capital growth, the Fund invests in dividend-paying common stocks
and may also invest in domestic and foreign corporate debt
securities, and obligations of the U.S. and foreign governments.
Although the Fund may from time to time emphasize investments in
U.S. issuers, there is no limit on the amount of the Fund's assets
that may be invested in foreign securities. Oppenheimer Fund may
try to hedge against losses in the value of its portfolio
securities by using hedging instruments, including put and call
options, Futures, Forward Contracts, and options on Futures and
foreign currencies. See "Special Investment Methods - Hedging,"
below.
Special Situations. Oppenheimer Fund may invest in securities of
companies that are in "special situations" that the Manager
believes present opportunities for capital growth. A "special
situation" may be an event such as a proposed merger,
reorganization, or other unusual development that is expected to
occur and which may result in an increase in the value of a
company's securities regardless of general business conditions or
the movement of prices in the securities market as a whole. There
is a risk that the price of the security may decline if the
anticipated development fails to occur. Although Oppenheimer Fund
may invest in companies for the purpose of influencing their
managerial policy, the Fund has not made any such investment, and
has no present intention of doing so.
Concentration of Investments. Oppenheimer Fund reserves the right
to concentrate up to 50% of its assets in any one industry and may
do so when the Manager deems it appropriate to seek to achieve the
Fund's investment objectives. Such concentration would possibly
occur only when trends in the market as a whole were considered
unfavorable but at the same time a particular industry was believed
to afford better-than-average prospects. Except in that case, it
is not the intention of the Fund to concentrate more than 25% of
the value of its total assets in any one industry.
Temporary Defensive Investments. When stock market prices are
falling or in other unusual economic or business circumstances,
Oppenheimer Fund may invest all or a portion of its assets in
defensive securities. Securities selected for defensive purposes
may include debt securities, such as rated or unrated bonds and
debentures, preferred stocks, cash or cash equivalents, such as
U.S. Treasury bills and other short-term obligations of the U.S.
Government, its agencies or instrumentalities, or commercial paper
rated "A-1" or better by Standard & Poor's Corporation or "P-1" or
better by Moody's Investors Service, Inc.
Special Investment Methods
OMSF and Oppenheimer Fund may use the special investment methods
summarized below.
When-Issued Securities. OMSF 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. Although OMSF 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, OMSF may dispose of a commitment prior to settlement.
There may be a risk of loss to OMSF if the value of the security
declines prior to the settlement date.
Illiquid and Restricted Securities. 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. OMSF and Oppenheimer Fund will not invest more
than 10% of their respective net assets in illiquid or restricted
securities (the Board of OMSF and Oppenheimer Fund may increase
that limit to 15%). Illiquid securities include repurchase
agreements maturing in more than seven days, or certain
participation interests other than those with puts exercisable
within seven days.
Investing in Small, Unseasoned Companies. OMSF and Oppenheimer
Fund may invest in securities of small, unseasoned companies. These
are companies that have been in operation for less than three
years, even after including the operations of any predecessors.
Securities of these companies may have limited liquidity (which
means that the fund may have difficulty selling them at an
acceptable price when it wants to) and the prices of these
securities may be volatile. Neither OMSF nor Oppenheimer Fund
currently intends to invest no more than 5% of its total assets in
securities of small, unseasoned issuers.
Repurchase Agreements. Both OMSF and Oppenheimer Fund may enter
into repurchase agreements of seven days or less without limit, and
may invest up to 10% of their respective net assets in repurchase
agreements having a maturity beyond seven days. Repurchase
agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the fund may
experience costs or delays in disposing of the collateral and may
experience losses if there is any delay in doing so.
Loans of Portfolio Securities. Both funds are authorized to lend
their portfolio securities. The funds must receive collateral for
a loan. Both OMSF and Oppenheimer Fund restrict loans of
securities wherein the value of the securities loaned shall not
exceed 25% of the value of either fund's total assets. Neither
fund presently intends to engage in loans of portfolio securities
in excess of 5% of its total assets.
Hedging. Both funds may purchase and sell put and call options,
futures contracts relating to broadly-based securities indices or
interest rates ("Futures"), futures contracts on foreign currencies
("Forward Contracts"), and options on Futures, broadly-based
securities indices, or foreign currencies. These are all referred
to as "hedging instruments." Neither fund uses hedging instruments
for speculative purposes, and has limits on the use of them,
described below.
Both funds may buy and sell options, Futures and Forward Contracts
for a number of purposes. Each fund 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. Both 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, may
hedge the fund's portfolio against price fluctuations to some
extent. Other hedging strategies, such as buying futures and call
options, may 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 funds 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 funds for
liquidity purposes, or may be used for defensive reasons or to
raise cash to distribute to shareholders.
At present, neither OMSF nor Oppenheimer Fund intends 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. A call
or put option may not be purchased if the value of the fund's put
and call options would exceed 5% of the funds' total assets.
Call Options. Both funds may buy calls on securities, broadly-
based securities indices, foreign currencies, or Futures. Each
fund may buy calls to terminate its obligation on a call the fund
previously wrote. The funds may write (that is, sell) call
options. When either fund writes a call, it receives cash (called
a premium). Each call the fund writes must be "covered" while the
call is outstanding. That means the fund owns the investment on
which the call was written. Each fund may write calls on Futures
contracts, but these calls must be covered by Futures contracts or
other liquid assets the fund owns and segregates to enable it to
satisfy its obligations if the call is exercised. After writing
any call, not more than 35% of OMSF's total assets, and not more
than 25% of Oppenheimer Fund's total assets, may be subject to
calls.
Put Options. Both funds may buy and sell put options. The
funds can buy those puts that relate to securities the Fund owns,
broadly-based securities indices, foreign currencies, or Futures
(whether or not the Fund holds the particular Future in its
portfolio). Both funds may write puts on securities, broadly-based
securities indices, foreign currencies, or Futures in an amount up
to 25% of its total assets, but only if those puts are covered by
segregated liquid assets. In writing puts, there is a risk that
the funds may be required to buy the underlying security at a
disadvantageous price.
Foreign Currency Options. Both funds may buy or sell foreign
currency puts and calls only if they are traded on a securities or
commodities exchange or over-the-counter market, or are quoted by
recognized dealers in those options.
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 or if the hedging instrument does not perform as
expected, hedging strategies may reduce the fund's return. The
funds 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 funds. There are also special risks in
particular hedging strategies. If a covered call written by either
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.
Cross-hedging with Forward Contracts 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.
Investment Restrictions
Both OMSF and Oppenheimer Fund have certain investment restrictions
that, together with their respective investment objectives, are
fundamental policies changeable only by shareholder approval.
Their investment restrictions are substantially the same, except as
discussed below.
OMSF cannot:
1. invest in physical commodities or commodity contracts;
however, the Fund may (i) buy and sell hedging instruments
permitted by any of its other investment policies, and (ii) may
buy and sell options, futures, securities or other instruments
backed by, or the investment return from which is linked to changes
in the price of, physical commodities.
In addition, as a matter of fundamental policy, the Fund may invest
all of its assets in the securities of a single open-end management
investment company for which the Manager or one of its subsidiaries
or a successor is advisor or sub-advisor, notwithstanding any other
fundamental investment policy or limitation; such other investment
company must have substantially the same fundamental investment
objective, policies and limitations as the Fund.
Oppenheimer Fund cannot:
1. invest in commodities or commodities contracts other than
Hedging Instruments permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered
to be a commodity or commodity contract;
2. invest in or acquire shares of any other investment company or
trust except in connection with a plan of merger, consolidation or
reorganization; however, this policy shall not prevent the Fund
from investing in the securities issued by a real estate investment
trust, provided that such trust is not permitted to invest in real
estate or interests in real estate other than mortgages or other
security interests;
3. invest more than 15% of its total assets in securities of an
issuer which together with any predecessor has been in operation
for less than three years of continuous operation or securities of
issuers which are restricted as to disposition, including
securities that may be resold pursuant to Rule 144A under the
Securities Act of 1933.
Additional Comparative Information
General
For a discussion of the organization and operation of OMSF and
Oppenheimer Fund, including brokerage practices, see "Investment
Objective and Policies" and "How the Fund is Managed" in their
current prospectuses and "Brokerage Policies of the Fund" in their
current Statements of Additional Information.
Financial Information
For certain financial information about OMSF and Oppenheimer Fund,
see "Financial Highlights" and "Performance of the Fund" in their
prospectuses.
Management of OMSF and Oppenheimer Fund
For information about the management of OMSF and Oppenheimer Fund,
including their Board of Trustees, investment adviser, portfolio
managers and the distributor, see "Expenses" and "How the Fund is
Managed" in their current prospectuses.
Description of Shares of OMSF and Oppenheimer Fund
For a description of the classes of shares of OMSF and Oppenheimer
Fund, including voting rights, restrictions on disposition and
potential liability associated with their ownership, see "How the
Fund is Managed" in their current prospectuses and Statements of
Additional Information.
Dividends, Distributions and Taxes
Both funds declare dividends separately for Class A, Class B and
Class C shares from net investment income. OMSF distributes
dividends quarterly and Oppenheimer Fund distributes its dividends
on an annual basis. For a discussion of the policies of OMSF and
Oppenheimer Fund with respect to dividends and distributions, and
a discussion of the tax consequences of an investment in OMSF and
Oppenheimer Fund, see "Dividends, Capital Gains and Taxes" in their
current prospectuses.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of OMSF and Oppenheimer Fund may be
purchased, redeemed and exchanged, see "How to Buy Shares," "How to
Sell Shares," "Exchanges of Shares," "Special Investor Services,"
"Service Plan for Class A Shares," and "Distribution and Service
Plans for Class B and Class C Shares" in their current
prospectuses.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see
"How the Fund is Managed" in the current prospectus of OMSF and
Oppenheimer Fund.
OMSF Performance
OMSF does not maintain a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of
any capital gains. A discussion of the performance of OMSF's Class
A, Class B and Class C shares for the fiscal year ended September
30, 1996 is set forth under "Management's Discussion of
Performance" in the OMSF prospectus that accompanies this Proxy
Statement and Prospectus. See also "Comparing the Fund's
Performance to the Market" in the OMSF prospectus for a graph of
the performance of a hypothetical $10,000 investment in Class A,
Class B or Class C shares of OMSF compared with the performance of
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 above shows the effect of taxes. Also, OMSF's
performance data reflects the effect of OMSF business and operating
expenses. While index comparisons may be useful to provide a
benchmark for OMSF's performance, it should be noted that OMSF'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.
Information regarding Oppenheimer Fund's performance for its fiscal
year ended June 30, 1996 is set forth in the Fund's prospectus
dated October 25, 1996, copies of which may be obtained from
OppenheimerFunds Services by calling 1-800-525-7048 (see
"Miscellaneous - Financial Information") and which are incorporated
herein by reference.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at 6803 South Tucson Way, Englewood,
Colorado 80112 at at 10:00 A.M., Denver time, on June 17, 1997 and
any adjournments thereof. At the Meeting, shareholders of
Oppenheimer Fund will be asked to consider and vote upon the
Reorganization Agreement, and the transactions contemplated
thereby, including the transfer of substantially all the assets of
Oppenheimer Fund in exchange for Class A, Class B and Class C
shares of OMSF, the distribution of such shares to the shareholders
of Oppenheimer Fund in complete liquidation of Oppenheimer Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on April 11, 1997 as the
record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting.
The affirmative vote of a "majority" (as defined in the Investment
Company Act of 1940) of the outstanding shares of Oppenheimer Fund
is required for approval of the Proposal. The requirement for such
"majority" is defined in the Investment Company Act as the vote of
the lesser of: (1) 67% or more of the voting securities present or
represented by proxy at the shareholders meeting, if the holders of
more than 50% of the outstanding voting securities are present or
represented by proxy, or (2) more than 50% of the outstanding
voting securities. Each shareholder will be entitled to one vote
for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only
shareholders of Oppenheimer Fund will vote on the Reorganization of
Oppenheimer Fund with OMSF. The vote of shareholders of OMSF is
not being solicited to approve the Reorganization Agreement.
Reorganization of Oppenheimer Fund with OMSF is not contingent upon
shareholders of Oppenheimer Strategic Income & Growth Fund
approving the reorganization of OSI&GF with OMSF.
At the close of business on the Record Date, there were
approximately _____________ shares of Oppenheimer Fund issued and
outstanding, consisting of _________ Class A shares, ________ Class
B shares and _________ Class C shares. At the close of business on
the Record Date, there were _______ shares of OMSF issued and
outstanding, consisting of _______ Class A shares, ________ Class
B shares and ________ Class C shares. The presence in person or by
proxy of the holders of a majority of such shares constitutes a
quorum for the transaction of business at the Meeting. The Meeting
will not be held until the date and time at which a quorum exists
for the shares of the Fund. [To the knowledge of Oppenheimer Fund,
as of the Record Date, no person owned of record or beneficially
owned 5% or more of its outstanding Class A, Class B or Class C
shares.] [To the knowledge of OMSF, as of the Record Date, no
person owned of record or beneficially owned 5% or more of its
outstanding Class A, Class B or Class C shares.] [As of the Record
Date, the officers and Trustees of OMSF, and the officers and
Trustees of Oppenheimer Fund, beneficially owned as a group less
than 1% of the outstanding shares of each class of OMSF and of
Oppenheimer Fund, respectively.]
Proxies
The enclosed form of proxy, if properly executed and returned, will
be voted (or counted as an abstention or withheld from voting) in
accordance with the choices specified thereon, and will be included
in determining whether there is quorum to conduct the Meeting. The
proxy will be voted in favor of the Proposal unless a choice is
indicated to vote against or to abstain from voting on the
Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-
dealer based on instructions received from its customers. If no
instructions are received, the broker-dealer may (if permitted
under applicable stock exchange rules), as record holder, vote such
shares on the Proposal in the same proportion as that broker-dealer
votes street account shares for which voting instructions were
received in time to be voted ("broker non-votes"). Abstentions and
broker non-votes will be counted as present for purposes of
determining a quorum and will have the same effect as a vote
against the Proposal. If a shareholder executes and returns a
proxy but fails to indicate how the votes should be cast, the proxy
will be voted in favor of the Proposal.
The proxy may be revoked at any time prior to the voting thereof
by: (i) writing to the Secretary of Oppenheimer Fund at Two World
Trade Center, New York, New York 10048-0203; (ii) attending the
Meeting and voting in person; or (iii) signing and returning a new
proxy (if returned and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing
and mailing this Proxy Statement and Prospectus, will be borne by
Oppenheimer Fund. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of
the fund issuing the document. In addition to the solicitation of
proxies by mail, proxies may be solicited by officers of
Oppenheimer Fund or officers and employees of its transfer agent,
OppenheimerFunds Services (OFS), personally or by telephone or
telegraph. Any expenses so incurred will be borne by OFS. Proxies
may also be solicited by a proxy solicitation firm hired at
Oppenheimer Fund's expense for such purpose. Brokerage houses,
banks and other fiduciaries may be requested to forward soliciting
material to the beneficial owners of shares of Oppenheimer Fund and
to obtain authorization for the execution of proxies. For those
services, if any, they will be reimbursed by Oppenheimer Fund for
their reasonable out-of-pocket expenses.
With respect to the Reorganization, Oppenheimer Fund and OMSF will
share the cost of the tax opinion. Any other out-of-pocket
expenses of OMSF and Oppenheimer Fund associated with the
Reorganization, including legal, accounting and transfer agent
expenses, will be borne by OMSF and Oppenheimer Fund, respectively,
in the amounts so incurred by each fund.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by the surviving fund in
its financial statements similar to a pooling without restatement.
Further financial information as to Oppenheimer Fund is contained
in (i) its current Prospectus dated October 25, 1996, which is
incorporated herein and is available without charge upon written
request to OppenheimerFunds Services, P.O. Box 5270, Denver,
Colorado 80217 or by calling the toll-free number shown on the
front cover of this Proxy Statement and Prospectus, and (ii)
audited financial statements as of June 30, 1996, which are
included in the Additional Statement. Financial information for
OMSF is contained in its current Prospectus accompanying this Proxy
Statement and Prospectus and incorporated herein, and in its
audited financial statements as of September 30, 1996, which are
included in the Additional Statement.
Public Information
Additional information about OMSF and Oppenheimer Fund is
available, as applicable, in the following documents which are
incorporated herein by reference: (i) OMSF's Prospectus dated
January 15, 1997, revised March 6, 1997, accompanying this Proxy
Statement and Prospectus and incorporated herein; (ii) Oppenheimer
Fund's Prospectus dated October 25, 1996, which may be obtained
without charge by writing to OppenheimerFunds Services at the
address given in the preceding paragraph; (iii) OMSF's Annual
Report as of September 30, 1996, which may be obtained without
charge by writing to OFS at P.O. Box 5270, Denver, Colorado 80217;
and (iv) Oppenheimer Fund's Annual Report as of June 30, 1996,
which may be obtained without charge by writing to OFS. All of the
foregoing documents and the Statements of Additional Information
referred to below may be obtained by calling the toll-free number
for OMSF or Oppenheimer Fund, as applicable, on the cover of this
Proxy Statement and Prospectus.
Additional information about the following matters is contained in
the Additional Statement, which incorporates by reference the OMSF
Additional Statement, and Oppenheimer Fund's Prospectus dated
January 15, 1997, revised March 6, 1997 and its Statement of
Additional Information dated January 15, 1997, revised March 6,
1997: the organization and operation of OMSF and Oppenheimer Fund;
more information on investment policies, practices and risks;
information about OMSF's and Oppenheimer Fund's Board of Trustees
and its responsibilities; a further description of the services
provided by OMSF's and Oppenheimer Fund's investment adviser,
distributor, and transfer and shareholder servicing agent; dividend
policies; tax matters; an explanation of the method of determining
the offering price of the shares of OMSF and Oppenheimer Fund;
purchase, redemption and exchange programs; and distribution
arrangements.
OMSF and Oppenheimer Fund are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file reports and other information
with the SEC. Proxy material, reports and other information about
OMSF and Oppenheimer Fund which are of public record can be
inspected and copied at public reference facilities maintained by
the SEC in Washington, D.C. and certain of its regional offices,
and copies of such materials can be obtained at prescribed rates
from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Oppenheimer Fund knows of no business other than the
matters specified above which will be presented at the Meeting.
Since matters not known at the time of the solicitation may come
before the Meeting, the proxy as solicited confers discretionary
authority with respect to such matters as properly come before the
Meeting, including any adjournment or adjournments thereof, and it
is the intention of the persons named as attorneys-in-fact in the
proxy to vote this proxy in accordance with their judgment on such
matters.
By Order of the Board of Trustees
Andrew J. Donohue, Secretary
April 30, 1997 240
merge\240-n14.1
<PAGE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated
as of October 10, 1996 by and between Oppenheimer Fund, a
Massachusetts business trust, and Oppenheimer Multiple Strategies
Fund, a Massachusetts business trust ("Multiple Strategies").
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of
the management type; and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), of Oppenheimer Fund
through the acquisition by Multiple Strategies of substantially all
of the assets of Oppenheimer Fund in exchange for the voting shares
of beneficial interest ("shares") of Class A, Class B and Class C
shares of Multiple Strategies and the assumption by Multiple
Strategies of certain liabilities of Oppenheimer Fund, which Class
A, Class B and Class C shares of Multiple Strategies are thereafter
to be distributed by Oppenheimer Fund pro rata to its shareholders
in complete liquidation of Oppenheimer Fund and complete
cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan
of Reorganization (the "Agreement") pursuant to Section 368(a)(1)
of the Code as follows: The reorganization will be comprised of
the acquisition by Multiple Strategies of substantially all of the
properties and assets of Oppenheimer Fund in exchange for Class A,
Class B and Class C shares of Multiple Strategies and the
assumption by Multiple Strategies of certain liabilities of
Oppenheimer Fund, followed by the distribution of such Class A,
Class B and Class C shares of Multiple Strategies shares to the
Class A, Class B and Class C shareholders of Oppenheimer Fund in
exchange for their Class A, Class B and Class C shares of
Oppenheimer Fund, all upon and subject to the terms of the
Agreement hereinafter set forth.
The share transfer books of Oppenheimer Fund will be
permanently closed at the close of business on the Valuation Date
(as hereinafter defined) and only redemption requests received in
proper form on or prior to the close of business on the Valuation
Date shall be fulfilled by Oppenheimer Fund; redemption requests
received by Oppenheimer Fund after that date shall be treated as
requests for the redemption of the shares of Multiple Strategies to
be distributed to the shareholder in question as provided in
Section 5.
2. On the Closing Date (as hereinafter defined), all of the
assets of Oppenheimer Fund on that date, excluding a cash reserve
(the "Cash Reserve") to be retained by Oppenheimer Fund sufficient
in its discretion for the payment of the expenses of Oppenheimer
Fund's dissolution and its liabilities, but not in excess of the
amount contemplated by Section 10E, shall be delivered as provided
in Section 8 to Multiple Strategies, in exchange for and against
delivery to Oppenheimer Fund on the Closing Date of a number of
Class A, Class B and Class C shares of Multiple Strategies, having
an aggregate net asset value equal to the value of the assets of
Oppenheimer Fund so transferred and delivered.
3. The net asset value of Class A, Class B and Class C
shares of Multiple Strategies and the value of the assets of
Oppenheimer Fund to be transferred shall in each case be determined
as of the close of business of the New York Stock Exchange on the
Valuation Date. The computation of the net asset value of the
Class A, Class B and Class C shares of Multiple Strategies and the
Class A, Class B and Class C shares of Oppenheimer Fund shall be
done in the manner used by Multiple Strategies and Oppenheimer
Fund, respectively, in the computation of such net asset value per
share as set forth in their respective prospectuses. The methods
used by Multiple Strategies in such computation shall be applied to
the valuation of the assets of Oppenheimer Fund to be transferred
to Multiple Strategies.
Oppenheimer Fund shall declare and pay, immediately prior
to the Valuation Date, a dividend or dividends which, together with
all previous such dividends, shall have the effect of distributing
to Oppenheimer Fund's shareholders all of Oppenheimer Fund's
investment company taxable income for taxable years ending on or
prior to the Closing Date (computed without regard to any dividends
paid) and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Closing Date (after reduction for
any capital loss carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), Two World Trade Center, 34th
Floor, New York, New York 10048, at 4:00 P.M. New York time on June
20, 1997 or at such other time or place as the parties may
designate or as provided below (the "Closing Date"). The business
day preceding the Closing Date is herein referred to as the
"Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the
"Act"), or any rule, regulation or order thereunder, suspended the
redemption of its shares or postponed payment therefor, the Closing
Date shall be postponed until the first business day after the date
when both parties have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a
period of 60 days beyond the Valuation Date, then the other party
to the Agreement shall be permitted to terminate the Agreement
without liability to either party for such termination.
5. As soon as practicable after the closing, Oppenheimer
Fund shall distribute on a pro rata basis to the shareholders of
Oppenheimer Fund on the Valuation Date the Class A, Class B and
Class C shares of Multiple Strategies received by Oppenheimer Fund
on the Closing Date in exchange for the assets of Oppenheimer Fund
in complete liquidation of Oppenheimer Fund; for the purpose of the
distribution by Oppenheimer Fund of Class A, Class B and Class C
shares of Multiple Strategies to its shareholders, Multiple
Strategies will promptly cause its transfer agent to: (a) credit an
appropriate number of Class A and Class B shares of Multiple
Strategies on the books of Multiple Strategies to each Class A,
Class B and Class C shareholder, respectively of Oppenheimer Fund
in accordance with a list (the "Shareholder List") of its
shareholders received from Oppenheimer Fund; and (b) confirm an
appropriate number of Class A, Class B and Class C shares of
Multiple Strategies to each shareholder of Oppenheimer Fund;
certificates for Class A, Class B and Class C shares of Multiple
Strategies will be issued upon written request of a former
shareholder of Oppenheimer Fund but only for whole shares, with
fractional shares credited to the name of the shareholder on the
books of Multiple Strategies.
The Shareholder List shall indicate, as of the close of
business on the Valuation Date, the name and address of each
shareholder of Oppenheimer Fund, indicating his or her share
balance. Oppenheimer Fund agrees to supply the Shareholder List to
Multiple Strategies not later than the Closing Date. Shareholders
of Oppenheimer Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the Closing Date,
however, it will be necessary for such shareholders to surrender
their certificates in order to redeem, transfer or pledge the
shares of Multiple Strategies which they received.
6. Within one year after the Closing Date, Oppenheimer Fund
shall (a) either pay or make provision for payment of all of its
liabilities and taxes, and (b) either (i) transfer any remaining
amount of the Cash Reserve to Multiple Strategies, if such
remaining amount (as reduced by the estimated cost of distributing
it to shareholders) is not material (as defined below) or (ii)
distribute such remaining amount to the shareholders of Oppenheimer
Fund on the Valuation Date. Such remaining amount shall be deemed
to be material if the amount to be distributed, after deduction of
the estimated expenses of the distribution, equals or exceeds one
cent per share of Oppenheimer Fund outstanding on the Valuation
Date.
7. Prior to the Closing Date, there shall be coordination
between the parties as to their respective portfolios so that,
after the closing, Multiple Strategies will be in compliance with
all of its investment policies and restrictions. At the Closing,
Oppenheimer Fund shall deliver to Multiple Strategies two copies of
a list setting forth the securities then owned by Oppenheimer Fund.
Promptly after the Closing, Oppenheimer Fund shall provide Multiple
Strategies a list setting forth the respective federal income tax
bases thereof.
8. Portfolio securities or written evidence acceptable to
Multiple Strategies of record ownership thereof by The Depository
Trust Company or through the Federal Reserve Book Entry System or
any other depository approved by Oppenheimer Fund pursuant to Rule
17f-4 and Rule 17f-5 under the Act shall be endorsed and delivered,
or transferred by appropriate transfer or assignment documents, by
Oppenheimer Fund on the Closing Date to Multiple Strategies, or at
its direction, to its custodian bank, in proper form for transfer
in such condition as to constitute good delivery thereof in
accordance with the custom of brokers and shall be accompanied by
all necessary state transfer stamps, if any. The cash delivered
shall be in the form of certified or bank cashiers' checks or by
bank wire or intra-bank transfer payable to the order of Multiple
Strategies for the account of Multiple Strategies. Shares of
Multiple Strategies representing the number of shares of Multiple
Strategies being delivered against the assets of Oppenheimer Fund,
registered in the name of Oppenheimer Fund, shall be transferred to
Oppenheimer Fund on the Closing Date. Such shares shall thereupon
be assigned by Oppenheimer Fund to its shareholders so that the
shares of Multiple Strategies may be distributed as provided in
Section 5.
If, at the Closing Date, Oppenheimer Fund is unable to
make delivery under this Section 8 to Multiple Strategies of any of
its portfolio securities or cash for the reason that any of such
securities purchased by Oppenheimer Fund, or the cash proceeds of
a sale of portfolio securities, prior to the Closing Date have not
yet been delivered to it or Oppenheimer Fund's custodian, then the
delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and Oppenheimer Fund
will deliver to Multiple Strategies by or on the Closing Date and
with respect to said undelivered securities or cash executed copies
of an agreement or agreements of assignment in a form reasonably
satisfactory to Multiple Strategies, together with such other
documents, including a due bill or due bills and brokers'
confirmation slips as may reasonably be required by Multiple
Strategies.
9. Multiple Strategies shall not assume the liabilities
(except for portfolio securities purchased which have not settled
and for shareholder redemption and dividend checks outstanding) of
Oppenheimer Fund, but Oppenheimer Fund will, nevertheless, use its
best efforts to discharge all known liabilities, so far as may be
possible, prior to the Closing Date. The cost of printing and
mailing the proxies and proxy statements will be borne by
Oppenheimer Fund. Oppenheimer Fund and Multiple Strategies will
bear the cost of their respective tax opinion. Any documents such
as existing prospectuses or annual reports that are included in
that mailing will be a cost of the fund issuing the document. Any
other out-of-pocket expenses of Multiple Strategies and Oppenheimer
Fund associated with this reorganization, including legal,
accounting and transfer agent expenses, will be borne by
Oppenheimer Fund and Multiple Strategies, respectively, in the
amounts so incurred by each.
10. The obligations of Multiple Strategies hereunder shall be
subject to the following conditions:
A. The Board of Trustees of Oppenheimer Fund shall have
authorized the execution of the Agreement, and the shareholders of
Oppenheimer Fund shall have approved the Agreement and the
transactions contemplated thereby, and Oppenheimer Fund shall have
furnished to Multiple Strategies copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of
Oppenheimer Fund; such shareholder approval shall have been by the
affirmative vote of "a majority of the outstanding voting
securities" (as defined in the Act) of Oppenheimer Fund at a
meeting for which proxies have been solicited by the Proxy
Statement and Prospectus (as hereinafter defined).
B. Multiple Strategies shall have received an opinion
dated the Closing Date of counsel to Oppenheimer Fund, to the
effect that (i) Oppenheimer Fund is a business trust duly
organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts with full powers to carry on its
business as then being conducted and to enter into and perform the
Agreement; and (ii) that all action necessary to make the
Agreement, according to its terms, valid, binding and enforceable
on Oppenheimer Fund and to authorize effectively the transactions
contemplated by the Agreement have been taken by Oppenheimer Fund.
C. The representations and warranties of Oppenheimer
Fund contained herein shall be true and correct at and as of the
Closing Date, and Multiple Strategies shall have been furnished
with a certificate of the President, or a Vice President, or the
Secretary or the Assistant Secretary or the Treasurer of
Oppenheimer Fund, dated the Closing Date, to that effect.
D. On the Closing Date, Oppenheimer Fund shall have
furnished to Multiple Strategies a certificate of the Treasurer or
Assistant Treasurer of Oppenheimer Fund as to the amount of the
capital loss carry-over and net unrealized appreciation or
depreciation, if any, with respect to Oppenheimer Fund as of the
Closing Date.
E. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
Oppenheimer Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by
Oppenheimer Multiple Strategies Fund under the Securities Act of
1933, as amended (the "1933 Act"), containing a preliminary form of
the Proxy Statement and Prospectus, shall have become effective
under the 1933 Act not later than August 30, 1997.
G. On the Closing Date, Multiple Strategies shall have
received a letter of Andrew J. Donohue or other senior executive
officer of OppenheimerFunds, Inc. acceptable to Multiple
Strategies, stating that nothing has come to his or her attention
which in his or her judgment would indicate that as of the Closing
Date there were any material actual or contingent liabilities of
Oppenheimer Fund arising out of litigation brought against
Oppenheimer Fund or claims asserted against it, or pending or to
the best of his or her knowledge threatened claims or litigation
not reflected in or apparent from the most recent audited financial
statements and footnotes thereto of Oppenheimer Fund delivered to
Multiple Strategies. Such letter may also include such additional
statements relating to the scope of the review conducted by such
person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
H. Multiple Strategies shall have received an opinion,
dated the Closing Date, of KPMG Peat Marwick LLP, to the same
effect as the opinion contemplated by Section 11.E. of the
Agreement.
I. Multiple Strategies shall have received at the
closing all of the assets of Oppenheimer Fund to be conveyed
hereunder, which assets shall be free and clear of all liens,
encumbrances, security interests, restrictions and limitations
whatsoever.
11. The obligations of Oppenheimer Fund hereunder shall be
subject to the following conditions:
A. The Board of Trustees of Multiple Strategies shall
have authorized the execution of the Agreement, and the
transactions contemplated thereby, and Multiple Strategies shall
have furnished to Oppenheimer Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of
Multiple Strategies.
B. Oppenheimer Fund's shareholders shall have approved
the Agreement and the transactions contemplated hereby, by an
affirmative vote of "a majority of the outstanding voting
securities" (as defined in the Act) of Oppenheimer Fund, and
Oppenheimer Fund shall have furnished Multiple Strategies copies of
resolutions to that effect certified by the Secretary or an
Assistant Secretary of Oppenheimer Fund.
C. Oppenheimer Fund shall have received an opinion
dated the Closing Date of counsel to Multiple Strategies, to the
effect that (i) Multiple Strategies is a business trust duly
organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts with full powers to carry on its
business as then being conducted and to enter into and perform the
Agreement; (ii) all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable upon
Multiple Strategies and to authorize effectively the transactions
contemplated by the Agreement have been taken by Multiple
Strategies, and (iii) the shares of Multiple Strategies to be
issued hereunder are duly authorized and when issued will be
validly issued, fully-paid and non-assessable, except as set forth
in Multiple Strategies's then current Prospectus and Statement of
Additional Information.
D. The representations and warranties of Multiple
Strategies contained herein shall be true and correct at and as of
the Closing Date, and Oppenheimer Fund shall have been furnished
with a certificate of the President, a Vice President or the
Secretary or an Assistant Secretary or the Treasurer of Multiple
Strategies to that effect dated the Closing Date.
E. Oppenheimer Fund shall have received an opinion of
KPMG Peat Marwick LLP to the effect that the Federal tax
consequences of the transaction, if carried out in the manner
outlined in this Plan of Reorganization and in accordance with (i)
Oppenheimer Fund's representation that there is no plan or
intention by any Fund shareholder who owns 5% or more of
Oppenheimer Fund's outstanding shares, and, to Oppenheimer Fund's
best knowledge, there is no plan or intention on the part of the
remaining Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of Multiple Strategies shares received in the
transaction that would reduce Oppenheimer Fund shareholders'
ownership of Multiple Strategies shares to a number of shares
having a value, as of the Closing Date, of less than 50% of the
value of all of the formerly outstanding Fund shares as of the same
date, and (ii) the representation by each of Oppenheimer Fund and
Multiple Strategies that, as of the Closing Date, Oppenheimer Fund
and Multiple Strategies will qualify as regulated investment
companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement
will qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code, and under the regulations
promulgated thereunder.
2. Oppenheimer Fund and Multiple Strategies will
each qualify as a "party to a reorganization" within the meaning of
Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the
shareholders of Oppenheimer Fund upon the distribution of shares of
beneficial interest in Multiple Strategies to the shareholders of
Oppenheimer Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or
loss will be recognized by Oppenheimer Fund by reason of the
transfer of substantially all its assets in exchange for shares of
Multiple Strategies.
5. Under Section 1032 of the Code no gain or loss
will be recognized by Multiple Strategies by reason of the transfer
of substantially all Oppenheimer Fund's assets in exchange for
Class A, Class B and Class C shares of Multiple Strategies and
Multiple Strategies's assumption of certain liabilities of
Oppenheimer Fund.
6. The shareholders of Oppenheimer Fund will have
the same tax basis and holding period for the Class A, Class B or
Class C shares of beneficial interest in Multiple Strategies that
they receive as they had for Oppenheimer Fund shares that they
previously held, pursuant to Section 358(a) and 1223(1),
respectively, of the Code.
7. The securities transferred by Oppenheimer Fund
to Multiple Strategies will have the same tax basis and holding
period in the hands of Multiple Strategies as they had for
Oppenheimer Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
Oppenheimer Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by
Oppenheimer Multiple Strategies Fund under the 1933 Act, containing
a preliminary form of the Proxy Statement and Prospectus, shall
have become effective under the 1933 Act not later than August 30,
1997.
H. On the Closing Date, Oppenheimer Fund shall have
received a letter of Andrew J. Donohue or other senior executive
officer of OppenheimerFunds, Inc. acceptable to Oppenheimer Fund,
stating that nothing has come to his or her attention which in his
or her judgment would indicate that as of the Closing Date there
were any material actual or contingent liabilities of Multiple
Strategies arising out of litigation brought against Multiple
Strategies or claims asserted against it, or pending or, to the
best of his or her knowledge, threatened claims or litigation not
reflected in or apparent by the most recent audited financial
statements and footnotes thereto of Multiple Strategies delivered
to Oppenheimer Fund. Such letter may also include such additional
statements relating to the scope of the review conducted by such
person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
I. Oppenheimer Fund shall acknowledge receipt of the
shares of Multiple Strategies.
12. Oppenheimer Fund hereby represents and warrants that:
A. The financial statements of Oppenheimer Fund as at
September 30, 1996 (audited) heretofore furnished to Multiple
Strategies, present fairly the financial position, results of
operations, and changes in net assets of Oppenheimer Fund as of
that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year;
and that from September 30, 1996 through the date hereof there have
not been, and through the Closing Date there will not be, any
material adverse change in the business or financial condition of
Oppenheimer Fund, it being agreed that a decrease in the size of
Oppenheimer Fund due to a diminution in the value of its portfolio
and/or redemption of its shares shall not be considered a material
adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Oppenheimer Fund's
shareholders, Oppenheimer Fund has authority to transfer all of the
assets of Oppenheimer Fund to be conveyed hereunder free and clear
of all liens, encumbrances, security interests, restrictions and
limitations whatsoever;
C. The Prospectus, as amended and supplemented,
contained in Oppenheimer Fund's Registration Statement under the
1933 Act, as amended, is true, correct and complete, conforms to
the requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. The Registration Statement, as amended,
was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
D. There is no material contingent liability of
Oppenheimer Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Oppenheimer Fund, threatened against Oppenheimer Fund, not
reflected in such Prospectus;
E. There are no material contracts outstanding to which
Oppenheimer Fund is a party other than those ordinary in the
conduct of its business;
F. Oppenheimer Fund is a business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; and has all necessary and material
Federal and state authorizations to own all of its assets and to
carry on its business as now being conducted; and Oppenheimer Fund
is duly registered under the Act and such registration has not been
rescinded or revoked and is in full force and effect;
G. All Federal and other tax returns and reports of
Oppenheimer Fund required by law to be filed have been filed, and
all Federal and other taxes shown due on said returns and reports
have been paid or provision shall have been made for the payment
thereof and to the best of the knowledge of Oppenheimer Fund no
such return is currently under audit and no assessment has been
asserted with respect to such returns and to the extent such tax
returns with respect to the taxable year of Oppenheimer Fund ended
September 30, 1996 have not been filed, such returns will be filed
when required and the amount of tax shown as due thereon shall be
paid when due; and
H. Oppenheimer Fund has elected to be treated as a
regulated investment company and, for each fiscal year of its
operations, Oppenheimer Fund has met the requirements of Subchapter
M of the Code for qualification and treatment as a regulated
investment company and Oppenheimer Fund intends to meet such
requirements with respect to its current taxable year.
13. Multiple Strategies hereby represents and warrants that:
A. The financial statements of Multiple Strategies as
at September 30, 1996 (audited) heretofore furnished to Oppenheimer
Fund, present fairly the financial position, results of operations,
and changes in net assets of Multiple Strategies, as of that date,
in conformity with generally accepted accounting principles applied
on a basis consistent with the preceding year; and that from
September 30, 1996 through the date hereof there have not been, and
through the Closing Date there will not be, any material adverse
changes in the business or financial condition of Multiple
Strategies, it being understood that a decrease in the size of
Multiple Strategies due to a diminution in the value of its
portfolio and/or redemption of its shares shall not be considered
a material or adverse change;
B. The Prospectus, as amended and supplemented,
contained in Oppenheimer Multiple Strategies Fund's Registration
Statement under the 1933 Act, is true, correct and complete,
conforms to the requirements of the 1933 Act and does not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-
Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
C. There is no material contingent liability of
Multiple Strategies and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Multiple Strategies, threatened against Multiple Strategies, not
reflected in such Prospectus;
D. There are no material contracts outstanding to which
Multiple Strategies is a party other than those ordinary in the
conduct of its business;
E. Multiple Strategies is a business trust duly
organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts; has all necessary and material
Federal and state authorizations to own all its properties and
assets and to carry on its business as now being conducted; the
shares of Multiple Strategies which it issues to Oppenheimer Fund
pursuant to the Agreement will be duly authorized, validly issued,
fully-paid and non-assessable, except as otherwise set forth in
Multiple Strategies's Registration Statement; and will conform to
the description thereof contained in Multiple Strategies's
Registration Statement, will be duly registered under the 1933 Act
and in the states where registration is required; and Multiple
Strategies is duly registered under the Act and such registration
has not been revoked or rescinded and is in full force and effect;
F. All Federal and other tax returns and reports of
Multiple Strategies required by law to be filed have been filed,
and all Federal and other taxes shown due on said returns and
reports have been paid or provision shall have been made for the
payment thereof and to the best of the knowledge of Multiple
Strategies no such return is currently under audit and no
assessment has been asserted with respect to such returns and to
the extent such tax returns with respect to the taxable year of
Multiple Strategies ended September 30, 1996 have not been filed,
such returns will be filed when required and the amount of tax
shown as due thereon shall be paid when due;
G. Multiple Strategies has elected to be treated as a
regulated investment company and, for each fiscal year of its
operations, Multiple Strategies has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and Multiple Strategies intends to
meet such requirements with respect to its current taxable year;
H. Multiple Strategies has no plan or intention (i) to
dispose of any of the assets transferred by Oppenheimer Fund, other
than in the ordinary course of business, or (ii) to redeem or
reacquire any of the shares issued by it in the reorganization
other than pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated
by the Agreement, Multiple Strategies intends to operate its
business in a substantially unchanged manner.
14. Each party hereby represents to the other that no broker
or finder has been employed by it with respect to the Agreement or
the transactions contemplated hereby. Each party also represents
and warrants to the other that the information concerning it in the
Proxy Statement and Prospectus will not as of its date contain any
untrue statement of a material fact or omit to state a fact
necessary to make the statements concerning it therein not
misleading and that the financial statements concerning it will
present the information shown fairly in accordance with generally
accepted accounting principles applied on a basis consistent with
the preceding year. Each party also represents and warrants to the
other that the Agreement is valid, binding and enforceable in
accordance with its terms and that the execution, delivery and
performance of the Agreement will not result in any violation of,
or be in conflict with, any provision of any charter, by-laws,
contract, agreement, judgment, decree or order to which it is
subject or to which it is a party. Multiple Strategies hereby
represents to and covenants with Oppenheimer Fund that, if the
reorganization becomes effective, Multiple Strategies will treat
each shareholder of Oppenheimer Fund who received any of Multiple
Strategies's shares as a result of the reorganization as having
made the minimum initial purchase of shares of Multiple Strategies
received by such shareholder for the purpose of making additional
investments in shares of Multiple Strategies, regardless of the
value of the shares of Multiple Strategies received.
15. Multiple Strategies agrees that it will prepare and file
a Registration Statement on Form N-14 under the 1933 Act which
shall contain a preliminary form of proxy statement and prospectus
contemplated by Rule 145 under the 1933 Act. The final form of
such proxy statement and prospectus is referred to in the Agreement
as the "Proxy Statement and Prospectus." Each party agrees that it
will use its best efforts to have such Registration Statement
declared effective and to supply such information concerning itself
for inclusion in the Proxy Statement and Prospectus as may be
necessary or desirable in this connection. Oppenheimer Fund
covenants and agrees to deregister as an investment company under
the Investment Company Act of 1940, as amended, as soon as
practicable and, thereafter, to cause the cancellation of its
outstanding shares.
16. The obligations of the parties under the Agreement shall
be subject to the right of either party to abandon and terminate
the Agreement without liability if the other party breaches any
material provision of the Agreement or if any material legal,
administrative or other proceeding shall be instituted or
threatened between the date of the Agreement and the Closing Date
(i) seeking to restrain or otherwise prohibit the transactions
contemplated hereby and/or (ii) asserting a material liability of
either party, which proceeding has not been terminated or the
threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all taken together
shall constitute one Agreement. The rights and obligations of each
party pursuant to the Agreement shall not be assignable.
18. All prior or contemporaneous agreements and
representations are merged into the Agreement, which constitutes
the entire contract between the parties hereto. No amendment or
modification hereof shall be of any force and effect unless in
writing and signed by the parties and no party shall be deemed to
have waived any provision herein for its benefit unless it executes
a written acknowledgement of such waiver.
19. Oppenheimer Fund understands that the obligations of
Multiple Strategies under the Agreement are not binding upon any
Trustee or shareholder of Multiple Strategies personally, but bind
only Multiple Strategies and Multiple Strategies's property.
Oppenheimer Fund represents that it has notice of the provisions of
the Declaration of Trust of Multiple Strategies disclaiming
shareholder and Trustee liability for acts or obligations of
Multiple Strategies.
20. Multiple Strategies understands that the obligations of
Oppenheimer Fund under the Agreement are not binding upon any
Trustee or shareholder of Oppenheimer Fund personally, but bind
only Oppenheimer Fund and Oppenheimer Fund's property. Multiple
Strategies represents that it has notice of the provisions of the
Declaration of Trust of Oppenheimer Fund disclaiming shareholder
and Trustee liability for acts or obligations of Oppenheimer Fund.
IN WITNESS WHEREOF, each of the parties has caused the
Agreement to be executed and attested by its officers thereunto
duly authorized on the date first set forth above.
Oppenheimer Fund
By: /s/ Andrew J. Donohue
----------------------
Andrew J. Donohue, Secretary
Oppenheimer Multiple Strategies Fund
/s/ Andrew J. Donohue
By: ----------------------
Andrew J. Donohue, Secretary
merge\240plan<PAGE>
<PAGE>
Preliminary Copy
Oppenheimer Fund Proxy for Shareholders Meeting To Be Held
Class A Shares June 17, 1997
Your shareholder Your prompt response can save your Fund
vote is important! the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before
mailing.
OPPENHEIMER FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD June 17, 1997
The undersigned shareholder of Oppenheimer Fund (the "Fund"), does
hereby appoint George C. Bowen, Robert Bishop and Scott Farrar, and
each of them, as attorneys-in-fact and proxies of the undersigned,
with full power of substitution, to attend the Special Meeting of
Shareholders of the Fund to be held on June 17, 1997, at 6803 South
Tucson Way, Englewood, Colorado 80112 at 10:00 A.M., Denver time,
and at all adjournments thereof, and to vote the shares held in the
name of the undersigned on the record date for said meeting on the
Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
October 10, 1996 by and among the Fund and Oppenheimer
Multiple Strategies Fund ("OMSF"), on behalf of the Fund and
Oppenheimer Multiple Strategies Fund, and the transactions
contemplated thereby, including the transfer of substantially
all the assets of the Fund in exchange for Class A, Class B
and Class C shares of Oppenheimer Multiple Strategies Fund and
the assumption by Oppenheimer Multiple Strategies Fund of
certain liabilities of the Fund, the distribution of such
shares to the shareholders of the Fund in complete liquidation
of the Fund and the cancellation of the outstanding shares of
the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1997
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
<PAGE>
Oppenheimer Fund Proxy for Shareholders Meeting To Be Held
Class B Shares June 17, 1997
Your shareholder Your prompt response can save your Fund
vote is important! the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before
mailing.
OPPENHEIMER FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD June 17, 1997
The undersigned shareholder of Oppenheimer Fund (the "Fund"), does
hereby appoint George C. Bowen, Robert Bishop and Scott Farrar, and
each of them, as attorneys-in-fact and proxies of the undersigned,
with full power of substitution, to attend the Special Meeting of
Shareholders of the Fund to be held on June 17, 1997, at 6803 South
Tucson Way, Englewood, Colorado 80112 at 10:00 A.M., Denver time,
and at all adjournments thereof, and to vote the shares held in the
name of the undersigned on the record date for said meeting on the
Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
October 10, 1996 by and among the Fund and Oppenheimer
Multiple Strategies Fund ("OMSF"), on behalf of the Fund and
Oppenheimer Multiple Strategies Fund, and the transactions
contemplated thereby, including the transfer of substantially
all the assets of the Fund in exchange for Class A, Class B
and Class C shares of Oppenheimer Multiple Strategies Fund and
the assumption by Oppenheimer Multiple Strategies Fund of
certain liabilities of the Fund, the distribution of such
shares to the shareholders of the Fund in complete liquidation
of the Fund and the cancellation of the outstanding shares of
the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1997
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
<PAGE>
Oppenheimer Fund Proxy for Shareholders Meeting To Be Held
Class C Shares June 17, 1997
Your shareholder Your prompt response can save your Fund
vote is important! the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before
mailing.
OPPENHEIMER FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD June 17, 1997
The undersigned shareholder of Oppenheimer Fund (the "Fund"), does
hereby appoint George C. Bowen, Robert Bishop and Scott Farrar, and
each of them, as attorneys-in-fact and proxies of the undersigned,
with full power of substitution, to attend the Special Meeting of
Shareholders of the Fund to be held on June 17, 1997, at 6803 South
Tucson Way, Englewood, Colorado 80112 at 10:00 A.M., Denver time,
and at all adjournments thereof, and to vote the shares held in the
name of the undersigned on the record date for said meeting on the
Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
October 10, 1996 by and among the Fund and Oppenheimer
Multiple Strategies Fund ("OMSF"), on behalf of the Fund and
Oppenheimer Multiple Strategies Fund, and the transactions
contemplated thereby, including the transfer of substantially
all the assets of the Fund in exchange for Class A, Class B
and Class C shares of Oppenheimer Multiple Strategies Fund and
the assumption by Oppenheimer Multiple Strategies Fund of
certain liabilities of the Fund, the distribution of such
shares to the shareholders of the Fund in complete liquidation
of the Fund and the cancellation of the outstanding shares of
the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1997
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
MERGE\240-n14.1<PAGE>
<PAGE>
Preliminary Copy
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1997
To the Shareholders of Oppenheimer Strategic Income & Growth Fund:
Notice is hereby given that a Special Meeting of the Shareholders
of Oppenheimer Strategic Income & Growth Fund ("Strategic Income &
Growth Fund"), a registered management investment company, will be
held at 6803 South Tucson Way, Englewood, Colorado 80112 at 10:00
A.M., Denver time, on June 17, 1997, or any adjournments thereof
(the "Meeting"), for the following purposes:
1. To approve or disapprove an Agreement and Plan of
Reorganization between Strategic Income & Growth Fund and
Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund"),
and the transactions contemplated thereby, including (a)the
transfer of substantially all the assets of Strategic Income &
Growth Fund in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund, (b) the distribution of such shares to
the Class A, Class B and Class C shareholders of Strategic Income
& Growth Fund in complete liquidation of Strategic Income & Growth
Fund, (c) the de-registration of Strategic Income & Growth Fund as
an investment company under the Investment Company Act of 1940, as
amended, and (d) the cancellation of the outstanding shares of
Strategic Income & Growth Fund (the "Proposal").
2. To act upon such other matters as may properly come before the
Meeting.
Shareholders of record at the close of business on April 11, 1997
are entitled to notice of, and to vote at, the Meeting. The
Proposal is more fully discussed in the Proxy Statement and
Prospectus. Please read it carefully before telling us, through
your proxy or in person, how you wish your shares to be voted.
Strategic Income & Growth Fund's Board of Trustees recommends a
vote in favor of the Proposal. WE URGE YOU TO SIGN, DATE AND MAIL
THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
April __, 1997
_________________________________________________________________
Shareholders who do not expect to attend the Meeting are requested
to indicate voting instructions on the enclosed proxy and to date,
sign and return it in the accompanying postage-paid envelope. To
avoid unnecessary duplicate mailings, we ask your cooperation in
promptly mailing your proxy no matter how large or small your
holdings may be.
275
<PAGE>
Preliminary Copy
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
6802 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
PROXY STATEMENT
OPPENHEIMER MULTIPLE STRATEGIES FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement of Strategic Income & Growth Fund relating to
the Reorganization Agreement and the transactions contemplated
thereby (the "Reorganization") also constitutes a Prospectus of
Multiple Strategies Fund included in a Registration Statement on
Form N-14 filed by Multiple Strategies Fund with the Securities and
Exchange Commission (the "SEC"). Such Registration Statement
relates to the registration of shares of Multiple Strategies Fund
to be offered to the shareholders of Strategic Income & Growth Fund
pursuant to the Reorganization Agreement. Strategic Income &
Growth Fund is located at 6803 South Tucson Way, Englewood,
Colorado 80112 (telephone 1-800-525-7048).
This Proxy Statement and Prospectus sets forth concisely
information about Multiple Strategies Fund that shareholders of
Strategic Income & Growth Fund should know before voting on the
Reorganization. A copy of the Prospectus for Multiple Strategies
Fund, dated January 15, 1997, as revised March 6, 1997, is
enclosed, and incorporated herein by reference. The following
documents have been filed with the SEC and are available without
charge upon written request to OppenheimerFunds Services ("OFS"),
the transfer and shareholder servicing agent for Multiple
Strategies Fund and Strategic Income & Growth Fund, at P.O. Box
5270, Denver, Colorado 80217, or by calling the toll-free number
shown above: (i) a Prospectus for Strategic Income & Growth Fund,
dated January 15, 1997, as supplemented January 15, 1997 and March
6, 1997, (ii) a Statement of Additional Information about Strategic
Income & Growth Fund, dated January 15, 1997, and (iii) a Statement
of Additional Information about Multiple Strategies Fund, dated
January 15, 1997 as revised March 6, 1997(the "Multiple Strategies
Fund Additional Statement"). The Multiple Strategies Fund
Additional Statement, which is incorporated herein by reference,
contains more detailed information about Multiple Strategies Fund
and its management. A Statement of Additional Information relating
to the Reorganization, dated April __ 1997, has been filed with the
SEC as part of the Multiple Strategies Fund Registration Statement
on Form N-14 and is incorporated herein by reference, and is
available by written request to OFS at the same address immediately
above or by calling the toll-free number shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
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 ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement and Prospectus is dated April __, 1997.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<S> <C>
Page
Introduction . . . . . . . . . . . . . . . . . . . . . .1
General . .1
Record Date; Vote Required; Share Information 2
Proxies . .3
Costs of the Solicitation and the Reorganization. .3
Information Relating to Special Meeting of Shareholders
of Oppenheimer Fund. . . . . . . . . . . . . . . . . . .4
Comparative Fee Table. . . . . . . . . . . . . . . . . .5
Synopsis . . . . . . . . . . . . . . . . . . . . . . . 11
Parties to the Reorganization . . . . . . . .12
Shares to be Issued . . . . . . . . . . . . .12
The Reorganization . . . . . . . . . . .12
Reasons for the Reorganization. . . . . . . .13
Tax Consequences of the Reorganization. . . .14
Investment Objectives and Policies. . . . . .14
Investment Advisory and Distribution and
Service Plan Fees . . . . . . . . . . . . . .16
Purchases, Exchanges and Redemptions. . . . .17
Principal Risk Factors . . . . . . . . . . . . . . . . 18
Approval of the Reorganization (The Proposal). . . . . 21
Reasons for the Reorganization. . . . . . . .21
The Reorganization. . . . . . . . . . . . . .24
Tax Aspects of the Reorganization . . . . . .25
Capitalization Table (Unaudited). . . . . . .27
Comparison Between Strategic Income & Growth Fund and
Multiple Strategies Fund . . . . . . . . . . . . . . . 29
Investment Objectives and Policies. . . . . .29
Permitted Investments by Strategic Income & Growth Fund
and
Multiple Strategies Fund . . . . . . . . . .31
Certain Investments in a Single Open-End
Investment Company. . . . . . . . . . . . . .41
Investment Restrictions . . . . . . . . . . .42
Expense Ratios and Performance. . . . . . . .44
Shareholder Services. . . . . . . . . . . . .44
Rights of Shareholders. . . . . . . . . . . .46
Management and Distribution Arrangements. . .47
Purchase of Additional Shares . . . . . . . .49
Method of Carrying Out the Reorganization . . . . . . 50
Miscellaneous. . . . . . . . . . . . . . . . . . . . . 53
Financial Information . . . . . . . . . . . .53
Public Information. . . . . . . . . . . . . .53
Other Business . . . . . . . . . . . . . . . . . . . . 54
Exhibit A - Agreement and Plan of Reorganization by and between
Oppenheimer Strategic Income & Growth Fund and Oppenheimer Multiple
Strategies Fund. . . . . . . . . . . . . . . . . . . .A-1
Exhibit B - Average Annual Total Returns for the Periods Ended
December 31, 1996. . . . . . . . . . . . . . . . . . .B-1
</TABLE>
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
PROXY STATEMENT
Special Meeting of Shareholders
to be held June 17, 1997
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the
shareholders of Oppenheimer Strategic Income & Growth Fund
("Strategic Income & Growth Fund"), a registered management
investment company, in connection with the solicitation by the
Board of Trustees (the "Board") of proxies to be used at the
Special Meeting of Shareholders of Strategic Income & Growth Fund
to be held at 6803 South Tucson Way, Englewood, Colorado 80112, at
10:00 A.M., Denver time, on June 17, 1997, or any adjournments
thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will commence on or about April 30,
1997.
At the Meeting, shareholders of Strategic Income & Growth Fund will
be asked to approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Strategic Income & Growth Fund
and Oppenheimer Multiple Strategies Fund ("Multiple Strategies
Fund"), each a "Fund" and referred to herein collectively as the
"Funds" and the transactions contemplated thereby (the
"Reorganization"), including (a) the transfer of substantially all
the assets of Strategic Income & Growth Fund in exchange for Class
A, Class B and Class C shares of Multiple Strategies Fund, (b) the
distribution of such shares to the shareholders of Strategic Income
& Growth Fund in complete liquidation of Strategic Income & Growth
Fund, (c) the de-registration of Strategic Income & Growth Fund as
an investment company, under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (d) the cancellation of
the outstanding shares of Strategic Income & Growth Fund.
Multiple Strategies Fund currently offers Class A shares with a
sales charge imposed at the time of purchase. There is no initial
sales charge on purchases of Class B or Class C shares; however a
contingent deferred sales charge may be imposed, depending on when
the shares are sold. The Class A, Class B and Class C shares
issued pursuant to the Reorganization will be issued at net asset
value without a sales charge and without the imposition of the
contingent deferred sales charge. Additional information with
respect to these charges by Multiple Strategies Fund is set forth
herein, in the Prospectus of Multiple Strategies Fund accompanying
this Proxy Statement and Prospectus and in the Multiple Strategies
Fund Statement of Additional Information ("Multiple Strategies Fund
Additional Statement"), which is incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on April 11, 1997 as the
record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting.
An affirmative vote of the holders of a majority of the outstanding
voting securities of all of the Class A, Class B and Class C shares
in the aggregate of Strategic Income & Growth Fund is required to
approve the Reorganization. That level of vote is defined in the
Investment Company Act of 1940 as the vote of the holders of the
lesser of: (i) 67% or more of the voting securities present or
represented by proxy at the shareholders meeting, if the holders of
more than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding
voting securities. Each shareholder will be entitled to one vote
for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only
shareholders of Strategic Income & Growth Fund will vote on the
Reorganization. The vote of shareholders of Multiple Strategies
Fund is not being solicited.
At the close of business on the Record Date, there were
approximately ____________ shares of Strategic Income & Growth Fund
issued and outstanding, consisting of ____________________ Class A
shares, ________________ Class B shares and ______________ Class
C shares. At the close of business on the Record Date, there were
______________________ shares of Multiple Strategies Fund issued
and outstanding, consisting of ________________ Class A shares,
____________________ Class B shares and ______________ Class C
shares. The presence in person or by proxy of the holders of a
majority of the shares constitutes a quorum for the transaction of
business at the Meeting. To the knowledge of Strategic Income &
Growth Fund, as of the Record Date, no person owned of record or
beneficially owned 5% or more of its outstanding shares. As of the
Record Date, to the knowledge of Multiple Strategies Fund, no
person owned of record or beneficially owned 5% or more of its
outstanding shares except for _____________________________________
which owned of record ____________ Class A shares of Multiple
Strategies Fund as of such date (____% of the outstanding Class A
shares of Multiple Strategies Fund which represented ____% of the
outstanding shares of Multiple Strategies Fund) and
________________________________________, which of record owned
_____________________ shares of Class B shares of Multiple
Strategies Fund (____% of the outstanding Class B shares of
Multiple Strategies Fund as of such date which represented less
than ___% of the outstanding shares of Multiple Strategies Fund).
In addition, as of the record date, the Trustees and officers of
Strategic Income & Growth Fund and Multiple Strategies Fund owned
less than ___% of the outstanding shares of either Strategic Income
& Growth Fund or Multiple Strategies Fund, respectively.
Proxies
The enclosed form of proxy, if properly executed and returned, will
be voted (or counted as an abstention or withheld from voting) in
accordance with the choices specified thereon, and will be included
in determining whether there is quorum to conduct the Meeting. The
proxy will be voted in favor of the Proposal unless a choice is
indicated to vote against or to abstain from voting on the
Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-
dealer based on instructions received from its customers. If no
instructions are received, the broker-dealer may (if permitted
under applicable stock exchange rules), as record holder, vote such
shares on the Proposal in the same proportion as that broker-dealer
votes street account shares for which voting instructions were
received in time to be voted. If a shareholder executes and
returns a proxy but fails to indicate how the votes should be cast,
the proxy will be voted in favor of the Proposal. The proxy may be
revoked at any time prior to the voting thereof by: (i) writing to
the Secretary of Strategic Income & Growth Fund at Two World Trade
Center, New York, New York 10048-0203; (ii) attending the Meeting
and voting in person; or (iii) signing and returning a new proxy
(if returned and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing
and mailing this Proxy Statement and Prospectus, will be borne by
Strategic Income & Growth Fund. Any documents such as existing
prospectuses or annual reports that are included in that mailing
will be a cost of the fund issuing the document. In addition to
the solicitation of proxies by mail, proxies may be solicited by
officers of Strategic Income & Growth Fund or officers and
employees of OFS, personally or by telephone or telegraph; any
expenses so incurred will be borne by OFS. Proxies may also be
solicited by a proxy solicitation firm hired at Strategic Income &
Growth Fund's expense for such purpose. Brokerage houses, banks
and other fiduciaries may be requested to forward soliciting
material to the beneficial owners of shares of Strategic Income &
Growth Fund and to obtain authorization for the execution of
proxies. For those services, if any, they will be reimbursed by
Strategic Income & Growth Fund for their reasonable out-of-pocket
expenses.
With respect to the Reorganization, Strategic Income & Growth Fund
and Multiple Strategies Fund will bear the cost of their respective
tax opinions. Any other out-of-pocket expenses of Strategic Income
& Growth Fund and Multiple Strategies Fund associated with the
Reorganization, including legal, accounting and transfer agent
expenses, will be borne by Strategic Income & Growth Fund and
Multiple Strategies Fund, respectively, in the amounts so incurred
by each.
INFORMATION RELATING TO SPECIAL MEETING
OF SHAREHOLDERS OF OPPENHEIMER FUND
At a Special Meeting of Shareholders of Oppenheimer Fund, which
will also be held at 6803 South Tucson Way, Englewood, Colorado
80112 at 10:00 A.M. Denver time on June 17, 1997, shareholders of
Oppenheimer Fund will consider and vote upon an Agreement and Plan
of Reorganization (the "Oppenheimer Fund Reorganization Agreement")
between Oppenheimer Fund and Multiple Strategies Fund and the
transactions contemplated thereby (the "Oppenheimer Fund
Reorganization"). If the Oppenheimer Fund Reorganization Agreement
is approved by shareholders of Oppenheimer Fund and conditions of
the Oppenheimer Fund Reorganization Agreement are met, it is
anticipated that on or about June 20, 1997, Oppenheimer Fund will
transfer substantially all of its assets to Multiple Strategies
Fund in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund and that thereafter those Class A, Class
B and Class C shares of Multiple Strategies Fund would be
distributed to shareholders of Oppenheimer Fund in complete
liquidation of Oppenheimer Fund. The outstanding shares of
Oppenheimer Fund would then be canceled and Oppenheimer Fund would
de-register as an investment company under the Investment Company
Act.
The approval of the Reorganization Agreement which is being
submitted to shareholders of Strategic Income & Growth Fund for
approval at the Special Meeting of Shareholders to be held on June
17, 1997, and the implementation of the proposed Reorganization of
Strategic Income & Growth Fund into Multiple Strategies Fund are in
no way contingent upon approval of the Oppenheimer Fund
Reorganization Agreement by shareholders of Oppenheimer Fund or
implementation of the proposed Oppenheimer Fund Reorganization.
However, (i) approval of the Reorganization Agreement by
shareholders of Strategic Income & Growth Fund and the effectuation
of the transactions contemplated thereby and (ii) approval of the
Oppenheimer Fund Reorganization Agreement by shareholders of
Oppenheimer Fund and the effectuation of the transactions
contemplated thereby would result in the consolidation of these two
distinct open-end management investment companies into a third
open-end management investment company, Multiple Strategies Fund.
It is anticipated that the larger net assets resulting from the
consolidation of either Strategic Income & Growth Fund or
Oppenheimer Fund (or both of these funds) into Multiple Strategies
Fund would enable shareholders of Multiple Strategies Fund
(including those who were formerly shareholders of Strategic Income
& Growth Fund and/or Oppenheimer Fund) to obtain the benefits of
economies of scale by spreading expenses over a larger asset base.
The consolidation of either or both of these Funds into Multiple
Strategies Fund may also result in economies of an indeterminate
amount to OppenheimerFunds, Inc. which serves as investment adviser
to each of these Funds.
COMPARATIVE FEE TABLE
Strategic Income & Growth Fund and Multiple Strategies Fund each
pay a variety of expenses for management of their assets,
administration, distribution of their shares and other services,
and those expenses are reflected in each fund's net asset value per
share. Shareholders pay other expenses directly, such as sales
charges. The following table is provided to help you compare the
direct expenses of investing in each class of Strategic Income &
Growth Fund with the direct expenses of investing in each class of
Multiple Strategies Fund and the pro forma expenses of the
surviving fund after giving effect to the reorganization.
<PAGE>
<TABLE>
<CAPTION>
Strategic Income & Growth Fund
------------------------------------------
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
- - -----------------------------------------------------------------------------
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
- - -----------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if
Charge (as a % of the first year, shares are
lower of the original declining redeemed
purchase price or to 1% in within 12
redemption proceeds) the sixth months of
year and purchase
eliminated
thereafter
- - -----------------------------------------------------------------------------
Maximum Sales Charge None None None
on Reinvested Dividends
- - -----------------------------------------------------------------------------
Exchange Fee None None None
- - -----------------------------------------------------------------------------
Redemption Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Multiple Strategies Fund
------------------------------------------------
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
- - ----------------------------------------------------------------------------
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
- - -----------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if
Charge (as a % of the first year, shares are
lower of the original declining redeemed
purchase price or to 1% in within 12
redemption proceeds) the sixth months of
year and purchase
eliminated
thereafter
- - -----------------------------------------------------------------------------
Maximum Sales Charge None None None
on Reinvested Dividends
- - -----------------------------------------------------------------------------
Exchange Fee None None None
- - -----------------------------------------------------------------------------
Redemption Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Surviving Multiple Strategies Fund
--------------------------------------------
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
- - -----------------------------------------------------------------------------
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
- - -----------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if
Charge(as a % of the first year, shares are
lower of the original declining redeemed
purchase price or to 1% in within 12
redemption proceeds the sixth months of
year and purchase
eliminated
thereafter
- - -----------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- - -----------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
(1) If you invest more than $1 million ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A Contingent
Deferred Sales Charge" in each Fund's Prospectus) in Class A
shares, you may have to pay a sales charge of up to 1.0% if you
sell your shares within 18 calendar months from the end of the
calendar month during which you purchased those shares. This
contingent deferred sales charge will be waived for Class A shares
acquired in the Reorganization.
The Funds pay a variety of expenses directly for management of
their assets, administration, distribution of their shares and
other services and those expenses are reflected in the net asset
value per share of each class of Strategic Income & Growth Fund and
Multiple Strategies Fund. The following tables are the operating
expenses of Class A, Class B and Class C shares of Strategic Income
& Growth Fund and the operating expenses of Class A, Class B and
Class C shares of Strategic Income and Growth Fund and Multiple
Strategies Fund based on expenses for the twelve month period ended
September 30, 1996. The pro forma information (set forth below
consists of: (1) an estimate of the business expenses of the
surviving Multiple Strategies Fund as of September 30, 1996, after
giving effect to the Reorganization; an estimate of the business
expenses of the surviving Multiple Strategies Fund as of September
30, 1996, after giving effect to both the Reorganization and the
Oppenheimer Fund Reorganization. All amounts shown are a
percentage of net assets of each class of each of the Funds.
Strategic Income & Growth Fund
-------------------------------------
Class A Class B Class C
-------------------------------------
Management Fees 0.75% 0.75% 0.75%
- - --------------------------------------------------------------
12b-1 Distribution &
Service Plan Fees 0.24% 1.00% 1.00%
- - --------------------------------------------------------------
Other Expenses 0.44% 0.44% 0.53%
- - --------------------------------------------------------------
Total Fund
Operating Expenses 1.43% 2.19% 2.28%
- - --------------------------------------------------------------
Multiple Strategies Fund
----------------------------------
Class A Class B Class C
----------------------------------
Management Fees 0.74% 0.74% 0.74%
- - -----------------------------------------------------------
12b-1 Distribution &
Service Plan Fees 0.18% 1.00% 1.00%
- - -----------------------------------------------------------
Other Expenses 0.29% 0.39% 0.32%
- - -----------------------------------------------------------
Total Fund
Operating Expenses 1.21% 2.13% 2.06%
Pro Forma Combined Funds
(Strategic Income & Growth Fund with
Multiple Strategies Fund)
------------------------------------
Class A Class B Class C
------------------------------------
Management Fees 0.74% 0.74% 0.74%
- - -------------------------------------------------------------
12b-1 Distribution & 0.19% 1.00% 1.00%
Service Plan Fees
- - -------------------------------------------------------------
Other Expenses 0.32% 0.34% 0.35%
- - -------------------------------------------------------------
Total Fund
Operating Expenses 1.25% 2.08% 2.09%
Pro Forma Combined Funds
(Strategic Income & Growth Fund and
Oppenheimer Fund with Multiple
Strategies Fund)
-------------------------------------
Class A Class B Class C
-------------------------------------
Management Fees 0.74% 0.74% 0.74%
- - ---------------------------------------------------------
12b-1 Distribution & 0.16% 1.00% 1.00%
Service Plan Fees
- - ---------------------------------------------------------
Other Expenses 0.34% 0.36% 0.37%
- - ---------------------------------------------------------
Total Fund
Operating Expenses 1.24% 2.10% 2.11%
The 12b-1 fees for Class A shares of Strategic Income & Growth Fund
and Multiple Strategies Fund are service plan fees. The service
plan fees are a maximum of 0.25% of average annual net assets of
Class A shares of each fund. The 12b-1 fees for Class B shares and
the Class C shares of each of the Funds are Distribution and
Service Plan fees which include a service fee of 0.25% and an
asset-based sales charge of 0.75%.
Examples. To attempt to show the effect of the expenses on an
investment over time, the hypotheticals shown below have been
created. Assume that you make a $1,000 investment in (1) Class A,
Class B and Class C shares of Strategic Income & Growth Fund, or
(2) Class A, Class B and Class C shares of Multiple Strategies
Fund, or (3) Class A, Class B and Class C shares of the pro forma
surviving Multiple Strategies Fund (after the Reorganization), or
(4) Class A, Class B and Class C shares of the pro forma surviving
Multiple Strategies Fund (after the Reorganization and the
Oppenheimer Fund Reorganization) and that the annual return is 5%
and that the operating expenses for each fund are the ones shown in
the chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of each period shown.
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Strategic Income & Growth Fund
Class A Shares $61 $91 $122 $211
Class B Shares $72 $99 $137 $215
Class C Shares $33 $71 $122 $262
Multiple Strategies Fund
Class A Shares $69 $94 $120 $196
Class B Shares $72 $97 $134 $201
Class C Shares $31 $65 $111 $239
Pro Forma Surviving
Multiple Strategies Fund (after Reorganization)
Class A Shares $70 $95 $122 $200
Class B Shares $71 $95 $132 $200
Class C Shares $31 $65 $112 $242
Pro Forma Surviving
Multiple Strategies Fund (after Reorganization
and Oppenheimer Fund Reorganization)
Class A Shares $69 $95 $122 $199
Class B Shares $71 $96 $133 $201
Class C Shares $31 $66 $113 $244
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Strategic Income & Growth Fund
Class A Shares $61 $91 $122 $211
Class B Shares $22 $69 $117 $215
Class C Shares $23 $71 $122 $262
Oppenheimer Multiple Strategies Fund
Class A Shares $69 $94 $120 $196
Class B Shares $22 $67 $114 $201
Class C Shares $21 $65 $111 $239
Pro Forma Surviving
Oppenheimer Multiple Strategies Fund (after Reorganization)
Class A Shares $70 $95 $122 $200
Class B Shares $21 $65 $112 $200
Class C Shares $21 $65 $112 $242
Pro Forma Surviving
Multiple Strategies Fund (after Reorganization
and Oppenheimer Fund Reorganization)
Class A Shares $69 $95 $122 $199
Class B Shares $21 $66 $113 $201
Class C Shares $21 $66 $113 $244
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because each of the Funds automatically converts your Class B
shares into Class A shares after 6 years. Long term Class B and C
shareholders could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge
and contingent deferred sales charge. The automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur.
The examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than the amounts shown.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus
and presents key considerations for shareholders of Strategic
Income & Growth Fund to assist them in determining whether to
approve the Reorganization. This synopsis is only a summary and is
qualified in its entirety by the more detailed information
contained in or incorporated by reference in this Proxy Statement
and Prospectus and by the Reorganization Agreement, a copy of which
is attached as an Exhibit A hereto. Shareholders should carefully
review this Proxy Statement and Prospectus and the Reorganization
Agreement in their entirety and, in particular, the current
Prospectus of Multiple Strategies Fund which accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference.
Parties to the Reorganization
Strategic Income & Growth Fund is an open-end, diversified
management investment company organized in 1992 as a Massachusetts
business trust. Multiple Strategies Fund is an open-end,
diversified management investment company organized as a
Massachusetts business trust in 1987 as a result of the combination
of three series of a mutual fund managed by OppenheimerFunds, Inc.,
which serves as investment adviser to both Strategic Income &
Growth Fund and Multiple Strategies Fund. Each Fund may issue an
unlimited number of shares of beneficial interest. Multiple
Strategies Fund conducted operations under the name Oppenheimer
Asset Allocation Fund until March 6, 1997, at which time its name
was changed to Oppenheimer Multiple Strategies Fund. Strategic
Income & Growth Fund is located in 6803 South Tucson Way,
Englewood, Colorado 80112. Multiple Strategies Fund is located at
Two World Trade Center, New York, New York 10048-0203. The address
of OppenheimerFunds, Inc. (the "Manager") is also Two World Trade
Center, New York, New York, 10048-0203. Additional information
about the parties is set forth below.
Shares to be Issued
All shareholders of Strategic Income & Growth Fund who own Class A
shares will receive Class A shares of Multiple Strategies Fund in
exchange for their Class A shares of Strategic Income & Growth
Fund. Shareholders of Strategic Income & Growth Fund who own Class
B shares will receive Class B shares of Multiple Strategies Fund in
exchange for their Class B shares of Strategic Income & Growth
Fund. Shareholders of Strategic Income & Growth Fund who own Class
C shares will receive Class C shares of Multiple Strategies Fund in
exchange for their Class C shares of Strategic Income & Growth
Fund. All classes of shares vote together in the aggregate as to
certain matters; however shares of a particular class vote together
on matters that affect that class alone.
The Reorganization
The Reorganization Agreement provides for the transfer of the
assets of Strategic Income & Growth Fund to Multiple Strategies
Fund in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund. The net asset value of Multiple
Strategies Fund Class A, Class B and Class C shares issued in the
exchange will equal the value of the assets of Strategic Income &
Growth Fund received by Multiple Strategies Fund. Following the
Closing of the Reorganization, presently scheduled for June 20,
1997, Strategic Income & Growth Fund will distribute the Class A,
Class B and Class C shares of Multiple Strategies Fund received by
Strategic Income & Growth Fund on the Closing Date (as defined
herein) to holders of Class A, Class B and Class C shares of
Strategic Income & Growth Fund, respectively. As a result of the
Reorganization, each Class A, Class B and Class C Strategic Income
& Growth Fund shareholder will receive the number of full and
fractional Multiple Strategies Fund Class A, Class B and Class C
shares that is equal in value to such shareholder's pro rata
interest in the assets transferred to Multiple Strategies Fund as
of the Valuation Date (as defined herein). The Board has
determined that the interests of existing Strategic Income & Growth
Fund shareholders will not be diluted as a result of the
Reorganization. For the reasons set forth below under "The
Reorganization - Reasons for the Reorganization," the Board,
including the trustees who are not "interested persons" of
Strategic Income & Growth Fund (the "Independent Trustees"), as
that term is defined in the Investment Company Act, has concluded
that the Reorganization is in the best interests of Strategic
Income & Growth Fund and its shareholders and recommends approval
of the Reorganization by Strategic Income & Growth Fund
shareholders. If the Reorganization is not approved, Strategic
Income & Growth Fund will continue in existence and the Board will
determine whether to pursue alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board the reorganization of Strategic
Income & Growth Fund into Multiple Strategies Fund so that
shareholders of Strategic Income & Growth Fund may become
shareholders of a larger fund, which after such reorganization
allows shareholders to experience a reduction in expenses. In
connection with its consideration of the Manager's recommendation,
the Board of Trustees of Strategic Income & Growth Fund reviewed
extensive information from the Manager in evaluating the effect of
the proposed Reorganization on shareholders of the Fund. In
determining whether to recommend approval of the Reorganization to
shareholders of Strategic Income & Growth Fund, the Board of
Trustees considered a number of factors including, but not limited
to: (1) the relative size and performance of each Fund, whether or
not the Reorganization is effected; (2) the future prospects for
growth and performance of each Fund; (3) the compatibility of the
Funds' respective investment objectives, policies and restrictions;
(4) the comparability the Funds' respective arrangements with their
investment adviser, general distributor and transfer agent; (5) the
comparability of the capital structure of the Funds and the
distribution arrangements relating to their respective share
classes; (6) the relative expense ratios of each Fund and the
likely effect of the Reorganization on those expense ratios; (7)
the costs of the Reorganization and the allocation of such costs to
the constituent parties; (8) whether any cost savings can be
achieved by combining the Funds; (9) the tax status and
consequences of the Reorganization; and (10) whether the
Reorganization would result in the dilution of shareholder
interests. See "Approval of the Reorganization".
Tax Consequences of the Reorganization
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization. As a condition to the
closing of the Reorganization, each Fund will receive an opinion to
the effect that the Reorganization will so qualify. As a result,
no gain or loss will be recognized by either fund, or by the
shareholders of either fund for Federal income tax purposes as a
result of the Reorganization. For further information about the
tax consequences of the Reorganization, see "Approval of the
Reorganization - Tax Aspects" below.
Investment Objectives and Policies
Strategic Income & Growth Fund. Strategic Income & Growth Fund is
a mutual fund with a primary investment objective of current income
and a secondary investment objective of capital appreciation. The
Fund seeks its primary investment objective of current income
principally by investing in securities in three market sectors:
(1) U.S. Government Securities, (2) foreign debt securities,
including lower-rated, high yield foreign securities that have
special risks, and (3) domestic debt securities, including lower-
rated, high yield, high risk bonds. Strategic Income & Growth Fund
seeks its secondary investment objective of capital appreciation
principally by investing in domestic equity securities. The
investment objectives of the Fund are fundamental policies.
Under normal circumstances, Strategic Income & Growth Fund will
invest at least some of its assets in each of the four sectors
described above. There is no specific percentage of its assets
that must be invested in any one or more of these sectors at any
time. However, from time to time it may invest up to 100% of its
total assets in any one sector, other than in domestic equity
securities if, in the judgment of the Manager, the Fund has the
opportunity of seeking a high level of current income without undue
risk to principal.
The Manager may use different approaches at different times to
determine how to allocate the Fund's assets between the three debt
securities sectors to seek income and the domestic equity sector to
seek capital appreciation. The Manager's asset allocation
determinations are made periodically in the following manner. The
Manager establishes a target level of current income to seek from
the Fund's portfolio investments. That target may use, as a point
of reference, a measure of current interest rates, such as the
interest rate then being paid on 3-month U.S. Treasury bills. The
Manager then estimates what proportion of the Fund's assets are to
be allocated to the debt securities sectors to seek that level of
current income. The remainder of the Fund's assets that are not
allocated to debt securities are then allocated to the domestic
equity sector to attempt to achieve capital appreciation. The
Manager currently intends to determine this allocation on a monthly
basis, although the frequency of the determination may vary.
Under this asset allocation approach the proportion of the
Fund's assets allocated to the different debt securities sectors
and to the domestic equity sector will vary over time. The
allocation will depend upon the level of current portfolio income
targeted by the Manager, the Manager's estimate's of earnings
available from the fixed income sectors, and other factors. Since
the objective of capital appreciation is secondary to the objective
of current income, there may be periods in which relatively little
or none of Strategic Income & Growth Fund's assets are invested in
equity securities. The Manager may vary, revise or discontinue
this asset allocation approach or adopt a different approach. The
use of this approach is not an objective or fundamental investment
policy of the Fund, but merely illustrates the investment selection
and allocation techniques the Manager currently intends to employ
in seeking the Fund's objectives and in implementing the Fund's
investment policies. There can be no assurance that any asset
allocation approach will be successful in providing the Fund or its
shareholders a particular amount of current income or achieving
particular investment results.
Multiple Strategies Fund. Multiple Strategies Fund is a mutual
fund that seeks high total investment return consistent with
preservation of principal as its investment objective. That means
that the Fund seeks current income and capital appreciation in the
value of its shares, consistent with preservation of principal. In
seeking its investment objective, which is a fundamental policy,
the Fund may invest in different types of securities, including
equity securities, debt securities, money market instruments and
hedging instruments. The Fund does not have a fundamental
investment policy which requires it to invest any set amount or
percentage of its assets at any one time in one of more of the
foregoing types of securities. However, as a non-fundamental
investment policy, the Fund will invest at least 25% of its assets
in equity securities, including common stocks, preferred stocks and
securities convertible into common stock. In addition, as a non-
fundamental investment policy, the Fund will invest at least 25% of
its total assets in fixed-income senior securities. The Fund may
invest up to 35% of its total assets in non-investment grade
securities.
To seek the Fund's investment objective of high total investment
return consistent with preservation of principal, from time to time
the Manager reallocates the Fund's assets among equity securities,
debt securities, money market instruments and hedging instruments.
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. Using this asset allocation
approach, the proportion of the Fund's assets invested in any one
type of investment will vary over time. There can be no assurance
that any asset allocation approach will be successful in providing
the Fund or its shareholders a particular amount of current income
or achieving particular investment results.
Investment Advisory and Distribution and Service Plan Fees
The terms and conditions of each investment advisory agreement are
substantially the same. Both funds obtain investment management
services from the Manager. The management fee is computed on the
net asset value of each fund as of the close of business each day
and payable monthly at the following annual rates: Strategic Income
& Growth Fund pays 0.75% of the first $200 million of average
annual net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million and 0.50% of average annual net assets in excess
of $1 billion. Multiple Strategies Fund pays 0.75% of the first
$200 million of average annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200
million and 0.60% of average annual net assets in excess of $800
million.
Strategic Income & Growth Fund and Multiple Strategies Fund have
both adopted Service Plans for their respective Class A shares.
Both Service Plans provide for compensation to the Distributor for
a portion of its costs incurred in connection with the personal
service and maintenance of accounts that hold Class A shares.
Under each plan, payment is made at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of
each of the Funds. The Board of Trustees of Multiple Strategies
Fund has set the maximum fee at 0.15% for assets representing Class
A shares sold before April 1, 1988, and 0.25% for assets
representing Class A shares sold on or after that date.
Strategic Income & Growth Fund and Multiple Strategies Fund have
adopted Distribution and Service Plans (the "Plans") for Class B
and Class C shares under which each fund pays the Distributor for
its services in connection with distributing Class B and Class C
shares and servicing accounts. Under each Plan, the funds pay the
Distributor an asset-based sales charge of 0.75% per annum of Class
B shares outstanding for six years or less and on Class C shares.
The funds also pay the Distributor a service fee of 0.25% per
annum, each of which is computed on the average annual net assets
of Class B and Class C shares determined as of the close of each
regular business day of each fund.
Purchases, Exchanges and Redemptions
Both Strategic Income & Growth Fund and Multiple Strategies Fund
are part of the OppenheimerFunds complex of mutual funds. The
procedures for purchases, exchanges and redemptions of shares of
the funds are substantially the same. Shares of either fund may be
exchanged only for Class A, Class B shares or Class C shares of the
other Oppenheimer funds offering such shares.
Strategic Income & Growth Fund has a maximum initial sales charges
on Class A shares of 4.75% whereas Multiple Strategies Fund has a
maximum initial sales charge on Class A shares of 5.75%. With
respect to purchases of more than $1 million ($500,000 or more for
purchases by "Retirement Plans" as defined in "Class A Contingent
Deferred Sales Charge" in each fund's Prospectus) in Class A shares
of either Fund, investors may have to pay a sales charge of up to
1% if shares are sold within 18 calendar months from the end of the
calendar month during which shares are purchased. Each of the
funds has a contingent deferred sales charge imposed on the
proceeds of Class B shares redeemed within six years of buying
them. The contingent deferred sales charge ("CDSC") varies
depending on how long you hold your shares. Each of the funds has
a contingent deferred sales charge of 1% imposed on the proceeds of
Class C shares if redeemed within twelve months of their purchase.
Class A, Class B and Class C shares of Multiple Strategies Fund
received in the Reorganization will be issued at net asset value,
without a sales charge and no CDSC will be imposed as a result of
the Reorganization. Services available to shareholders of both
funds include purchase and redemption of shares through
OppenheimerFunds AccountLink and PhoneLink (an automated telephone
system), telephone redemptions, and exchanges by telephone to other
Oppenheimer funds which offer Class A, Class B and Class C shares,
and reinvestment privileges. Please see "Shareholder Services,"
and you should refer to Strategic Income & Growth Fund's Prospectus
and Multiple Strategies Fund's Prospectus included with this
document for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
Multiple Strategies Fund, shareholders should carefully consider
the following risk factors, the information set forth in this Proxy
Statement and Prospectus and the more complete description of risk
factors set forth in the documents incorporated by reference
herein, including the Prospectuses of the Funds and their
respective Statements of Additional Information.
Stock Investment Risks. Both Strategic Income & Growth Fund and
Multiple Strategies Fund may invest a substantial portion of their
assets in equity securities, including stocks. The value of each
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile, and stock prices can
change substantially. This market risk will affect each Fund's net
asset values per share, which will fluctuate as values of the
Fund's portfolio securities and other assets and liabilities
change. Not all stock prices change uniformly or at the same time,
and not all stock markets move in the same direction at the same
time. Other factors can affect a particular stock's prices (for
example, poor earnings reports by an issuer, loss of major
customers, major litigation against an issuer and changes in
government regulations affecting an industry). Not all of these
factors can be predicted. Each Fund attempts to limit certain
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.
Interest Rate Risks. Both Strategic Income & Growth Fund and
Multiple Strategies Fund may invest a substantial portion of their
assets in debt securities. 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.
Foreign Securities Have Special Risks. Strategic Income & Growth
Fund may invest in foreign debt securities. Multiple Strategies
Fund may invest in equity and debt securities issued by foreign
companies and debt securities issued by foreign governments. While
foreign securities offer special investment opportunities, there
are also special risks. The change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign currency. Foreign
issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of
foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's
assets, foreign taxes, delays in settlement of transactions,
changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors. More information
about the risks and potential rewards of investing in foreign
securities is contained in each Fund's Statement of Additional
Information.
Special Risks of Investing in Lower-Grade Securities. Strategic
Income & Growth Fund may invest up to 100% of its total assets and
Multiple Strategies Fund may invest up to 35% of its total assets
in domestic and foreign high-yield, "lower-grade" debt securities
(including both high-yielding rated and unrated securities).
"Lower-grade" debt securities 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
below "Baa" by Moody's Investors Service, Inc. or similar ratings
by other nationally-recognized rating organizations, or, if
unrated, are judged by the Manager to be comparable to such lower-
rated securities. Each Fund may invest in securities rated as low
as "C" or "D" by Standard & Poor's or by Moody's or that may be in
default at the time of purchase. For a description of these
securities ratings, please refer to Appendix B to the Statement of
Additional Information.
High yield, lower-grade securities, whether rated or unrated, may
be subject to greater market fluctuations and risk of loss of
income and principal than lower yielding, investment grade
securities, and may be considered to have certain speculative
risks. 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," above.
These risks mean that Strategic Income Fund and Multiple Strategies
Fund may not achieve the income anticipated from lower-grade
securities, and that their net asset values per share may be
affected by declines in the value of these securities. However,
each 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 its
shares, as will each Fund's policy of diversifying its investments.
Both Strategic Income & Growth Fund and Multiple Strategies Fund
may use hedging instruments. 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 or if the
hedging instrument does not perform as expected, 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.
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
each Fund may use are described in greater detail in the Statement
of Additional Information.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Trustees (the "Board") held October
22, 1996, the Trustees reviewed and discussed materials relevant to
the proposed Reorganization. The Board, including the Independent
Trustees, unanimously approved and recommended to shareholders of
Strategic Income & Growth Fund that they approve the
Reorganization. Both funds offer Class A, Class B and Class C
shares and the terms and conditions of their offer, sale,
redemption and exchange, distribution arrangements, expenses borne
separately by each class and other related matters are similar.
The Board considered that this will facilitate an exchange. In the
Reorganization, Class A, Class B and Class C shareholders of
Strategic Income & Growth Fund will receive Class A, Class B and
Class C shares, respectively, of Multiple Strategies Fund.
In considering the proposed Reorganization, the Board reviewed
information which demonstrated that Strategic Income & Growth Fund
is a significantly smaller fund than Multiple Strategies Fund. At
September 30, 1996, Strategic Income & Growth Fund had net assets
of $76,786,571 whereas Multiple Strategies Fund had net assets of
$291,441,747. The Board considered the fact that the Manager's
recommendation to reorganize Strategic Income & Growth Fund with
and into Multiple Strategies Fund was based, in part, upon the
Manager's observation that it does not anticipate that Strategic
Income & Growth Fund will increase substantially in size in the
near future. The Board also considered the fact that after the
Reorganization, the shareholders of Strategic Income & Growth Fund
will be shareholders of a larger fund and may incur lower
operating, transfer agency and other expenses which may result from
anticipated economies of scale. It was also noted that those
anticipated economies of scale would be further increased if the
reorganization of Oppenheimer Fund with and into Multiple
Strategies Fund is approved by shareholders of Oppenheimer Fund.
Shareholders of Strategic Income & Growth Fund are not being asked
to consider and vote upon the proposed reorganization of
Oppenheimer Fund with and into Multiple Strategies Fund. The
Reorganization (of Strategic Income & Growth Fund with and into
Multiple Strategies Fund) is not contingent upon approval of the
Oppenheimer Fund Reorganization.
Among several other factors, the Board focused on the investment
objectives of the two funds. Strategic Income & Growth Fund seeks
current income as its primary investment objective; its secondary
objective is to seek capital appreciation. Multiple Strategies
Fund seeks high total investment return consistent with
preservation of principal as its investment objective. The Board
noted that the investment objectives of the Funds are compatible in
that current income and capital appreciation, the investment
objectives of Strategic Income & Growth Fund, are components of
total return.
The Board, in reviewing financial information, considered the
investment advisory fee rate of both funds (also known as the
"management fee rate"). These management fee rates may be higher
than the rates paid by some other funds. The management fee rates
for Strategic Income & Growth Fund are 0.75% of the first $200
million of average annual net assets; 0.72% of the next $200
million; 0.69% of the next $200 million; 0.66% of the next $200
million; 0.60% of the next $200 million and 0.50% of the average
annual net assets in excess of $1 billion. Strategic Income &
Growth Fund's management fee for its fiscal year ended September
30, 1996 was 0.75% of average annual net assets for Class A, Class
B and Class C shares. The management fee rates of Multiple
Strategies Fund are 0.75% of the first $200 million of average
annual net assets; 0.72% of the next $200 million; 0.69% of the
next $200 million; 0.66% of the next $200 million; and 0.60% of
average annual net assets in excess of $800 million. Multiple
Strategies Fund's management fee for the fiscal year ended
September 30, 1996 was 0.74% of average annual net assets for Class
A, Class B and Class C shares. The Board considered the fact that,
despite the additional breakpoint of 0.50% on assets in excess of
$1 billion in the advisory fee schedule for Strategic Income &
Growth Fund, it is possible that shareholders of Strategic Income
& Growth Fund may benefit from the reduced expenses which are
anticipated as a result of the Reorganization well before they
would ever benefit from the additional breakpoint if the
Reorganization did not take place. In connection with their
consideration of these factors, if the two funds were combined,
shareholders of Multiple Strategies Fund would continue to have a
management fee of 0.74% for Class A, Class B and Class C shares.
The Board reviewed pro forma information which indicated that the
expense ratio of a combined fund would therefore be lower than that
of Strategic Income & Growth Fund.
In addition to these factors, the Board also considered information
with respect to the historical performance of Strategic Income &
Growth Fund and Multiple Strategies Fund. The Board reviewed the
total return performance information for each Fund for the twelve
months ended September 30, 1996, noting that the average annual
returns were better for each class of Strategic Income & Growth
Fund than for the corresponding class of Multiple Strategies Fund.
The average annual total returns of Multiple Strategies Fund were
better than those of Strategic Income & Growth Fund for the three
year period ended September 30, 1996. Although past performance is
not predictive of future results, the Board determined that
shareholders of Strategic Income & Growth Fund would have an
opportunity to become shareholders of a fund with a better long-
term performance history. See Exhibit B to this Proxy Statement
for performance information relating to Strategic Income & Growth
Fund and Multiple Strategies Fund.
The Board of Trustees considered the various factors relevant
to the situation, including the nature of the anticipated benefits
to be derived from the Reorganization by shareholders of Strategic
Income & Growth Fund. They considered the fact that the
Reorganization is expected to qualify as a tax-free reorganization
and, in addition, the fact that no sales charges would be imposed
upon shareholders in connection with the transactions contemplated
by the Reorganization. They also considered the fact that the
Reorganization may result in economies of an indeterminate amount
to the Manager. The Board of Trustees evaluated the merits of the
Fund's participation in the Reorganization and concluded that the
Fund's participation in the Reorganization was in the best
interests of the Fund and, in addition, that the interests of
current shareholders of the Fund would not be diluted as a result
of its participation. The Board of Trustees were represented by
legal counsel in connection with the proposed transaction.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full
as Exhibit A to this Proxy Statement and Prospectus) contemplates
a reorganization under which (a) all of the assets of Strategic
Income & Growth Fund (other than the cash reserve described below
(the "Cash Reserve")) will be transferred to Multiple Strategies
Fund in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund, (b) the Class A, Class B and Class
shares of Multiple Strategies Fund will be distributed among the
shareholders of Strategic Income & Growth Fund in complete
liquidation of Strategic Income & Growth Fund, and (c) the
outstanding shares of Strategic Income & Growth Fund will be
canceled. The Reorganization Agreement provides that Multiple
Strategies Fund will not assume any of Strategic Income & Growth
Fund's liabilities except for portfolio securities purchased which
have not settled and outstanding shareholder redemption and
dividend checks.
The result of effectuating the Reorganization would be that: (i)
Multiple Strategies Fund will add to its gross assets all of the
assets (net of any liability for portfolio securities purchased but
not settled and outstanding shareholder redemption and dividend
checks) of Strategic Income & Growth Fund other than its Cash
Reserve; and (ii) the shareholders of Strategic Income & Growth
Fund as of the close of business on the Closing Date will become
shareholders of either Class A, Class B or Class C shares of
Multiple Strategies Fund.
The effect of the Reorganization will be that shareholders of
Strategic Income & Growth Fund who vote their Class A, Class B and
Class C shares in favor of the Reorganization will be electing to
redeem their shares of Strategic Income & Growth Fund (at net asset
value on the Valuation Date referred to below under "Method of
Carrying Out the Reorganization Plan," calculated after subtracting
the Cash Reserve) and reinvest the proceeds in Class A, Class B or
Class C shares of Multiple Strategies Fund at net asset value
without sales charge and without recognition of taxable gain or
loss for Federal income tax purposes (see "Tax Aspects to be of the
Reorganization" below). The Cash Reserve is that amount retained
by Strategic Income & Growth Fund which is sufficient in the
discretion of the Board for the payment of: (a) Strategic Income &
Growth Fund's expenses of liquidation, and (b) its liabilities,
other than those assumed by Multiple Strategies Fund. Strategic
Income & Growth Fund and Multiple Strategies Fund will bear all of
their respective expenses associated with the Reorganization, as
set forth under "Costs of the Solicitation and the Reorganization"
above. Management estimates that such expenses associated with the
Reorganization to be borne by Strategic Income & Growth Fund will
not exceed $39,000. Liabilities as of the date of the transfer of
assets will consist primarily of accrued but unpaid normal
operating expenses of Strategic Income & Growth Fund, excluding the
cost of any portfolio securities purchased but not yet settled and
outstanding shareholder redemption and dividend checks. See
"Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the
Funds as to their respective portfolios so that, after the closing,
Multiple Strategies Fund will be in compliance with all of its
investment policies and restrictions. Strategic Income & Growth
Fund will recognize capital gain or loss on any sales made pursuant
to this paragraph.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the
Reorganization Agreement, Strategic Income & Growth Fund will pay
a dividend or dividends which, together with all previous such
dividends, will have the effect of distributing to Strategic Income
& Growth Fund's shareholders all of Strategic Income & Growth
Fund's investment company taxable income for taxable years ending
on or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gain, if
any, realized in taxable years ending on or prior to the Closing
Date (after reduction for any available capital loss carry-
forward). Such dividends will be included in the taxable income of
Strategic Income & Growth Fund's shareholders as ordinary income
and capital gain, respectively.
The exchange of the assets of Strategic Income & Growth Fund for
Class A, Class B and Class C shares of Multiple Strategies Fund and
the assumption by Multiple Strategies Fund of certain liabilities
of Strategic Income & Growth Fund is intended to qualify for
Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). Strategic Income & Growth Fund has represented to
KPMG Peat Marwick LLP, tax adviser to Strategic Income & Growth
Fund, that there is no plan or intention by any Fund shareholder
who owns 5% or more of Strategic Income & Growth Fund's outstanding
shares, and, to Strategic Income & Growth Fund's best knowledge,
there is no plan or intention on the part of the remaining
Strategic Income & Growth Fund shareholders, to redeem, sell,
exchange or otherwise dispose of a number of Multiple Strategies
Fund Class A or Class B shares received in the transaction that
would reduce Strategic Income & Growth Fund shareholders' ownership
of Multiple Strategies Fund shares to a number of shares having a
value, as of the Closing Date, of less than 50% of the value of all
the formerly outstanding Strategic Income & Growth Fund shares as
of the same date. Multiple Strategies Fund and Strategic Income &
Growth Fund have each represented to KPMG Peat Marwick LLP, that,
as of the Closing Date, it will qualify as a regulated investment
company or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Multiple
Strategies Fund and Strategic Income & Growth Fund will receive the
opinion of KPMG Peat Marwick LLP to the effect that, based on the
Reorganization Agreement, the above representations, existing
provisions of the Code, Treasury Regulations issued thereunder,
current Revenue Rulings, Revenue Procedures and court decisions,
for Federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement
will qualify as a tax-free "reorganization" within the meaning
of Section 368(a)(1) of the Code.
2. Strategic Income & Growth Fund and Multiple Strategies Fund
will each qualify as "a party to a reorganization" within the
meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of
Strategic Income & Growth Fund upon the distribution of Class
A, Class B or Class C shares of beneficial interest in Multiple
Strategies Fund to the shareholders of Strategic Income &
Growth Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by Strategic Income & Growth Fund by reason of the
transfer of its assets solely in exchange for Class A, Class B
or Class C shares of Multiple Strategies Fund.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Multiple Strategies Fund by reason of the
transfer of Strategic Income & Growth Fund's assets solely in
exchange for Class A, Class B or Class C shares of Multiple
Strategies Fund.
6. The shareholders of Strategic Income & Growth Fund will have
the same tax basis and holding period for the shares of
beneficial interest in Multiple Strategies Fund that they
receive as they had for Strategic Income & Growth Fund stock
that they previously held, pursuant to Sections 358(a) and
1223(1) of the Code, respectively.
7. The securities transferred by Strategic Income & Growth Fund to
Multiple Strategies Fund will have the same tax basis and
holding period in the hands of Multiple Strategies Fund as they
had for Strategic Income & Growth Fund, pursuant to Sections
362(b) and 1223(1) of the Code, respectively.
Shareholders of Strategic Income & Growth Fund should consult their
tax advisors regarding the effect, if any, of the Reorganization in
light of their individual circumstances. Since the foregoing
discussion relates only to the Federal income tax consequences of
the Reorganization, shareholders of Strategic Income & Growth Fund
should also consult their tax advisers as to state and local tax
consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Strategic Income
& Growth Fund and Multiple Strategies Fund and indicates the pro
forma combined capitalization as of September 30, 1996 as if the
Reorganization had occurred on that date.
September 30, 1996
- - ------------------
<TABLE>
<CAPTION>
Net Asset
Shares Value
Net Assets Outstanding Per Share
---------- ------------ -----------
<S> <C> <C> <C>
Strategic & Income Growth Fund
Class A $46,746,928 7,956,397 $5.88
Class B $28,933,298 4,932,725 $5.87
Class C $ 1,106,345 188,933
$5.86
Multiple Strategies Fund
Class A $264,358,580 18,756,434 $14.09
Class B $ 5,996,160 428,130 $14.01
Class C $ 21,087,007 1,503,813 $14.02
Multiple Strategies Fund
Pro Forma Surviving Fund (after Reorganization with Strategic
Income & Growth)(1)
Class A $311,105,508 22,074,172 $14.09
Class B $ 34,929,458 2,493,319 $14.01
Class C $ 22,193,352 1,582,725 $14.02
Multiple Strategies Fund
Pro Forma Surviving Fund (after Reorganization with Strategic
Income & Growth and with Oppenheimer Fund)(2)
Class A $587,830,904 $14.09
Class B $ 36,968,973 $14.01
Class C $ 26,505,099 $14.02
</TABLE>
(1) Reflects issuance of 3,317,737.97 Class A shares, 2.065,189.01
Class B shares and 78,911.91 of Class C shares of Multiple
Strategies Fund in a tax-free exchange for the net assets of
Strategic Income & Growth Fund, aggregating $76,786,571. The pro
forma ratio of expenses to average annual net assets of the Class
A shares for year ended September 30, 1996 would have been 1.25%.
The pro forma ratio of expenses to average net assets of Class B
shares for year ended September 30, 1996 would have been 2.08%. The
pro forma ratio of expenses to average net assets of Class C shares
for year ended September 30, 1996 would have been 2.09%.
(2) Reflects issuance of ____________Class A shares, _________Class
B shares and ___________ Class C shares of Multiple Strategies Fund
in a tax-free exchange for the net assets of Strategic Income and
Growth Fund, aggregating $___________ and issuance of ____________
Class A shares, ____________ Class B shares and ___________ Class
C shares of Multiple Strategies Fund in a tax-free exchange for the
net assets of Oppenheimer Fund, aggregating $____________ . The
pro forma ratio of expenses to average annual net assets of the
Class A shares for year ended September 30, 1996 would have been
______%. The pro forma ratio of expenses to average annual net
assets of the Class B shares for year ended September 30, 1996
would have been ______%. The pro forma ratio of expenses to
average annual net assets of the Class C shares for year ended
September 30, 1996 would have been ______%.
COMPARISON BETWEEN STRATEGIC INCOME & GROWTH FUND
AND MULTIPLE STRATEGIES FUND
Information about Multiple Strategies Fund and Strategic Income &
Growth Fund is set forth below. Additional information about
Multiple Strategies Fund is set forth in its Prospectus, which
accompanies this Proxy Statement and Prospectus. Additional
information about both Funds is set forth in documents that may be
obtained upon request of the Transfer Agent or upon review at the
offices of the SEC. The following discussion about the investment
objectives and policies of Strategic Income & Growth Fund and
Multiple Strategies Fund is qualified in its entirety by reference
to each Fund's current Prospectus and Statement of Additional
Information. See "Miscellaneous - Public Information."
Investment Objectives and Policies
Multiple Strategies Fund. Multiple Strategies Fund seeks its
investment objective of high total return consistent with
preservation of principal by investing in various types of
securities which generally include equity securities, debt
securities, money market instruments and hedging instruments as
described below. The Fund will invest at least 25% of its assets
in equity securities, including common stocks, preferred stocks and
securities convertible into common stock. In addition, the Fund
will invest at least 25% of its total assets in fixed-income senior
securities. The Fund may invest up to 35% of its total assets in
non-investment grade securities. In general, the types of
securities in which Multiple Strategies Fund invests 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 investments in debt securities 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.
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, Futures and options on Futures.
In seeking Multiple Strategies Fund's investment objective of a
high total investment return consistent with preservation of
principal, 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.
Strategic Income & Growth Fund. Strategic Income & Growth Fund has
a primary investment objective of current income and a secondary
investment objective of capital appreciation. The Fund seeks its
primary investment objective of current income principally by
investing in securities in three market sectors: (1) U.S.
Government Securities, (2) foreign debt securities, including
lower-rated, high yield foreign securities that have special risks,
and (3) domestic debt securities, including lower-rated, high
yield, high risk bonds. Strategic Income & Growth Fund seeks its
secondary investment objective of capital appreciation principally
by investing in domestic equity securities.
Under normal circumstances, Strategic Income & Growth Fund will
invest at least some of its assets in each of the four sectors
described above. There is no specific percentage of its assets
that must be invested in any one or more of these sectors at any
time. However, from time to time it may invest up to 100% of its
total assets in any one sector, other than in domestic equity
securities if, in the judgment of the Manager, the Fund has the
opportunity of seeking a high level of current income without undue
risk to principal. Because that means that Strategic Income &
Growth Fund could invest all of its assets in lower rated
securities, an investment in Strategic Income & Growth Fund may be
considered to be speculative.
Permitted Investments by Both Multiple Strategies Fund and
Strategic Income & Growth Fund
The securities in which Multiple Strategies Fund and Strategic
Income & Growth Fund each normally invest are summarized below.
The Funds invest in substantially the same types of securities and
are subject to similar investment restrictions. These investment
techniques and strategies involve certain risks which are explained
more fully in each Fund's Statement of Additional Information.
Equity Securities. Multiple Strategies Fund will invest at least
25% of its total assets in equity securities, including common
stocks, preferred stocks and securities convertible into common
stock. It may buy equity securities issued by domestic or foreign
companies in any industry (for example, industrial, financial or
utility). Strategic Income & Growth Fund may, when investing to
seek its secondary objective of capital appreciation, buy equity
securities of domestic corporations in any industry. Each Fund's
investments may include common stocks, preferred stocks,
convertible securities and warrants. In selecting stocks, Multiple
Strategies Fund may emphasize and Strategic Income & Growth Fund
will emphasize issues that are listed on a U.S. securities exchange
or quoted on the Automated Quotation System ("NASDAQ") of the
NASDAQ Stock Market, Inc. Although Multiple Strategies Fund may
invest in securities of small, unseasoned companies, it currently
intends that its investments in securities of companies (including
predecessors) that have operated less than three years will not
exceed 5% of its total assets. As a matter of fundamental policy,
Strategic Income & Growth Fund's investments in such securities
will not exceed 5% of its total assets. Although its equity
investments are not limited to companies of a particular size, it
is currently anticipated that the equity investments made by
Strategic Income & Growth Fund will be companies which have assets
in excess of $100 million.
Debt Securities. Both Multiple Strategies Fund and Strategic
Income & Growth Fund may invest in debt securities, including
domestic debt securities, foreign debt securities and debt
securities issued or guaranteed by the U. S. Government or its
agencies or instrumentalities. Strategic Income & Growth Fund may
invest some or all of its assets in each of these three types of
securities, although it will normally invest some assets in each
sector. Multiple Strategies Fund will invest at least 25% of its
total assets in fixed-income senior securities. Fixed-income
securities include bonds and notes. The domestic debt securities
in which each Fund may invest include lower-rated, high risk, high
yield securities commonly called "junk bonds" and the foreign debt
securities in which each Fund may invest include foreign debt rated
below investment grade. Since Strategic Income & Growth Fund may
invest without limit in any of the three debt securities sectors,
it may invest up to 100% of its assets in "junk bonds" or foreign
debt securities rated below investment grade. Multiple Strategies
Fund has no limitations on the maturity, capitalization of the
issuer or credit rating of the debt securities in which it invests
other than the Fund will not invest more than 35% of its total
assets in lower-grade debt securities. Both Funds 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.
Certain of U.S. Government securities in which each Fund may
invest, 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 in which each
Fund may invest 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 National Mortgage
Association (these securities are referred to as "Fannie Maes") and
obligations supported only by the credit of the instrumentality,
such as Federal Home Loan Mortgage Corporation (these securities
are referred to as "Freddie Macs"). Each Fund may invest in zero
coupon U.S. Treasury securities (described below) and short-term
U.S. Government Securities that are money market instruments.
The types of securities described below may be included in one or
more of the debt securities sectors in which Multiple Strategies
Fund and/or Strategic Income & Growth Fund may invest.
Money Market Instruments. Multiple Strategies 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 Multiple Strategies
Fund's Statement of Additional Information.
Asset-Backed Securities. Both Multiple Strategies Fund and
Strategic Income & Growth 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. Both Multiple Strategies Fund
and Strategic Income & Growth 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.
Each 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 payments. 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.
Participation Interests. Both Multiple Strategies Fund and
Strategic Income & Growth 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. Neither Fund may
invest more than 5% of its total assets 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.
Zero Coupon Securities. Both Multiple Strategies Fund and
Strategic Income & Growth Fund may invest in zero coupon securities
issued either by private issuers or by the U.S. Treasury. In
addition, Strategic Income & Growth Fund may invest in zero coupon
securities issued by foreign banks or foreign companies. 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. These securities 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.
Bank Obligations. Strategic Income & Growth Fund may invest in
certain kinds of bank obligations which may fall within the
domestic or foreign debt securities sectors. Generally, these are
debt obligations that have a maturity of one year or less, and
include: certificates of deposit, bankers' acceptances, time
deposits, and letters of credit if they are payable in the United
States or London, England. Those letters of credit must be issued
or guaranteed by a domestic or foreign bank having total assets in
excess of $1 billion and which the Manager has determined to be
creditworthy, considering, among other factors, and ratings
assigned to the securities by one or more "nationally-recognized
statistical rating organizations" as that term is defined in Rule
2a-7 under the Investment Company Act.
Commercial Paper. Both Strategic Income & Growth Fund and Multiple
Strategies Fund may invest in foreign or domestic commercial paper,
which in general terms is short-term corporate debt. Strategic
Income & Growth Fund may purchase commercial paper which is rated
at least "A-3" by Standard & Poor's or at least "Prime-3" by
Moody's, or which if not rated, was issued by a corporation having
an already-issued debt security rated at least "BBB" by Standard &
Poor's or "Baa" by Moody's or rated similarly by another nationally
recognized statistical rating organization. The Fund's commercial
paper investments may include variable amount master demand notes
and floating rate or variable rate notes, described in the
Statement of Additional Information. Multiple Strategies Fund may
purchase commercial paper which is rated "A-1" or "A-2" by S&P or
"Prime-1" or "Prime-2" by Moody's or which, if not rated, was
issued by a corporation having an exiting debt security rated at
least "AA" or "Aa" by S&P or Moody's, respectively.
Foreign Securities. Both Multiple Strategies Fund and Strategic
Income & Growth Fund may invest in foreign securities. Foreign
securities (which may be denominated in U.S. dollars or non-U.S.
currencies) are issued or guaranteed by foreign corporations,
certain supranational entities, and foreign governments or their
agencies or their instrumentalities, and securities issued by U.S.
corporations denominated in non-U.S. currencies. Securities of
foreign issuers that are represented by American Depository
Receipts, or that are listed only on a U.S. securities exchange, or
are traded only 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 that apply to foreign
securities traded and held abroad.
Multiple Strategies 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 50% of its assets invested in
foreign securities. The Fund may purchase foreign securities
issued by companies engaged in mining gold and other precious
metals.
Strategic Income & Growth Fund's investments in foreign securities
are limited to foreign debt securities. Such investments may
include emerging market debt securities. Investments in emerging
market countries involve certain risks in addition to the risks
attendant to investments in foreign securities. No more than 25%
of the Fund's assets will be invested in government securities of
any one foreign country or in debt securities issued by companies
organized under the laws of any one foreign country. Each Fund's
investments in foreign securities may include debt obligations
known as "Brady Bonds". "Brady Bonds" are issued to exchange
existing commercial bank loans to foreign governments for new
obligations that are usually collateralized by zero coupon U.S.
Treasury securities that have the same maturity as the debt
obligation.
Derivative Investments. Both Multiple Strategies Fund and
Strategic Income & Growth Fund may invest in derivative securities.
In general, a "derivative investment" is a specially designed
investment. Its performance is linked to the performance of
another investment or security, such as an option, future, index,
currency or commodity. In the broadest sense, exchange-traded
options and futures contracts (discussed in "Hedging," below) may
be considered "derivative investments." The Fund may not purchase
or sell physical 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 or from investing in securities or other instruments
backed by, or the investment return from which is linked to changes
in the price of, physical commodities. Please refer to the
Prospectus of Strategic Income & Growth Fund for a description of
the various derivative investments which may be made by that Fund.
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, and the derivative
itself, may not perform the way the Manager expected it to
perform. The 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 trade in the over-the-
counter market and may be illiquid. Please see "Illiquid and
Restricted Securities", below.
Hedging. As described below, both Multiple Strategies Fund and
Strategic Income & Growth 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. These are all referred to as "hedging instruments."
Neither Multiple Strategies Fund nor Strategic Income & Growth Fund
uses hedging instruments for speculative purposes, and each Fund
has limits on the use of them, as described below. The hedging
instruments the Funds may use are described below and in greater
detail in "Hedging" in each Fund's Statement of Additional
Information.
The Funds 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, may hedge
the Fund's portfolio against price fluctuations to some extent.
Other hedging strategies, such as buying futures and call options,
may tend to increase the Fund's exposure to the securities market.
Futures. Multiple Strategies Fund may buy and sell futures
contracts that relate to (1) broadly-based stock indices (referred
to as Stock Index Futures), (2) other broadly-based securities
indices (referred to as Financial Futures), (3) interest rates
(these are referred to as Interest Rate Futures) or (4) foreign
currencies (these are referred to as Forward Contracts). Strategic
Income & Growth Fund may buy and sell futures contracts that relate
to certain Financial Futures, Interest Rate Futures and Forward
Contracts. These types of Futures are described in "Hedging" in
each Fund's Statement of Additional Information. At present,
Multiple Strategies 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.
Put and Call Options. Both Multiple Strategies Fund and Strategic
Income & Growth Fund may buy and sell certain kinds of put options
(puts) and call options (calls) as described in more detail in each
Fund's respective prospectus. In each case a call or put option
may not be purchased if the value of all the Fund's put and call
options would exceed 5% of the Fund's total assets.
Multiple Strategies Fund may buy calls on securities, broadly-based
securities indices, foreign currencies, Interest Rate Futures or
Financial Futures. It may buy calls to terminate its obligation on
a call the Fund previously wrote. It may write (that is, sell)
call options. When the Fund writes a call, it receives cash
(called a premium). Each call the Fund writes must be "covered"
while the call is outstanding. That means the Fund owns the
investment on which the call was written. The Fund may write calls
on Futures contracts, but these calls must be covered by Futures
contracts or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised.
After writing any call, not more than 35% of the Fund's total
assets may be subject to calls.
Multiple Strategies Fund may buy and sell put options. The Fund
can buy those puts that relate to securities the Fund owns,
broadly-based securities indices, foreign currencies, or Interest
Rate Futures or Financial Futures (whether or not the Fund holds
the particular Future in its portfolio). The Fund may write puts
on securities, broadly-based securities indices, foreign
currencies, or Interest Rate Futures or Financial Futures in an
amount up to 25% of its total assets, but only if those puts are
covered by segregated liquid assets. In writing puts, there is a
risk that the Fund may be required to buy the underlying security
at a disadvantageous price.
Multiple Strategies Fund may buy or sell foreign currency puts and
calls only if they are traded on a securities or commodities
exchange or over-the-counter market, or are quoted by recognized
dealers in those options.
Strategic Income & Growth Fund may buy calls on (1) debt
securities, (2) foreign currencies, (3) Futures, (4) broadly-based
securities indices, (5) interest rate spreads, (6) equity
securities, or to terminate its obligation on a call the Fund
previously wrote. The Fund may write call options on debt or
equity securities, foreign currency or Futures, but only if they
are "covered." 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. Up to 100% of
the Fund's assets may be subject to covered calls.
Strategic Income & Growth Fund may purchase put options that relate
to (1) debt securities, (2) Futures, (3) foreign currencies, (4)
broadly-based securities indices, (5) interest rate spreads, or (6)
equity securities. The Fund can buy a put on a debt security
whether or not the Fund owns the particular debt security in its
portfolio. The Fund may sell a put on debt securities or Futures,
but only if the puts are covered by segregated liquid assets. The
Fund will not write puts if more than 50% of the Fund's net assets
would have to be segregated to cover put obligations.
Forward Contracts. Both Multiple Strategies Fund and Strategic
Income & Growth Fund may enter into 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 Funds use 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. Both Funds may also use "cross hedging," where the Fund
hedges against changes in currencies other than the currency in
which a security it holds is denominated.
Interest Rate Swaps. Strategic Income & Growth Fund may engage in
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 which it
owns. The Fund may not enter into swaps with respect to more than
25% of its total assets. The Fund will segregate liquid assets 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.
See "Risk Factors" for a discussion of the risks involved in the
use of hedging instruments.
Illiquid and Restricted Securities. Under the policies and
procedures established by each 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. Both Funds currently intends not to invest
more than 10% of their respective net assets in illiquid or
restricted securities. In each case, the Board may increase that
limit to 15%. In each instance, the Fund's percentage limitation
on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers. The Manager monitors holdings of illiquid securities
on an ongoing basis and at times the Fund may be required to sell
some holdings to maintain adequate liquidity.
Loans of Portfolio Securities. Both Multiple Strategies Fund and
Strategic Income & Growth Fund may lend their portfolio securities
to brokers, dealers and other financial institutions. In each
case, the Fund must receive collateral for a loan. In each
instance and, in the case of Multiple Strategies Fund as a matter
of fundamental policy, such loans are limited to not more than 25%
of the value of the Fund's total assets. Such loans are subject to
the conditions described in the Statement of Additional Information
of each Fund. Multiple Strategies Fund does not intend to engage in
loans of portfolio securities in excess of 5% of the value of its
total assets. Strategic Income & Growth Fund presently does not
intend to lend its portfolio securities, but if it does, the value
of securities loaned is not expected to exceed 5% of the value of
the Fund's total assets in the coming year.
Repurchase Agreements. Both Multiple Strategies Fund and Strategic
Income & Growth Fund may enter into repurchase agreements. In a
repurchase transaction, the Fund buys a security and simultaneously
sells it to the vendor for delivery at a future date. They are
primarily used for liquidity purposes. Repurchase agreements must
be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is
any delay in its ability to do so. Neither Multiple Strategies
Fund nor Strategic Income & Growth Fund will enter into a
repurchase agreement that will cause more than 10% of its net
assets to be subject to repurchase agreements having a maturity
beyond seven days.
"When-Issued" and Delayed Delivery Transactions. Both Multiple
Strategies Fund and Strategic Income & Growth 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.
Certain Investments in a Single Open-End Investment Company
Multiple Strategies Fund has a fundamental investment policy which
permits it to invest all of its assets in the securities of a
single open-end management investment company for which the Manager
or one of its subsidiaries or a successor is advisor or sub-
advisor, notwithstanding any other fundamental investment policy or
limitation; such other investment company must have substantially
the same fundamental investment objective, policies and limitations
as the Fund.
Investment Restrictions
Both Multiple Strategies Fund and Strategic Income & Growth Fund
have certain investment restrictions which, together with their
respective investment objectives, are fundamental policies.
Fundamental policies may be changed only upon approval by
shareholders. Under these fundamental policies, Multiple
Strategies Fund and Strategic Income & Growth Fund are subject to
the following investment restrictions:
1. The Funds cannot buy securities issued or guaranteed by any
one issuer (except the U.S. Government or any of its agencies
or instrumentalities) if, with respect to 75% of their
respective total assets, more than 5% of the Fund's total
assets would be invested in securities of that issuer, or the
Fund would then own more than 10% of that issuer's voting
securities.
2. The Funds cannot concentrate investments in any particular
industry. This means that neither Fund may purchase the
securities of companies in any one industry if thereafter more
than 25% of the value of that Fund's total assets would
consist of securities of companies in that industry. However,
that limitation does apply not in either case to U.S.
Government Securities.
3. The Funds cannot lend money, except that the Fund may buy debt
securities that the Fund's investment policies and
restrictions permit it to purchase. Each Fund may also make
loans of portfolio securities subject to the restrictions
stated under "Loans of Portfolio Securities."
4. The Funds cannot buy or sell real estate, or commodities or
commodity contracts including futures contracts. However,
each Fund may invest in debt securities secured by real estate
or interests therein, which in the case of Strategic Income &
Growth Fund may include real estate investment trusts which
invest in real estate or interests therein. In addition, both
Funds may buy and sell any of the Hedging Instruments which it
may use as approved by its Board of Trustees, whether or not
such Hedging Instrument is considered to be a commodity or
commodity contract.
5. The Funds cannot buy securities on margin, but each Fund is
permitted to make margin deposits in connection with any of
the Hedging Instruments which it may use.
6. The Funds cannot underwrite securities issued by other persons
except to the extent that in connection with the disposition
of its portfolio investments, it may be deemed an underwriter
for purposes of the Securities Act of 1933.
7. The Funds cannot 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.
8. The Funds cannot buy and retain the securities of any issuer
it 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.
Under its fundamental policies, Multiple Strategies Fund is subject
to the following additional investment restrictions:
1. The Fund cannot 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).
2. The Fund cannot 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.
3. The Fund cannot invest in physical commodities or commodity
contracts; however, the Fund may (i) buy and sell hedging
instruments permitted by any of its other investment policies,
and (ii) buy and sell options, futures, securities or other
instruments backed by, or the investment return from which is
linked to changes in the price of, physical commodities.
Under its fundamental policies, Strategic Income & Growth Fund is
subject to the following additional investment restrictions:
1. The Fund cannot buy securities of an issuer which, together
with any predecessor, has been in operation for less than
three years, if as a result, the aggregate of these
investments would exceed 5% of the value of the Fund's total
assets.
2. The Fund cannot make short sales of securities or maintain a
short position, unless as short sales against-the-box.
3. The Fund may not invest in oil, gas, or other mineral
exploration programs.
Unless the Prospectus of either Multiple Strategies Fund or
Strategic Income & Growth Fund states that a percentage
restriction applies on an ongoing basis, a restriction applies only
at the time the Fund makes an investment, and the Fund need not
sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other
investment restrictions are listed in "Investment Restrictions" in
the Statement of Additional Information of each Fund.
Expense Ratios and Performance
The ratio of expenses to average net assets for Strategic Income &
Growth Fund for the fiscal year ended September 30, 1996 was 1.43%,
2.19% and 2.28%, respectively, for Class A, Class B and Class C
shares (on an annualized basis). The ratio of expenses to average
net assets for Multiple Strategies Fund for the fiscal year ended
September 30, 1996, for its Class A, Class B and Class C shares (on
an annualized basis) was 1.21%, 2.13% and 2.06%, respectively.
Further details are set forth above under "Comparative Fee Table",
and in Strategic Income & Growth Fund's Annual Report as of
September 30, 1996, and Multiple Strategies Fund's Annual Report as
of September 30, 1996, which are included in the Statement of
Additional Information. The performance of the funds for the 1,3,5
and 10 year periods or life of class ended December 31, 1996 is set
forth in Exhibit B.
Shareholder Services
The policies of Strategic Income & Growth Fund and Multiple
Strategies Fund with respect to minimum initial investments and
subsequent investments by its shareholders are the same. Both
Strategic Income & Growth Fund and Multiple Strategies Fund offer
the following privileges: (i) Right of Accumulation, (ii) Letter of
Intent, (iii) reinvestment of dividends and distributions at net
asset value, (iv) net asset value purchases by certain individuals
and entities, (v) Asset Builder (automatic investment) Plans, (vi)
Automatic Withdrawal and Exchange Plans for shareholders who own
shares of the fund valued at $5,000 or more, (vii) reinvestment of
net redemption proceeds at net asset value within six months of a
redemption, (viii) AccountLink and PhoneLink arrangements, (ix)
exchanges of shares for shares of the same class of certain other
funds at net asset value, and (x) telephone redemption and exchange
privileges.
Shareholders may purchase shares through OppenheimerFunds
AccountLink, which links a shareholder account to an account at a
bank or financial institution and enables shareholders to send
money electronically between those accounts to perform a number of
types of account transactions. This includes the purchase of
shares through the automated telephone system (PhoneLink).
Exchanges can also be made by telephone, or automatically through
PhoneLink. After AccountLink privileges have been established with
a bank account, shares may be purchased by telephone in an amount
up to $100,000. Shares of either Fund may be exchanged for shares
of certain OppenheimerFunds at net asset value per share; however,
shares of a particular class may be exchanged only for shares of
the same class of other OppenheimerFunds. At present, not all of
the OppenheimerFunds offer the same classes of shares.
Shareholders of the funds may redeem their shares by written
request or by telephone request in an amount up to $50,000 in any
seven-day period. Shareholders may arrange to have share
redemption proceeds wired to a pre-designated account at a U.S.
bank or other financial institution that is an ACH member, through
AccountLink. There is no dollar limit on telephone redemption
proceeds sent to a bank account when AccountLink has been
established. Shareholders may also redeem shares automatically by
telephone by using PhoneLink. Shareholders may also have the
Transfer Agent send redemption proceeds of $2,500 or more by
Federal Funds wire to a designated commercial bank which is a
member of the Federal Reserve wire system. Shareholders of the
funds have up to six months to reinvest redemption proceeds of
their Class A shares in Class A shares of the funds or other
Oppenheimer funds without paying a sales charge. Strategic Income
& Growth Fund and Multiple Strategies Fund may redeem accounts
valued at less than $200 and $500, respectively, if the account has
fallen below such stated amounts for reasons other than market
value fluctuations. Both funds offer Automatic Withdrawal and
Automatic Exchange Plans under certain conditions.
Rights of Shareholders
The shares of each such fund, including shares of each class,
entitle the holder to one vote per share on the election of
trustees and all other matters submitted to shareholders of the
fund. Class A, Class B and Class C shares of Strategic Income &
Growth Fund and the Class A, Class B and Class C shares of Multiple
Strategies Fund which Strategic Income & Growth Fund shareholders
will receive in the Reorganization participate equally in the
funds' dividends and distributions and in the funds' net assets
upon liquidation, after taking into account the different expenses
paid by each class. Distributions and dividends for each class
will be different and Class B and Class C dividends and
distributions will be lower than Class A dividends. It is not
contemplated that Strategic Income & Growth Fund or Multiple
Strategies Fund will hold regular annual meetings of shareholders.
Under the Investment Company Act, shareholders of Strategic Income
& Growth Fund do not have rights of appraisal as a result of the
transactions contemplated by the Reorganization Agreement.
However, they have the right at any time prior to the consummation
of such transaction to redeem their shares at net asset value.
Shareholders of both of the funds have the right, under certain
circumstances, to remove a Trustee and will be assisted in
communicating with other shareholders for such purpose.
Strategic Income & Growth Fund was organized in 1992 as a
Massachusetts business trust. Multiple Strategies Fund was
organized in 1987 as a Massachusetts business trust as a result of
the combination of three series of a mutual fund managed by the
Manager into a single fund. Both Strategic Income & Growth Fund
and Multiple Strategies Fund are open-end, diversified management
investment companies, with an unlimited number of authorized shares
of beneficial interest. The Board has established three classes of
shares with respect to Multiple Strategies Fund and Strategic
Income & Growth Fund: Class A, Class B and Class C. With respect
to Strategic Income & Growth Fund and Multiple Strategies Fund,
each class has its own dividends and distributions and pays certain
expenses which will 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
proportionately. Shares of a particular class vote together on
matters that affect that class. Most amendments to the Declaration
of Trust of each of the funds require the approval of a "majority"
(as defined in the Investment Company Act) of the respective fund's
shareholders. Under certain circumstances, shareholders of the
funds may be held personally liable as partners for the funds'
obligations, and under each Declaration of Trust such a shareholder
is entitled to indemnification rights by the funds; the risk of a
shareholder incurring any such loss is limited to the remote
circumstances in which that fund is unable to meet its obligations.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York
10048-0203, acts as the investment adviser for Strategic Income &
Growth Fund and also acts as the investment adviser to Multiple
Strategies Fund. The terms and conditions of the Investment
Advisory Agreement for each fund are substantially the same. The
monthly management fee payable to the Manager by each fund is set
forth under "Synopsis - Investment Advisory and Distribution and
Service Plan Fees." The 12b-1 Distribution and Service Plan fees
paid by fund with respect to Class A, Class B and Class C shares
are set forth above under "Synopsis - Investment Advisory and
Distribution and Service Plan Fees."
Pursuant to each Investment Advisory Agreement, the Manager
supervises the investment operations of the funds and the
composition of their portfolios, and furnishes advice and
recommendations with respect to investments, investment policies
and the purchase and sale of securities. Both investment advisory
agreements require the Manager to provide Strategic Income & Growth
Fund and Multiple Strategies Fund with adequate office space,
facilities and equipment and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration for the funds, including the
compilation and maintenance of records with respect to their
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of each fund.
Expenses not expressly assumed by the Manager under each fund's
advisory agreement or by OppenheimerFunds Distributor, Inc., the
funds' distributor (the "Distributor"), under the General
Distributor's Agreement are paid by the funds. The advisory
agreements list examples of expenses paid by the funds, the major
categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. The management fee paid by Strategic
Income & Growth Fund for the fiscal year ended September 30, 1996
was $513,195. For the nine month period ended September 30, 1996,
the management fee paid by Multiple Strategies Fund was $1,544,001.
The Funds' Investment Advisory Agreements contain no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the funds' total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the funds. Due to changes in federal securities
laws, such state regulations no longer apply and the Manager's
undertaking is therefore inapplicable and has been withdrawn.
During the funds' last fiscal year, the funds' expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The Manager is controlled by Oppenheimer Acquisition Corp., a
holding company owned in part by senior management of the Manager
and ultimately controlled by Massachusetts Mutual Life Insurance
Company, a mutual life insurance company that also advises pension
plans and investment companies. The Manager has operated as an
investment company adviser since 1959. The Manager and its
affiliates currently advise investment companies with combined net
assets aggregating over $62 billion as of December 31, 1996, with
more than 3 million shareholder accounts. OppenheimerFunds
Services, a division of the Manager, acts as transfer and
shareholder servicing agent on an at-cost basis for Strategic
Income & Growth Fund and Multiple Strategies Fund and for certain
other open-end funds managed by the Manager and its affiliates.
The Distributor, under a General Distributor's Agreement for each
of the Funds, acts as the principal underwriter in the continuous
public offering of Class A, Class B and Class C shares of each
fund. During Strategic Income & Growth Fund's fiscal year ended
September 30, 1996, the aggregate sales charges on sales of
Strategic Income & Growth Fund's Class A shares were $277,077, of
which the Distributor and an affiliated broker-dealer retained in
the aggregate $91,918. During Strategic Income & Growth Fund's
fiscal year ended September 30, 1996, the contingent deferred sales
charges collected on Strategic Income & Growth Fund's Class B and
Class C shares totaled $79,826 and $929, respectively, all of which
the Distributor retained. For the nine month period ended
September 30, 1996 and the fiscal year ended December 31, 1995, the
aggregate amount of sales charges on sales of Multiple Strategies
Fund's Class A shares were $286,317 and 348,120, respectively, of
which $100,671 and $138,846, respectively, was retained by the
Distributor and an affiliated broker-dealer. Contingent deferred
sales charges collected by the Distributor on the redemption of
Class B and Class C shares for the nine month period ended
September 30, 1996 totaled $1,119 and $3,419, respectively, all of
which was retained by the Distributor. The contingent deferred
sales charge collected by the Distribution on the redemption of
Class C shares for fiscal year ended December 31, 1995 totaled
$3,807, all of which was retained by the Distributor. For
additional information about distribution of the Funds' shares and
the payments made by the Funds to the Distributor in connection
with such activities, please refer to "Distribution and Service
Plans," in each Fund's Statement of Addition Information.
Purchase of Additional Shares
Class A shares of Strategic Income & Growth Fund and Class A shares
of Multiple Strategies Fund may be purchased with an initial sales
charge of 4.75% and 5.75%, respectively, for purchases of less than
$50,000 in the case of Strategic Income & Growth Fund and purchases
of less than $25,000 in the case of Multiple Strategies Fund. The
sales charge as a percentage of the offering price declines on
purchases in excess of $50,000 in the case of Strategic Income &
Growth Fund and purchases in excess of $25,000 in the case of
Multiple Strategies Fund. If Class A shares of either fund are
purchased as part of an investment of at least $1 million in shares
of one or more Oppenheimer funds ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred
Sales Charge" in each fund's Prospectus), there is no initial sales
charge, but if shares are sold within 18 months after purchase,
there may be imposed a contingent deferred sales charge ("CDSC")
which will vary, depending on the amount invested. If shares of
Class A of either fund are redeemed within 18 months of the end of
the calendar month of their purchase, a contingent sales charge may
be deducted from the redemption proceeds. Class B shares of
Strategic Income & Growth Fund and Multiple Strategies Fund are
sold at net asset value without an initial sales charge. However,
if Class B shares of either fund are redeemed within six years of
the end of the calendar month of their purchase, a contingent
deferred sales charge may be deducted of up to 5%, depending upon
how long such shares had been held. Class C shares of either fund
may be purchased without an initial sales charge, but if you sell
your shares within 12 months of buying them, a contingent deferred
sales charge of 1% may be deducted.
The initial sales charge and contingent deferred sales charge on
Class A shares and Class B shares of Multiple Strategies Fund will
only affect shareholders of Strategic Income & Growth Fund to the
extent that they desire to make additional purchases of shares of
Multiple Strategies Fund in addition to the shares which they will
receive as a result of the Reorganization. The Class A, Class B
and Class C shares to be issued under the Reorganization Agreement
will be issued by Multiple Strategies Fund at net asset value.
Future dividends and capital gain distributions of Multiple
Strategies Fund, if any, may be reinvested without sales charge.
Any Strategic Income & Growth Fund shareholder who is entitled to
a reduced sales charge on additional purchases by reason of a
Letter of Intent or Right of Accumulation based upon holdings of
shares of Strategic Income & Growth Fund will continue to be
entitled to a reduced sales charge on any future purchase of shares
of Multiple Strategies Fund.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the
Reorganization Agreement is contingent upon the approval of the
Reorganization by the shareholders of Strategic Income & Growth
Fund and the receipt of the opinions and certificates set forth in
Sections 10 and 11 of the Reorganization Agreement and the
occurrence of the events described in those Sections. Under the
Reorganization Agreement, all the assets of Strategic Income &
Growth Fund, excluding the Cash Reserve, will be delivered to
Multiple Strategies Fund in exchange for Class A, Class B and Class
C shares of Multiple Strategies Fund. The Cash Reserve to be
retained by Strategic Income & Growth Fund will be sufficient in
the discretion of the Board for the payment of Strategic Income &
Growth Fund's liabilities, and Strategic Income & Growth Fund's
expenses of liquidation.
Assuming the shareholders of Strategic Income & Growth Fund approve
the Reorganization, the actual exchange of assets is expected to
take place on June 20, 1997, or as soon thereafter as is
practicable (the "Closing Date") on the basis of net asset values
as of the close of business on the business day preceding the
Closing Date (the "Valuation Date"). Under the Reorganization
Agreement, all redemptions of shares of Strategic Income & Growth
Fund shall be permanently suspended on the Valuation Date; only
redemption requests received in proper form on or prior to the
close of business on that date shall be fulfilled by it; redemption
requests received by Strategic Income & Growth Fund after that date
will be treated as requests for redemptions of Class A, Class B or
Class C shares of Multiple Strategies Fund to be distributed to the
shareholders requesting redemption. The exchange of assets for
shares will be done on the basis of the per share net asset value
of the Class A, Class B and Class C shares of Multiple Strategies
Fund, and the value of the assets of Strategic Income & Growth Fund
to be transferred as of the close of business on the Valuation
Date, valued in the manner used by Multiple Strategies Fund in the
valuation of assets. Multiple Strategies Fund is not assuming any
of the liabilities of Strategic Income & Growth Fund, except for
portfolio securities purchased which have not settled and
outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Multiple
Strategies Fund to Strategic Income & Growth Fund will be the same
as the value of the assets of the portfolio received by Multiple
Strategies Fund. For example, if, on the Valuation Date, Strategic
Income & Growth Fund were to have securities with a market value of
$95,000 and cash in the amount of $10,000 (of which $5,000 was to
be retained by it as the Cash Reserve), the value of the assets
which would be transferred to Multiple Strategies Fund would be
$100,000. If the net asset value per share of Multiple Strategies
Fund were $10 per share at the close of business on the Valuation
Date, the number of shares to be issued would be 10,000 ($100,000
divided by $10). These 10,000 shares of Multiple Strategies Fund
would be distributed to the former shareholders of Strategic Income
& Growth Fund. This example is given for illustration purposes
only and does not bear any relationship to the dollar amounts or
shares expected to be involved in the Reorganization.
After the Closing Date, Strategic Income & Growth Fund will
distribute on a pro rata basis to its shareholders of record on the
Valuation Date the Class A, Class B and Class C shares of Multiple
Strategies Fund received by Strategic Income & Growth Fund at the
closing, in liquidation of the outstanding shares of Strategic
Income & Growth Fund, and the outstanding shares of Strategic
Income & Growth Fund will be canceled. To assist Strategic Income
& Growth Fund in this distribution, Multiple Strategies Fund will,
in accordance with a shareholder list supplied by Strategic Income
& Growth Fund, cause its transfer agent to credit and confirm an
appropriate number of shares of Multiple Strategies Fund to each
shareholder of Strategic Income & Growth Fund. Certificates for
Class A, Class B and Class C shares of Multiple Strategies Fund
will be issued upon written request of a former shareholder of
Strategic Income & Growth Fund but only for whole shares with
fractional shares credited to the name of the shareholder on the
books of Multiple Strategies Fund. Former shareholders of
Strategic Income & Growth Fund who wish certificates representing
their shares of Multiple Strategies Fund must, after receipt of
their confirmations, make a written request to OFS, P.O. Box 5270,
Denver, Colorado 80217. Shareholders of Strategic Income & Growth
Fund holding certificates representing their shares will not be
required to surrender their certificates to anyone in connection
with the Reorganization. After the Reorganization, however, it
will be necessary for such shareholders to surrender such
certificates in order to redeem, transfer, pledge or exchange any
shares of Multiple Strategies Fund.
Under the Reorganization Agreement, within one year after the
Closing Date, Strategic Income & Growth Fund shall: (a) either pay
or make provision for all of its debts and taxes; and (b) either
(i) transfer any remaining amount of the Cash Reserve to Multiple
Strategies Fund, if such remaining amount is not material (as
defined below) or (ii) distribute such remaining amount to the
shareholders of Strategic Income & Growth Fund who were such on the
Valuation Date. Such remaining amount shall be deemed to be
material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent
per share of the number of Strategic Income & Growth Fund shares
outstanding on the Valuation Date. Within one year after the
Closing Date, Strategic Income & Growth Fund will complete its
liquidation.
Under the Reorganization Agreement, either Strategic Income &
Growth Fund or Multiple Strategies Fund may abandon and terminate
the Reorganization Agreement without liability if the other party
breaches any material provision of the Reorganization Agreement or,
if prior to the closing, any legal, administrative or other
proceeding shall be instituted or threatened (i) seeking to
restrain or otherwise prohibit the transactions contemplated by the
Reorganization Agreement and/or (ii) asserting a material liability
of either party, which proceeding or liability has not been
terminated or the threat thereto removed prior to the Closing Date.
In the event that the Reorganization Agreement is not consummated
for any reason, the Board will consider and may submit to the
shareholders other alternatives.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by the surviving fund in
its financial statements as a tax free reorganization. Further
financial information as to Strategic Income & Growth Fund is
contained in its current Prospectus, which is available without
charge from OppenheimerFunds Services, the Transfer Agent, P.O. Box
5270, Denver, Colorado 80217, and is incorporated herein by
reference, and in its Annual Report as of September 30, 1996, which
are included in the Additional Statement. Financial information
for Multiple Strategies Fund is contained in its current Prospectus
accompanying this Proxy Statement and Prospectus and incorporated
herein by reference, and in its Annual Report as of September 30,
1996, which are included in the Additional Statement.
Public Information
Additional information about Strategic Income & Growth Fund and
Multiple Strategies Fund is available, as applicable, in the
following documents which are incorporated herein by reference: (i)
Multiple Strategies Fund's Prospectus dated January 15, 1997, as
supplemented March 6, 1997, accompanying this Proxy Statement and
incorporated herein; (ii) Strategic Income & Growth Fund's
Prospectus dated January 15, 1997, as supplemented on March 6,
1997, which may be obtained without charge by writing to
Oppenheimer Funds Services, P.O. Box 5270, Denver, Colorado 80217;
(iii) Multiple Strategies Fund's Annual Report as of September 30,
1996, which may be obtained without charge by writing to
Oppenheimer Funds Services at the address indicated above; and (iv)
Strategic Income & Growth Fund's Annual Report as of September 30,
1996, which may be obtained without charge by writing to
Oppenheimer Funds Services at the address indicated above. All of
the foregoing documents may be obtained by calling the toll-free
number on the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in
the Statement of Additional Information, which incorporates by
reference the Multiple Strategies Fund Statement of Additional
Information dated January 15, 1997, as supplemented March 6, 1997
and Strategic Income & Growth Fund's Prospectus dated January 15,
1997, as supplemented March 6, 1997, and Statement of Additional
Information dated January 15, 1997; the organization and operation
of Multiple Strategies Fund and Strategic Income & Growth Fund;
more information on investment policies, practices and risks;
information about Strategic Income & Growth Fund's and Multiple
Strategies Fund's Boards of Trustees and their responsibilities; a
further description of the services provided by Multiple Strategies
Fund's and Strategic Income & Growth Fund's investment adviser,
distributor, and transfer and shareholder servicing agent; dividend
policies; tax matters; an explanation of the method of determining
the offering price of the shares and/or contingent deferred sales
charges, as applicable of Class A, Class B and Class C shares of
Multiple Strategies Fund and Strategic Income & Growth Fund;
purchase, redemption and exchange programs; the different expenses
paid by each class of shares; and distribution arrangements.
Strategic Income & Growth Fund and Multiple Strategies Fund are
subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, file
reports and other information with the SEC. Proxy material,
reports and other information about Strategic Income & Growth Fund
and Multiple Strategies Fund which are of public record can be
inspected and copied at public reference facilities maintained by
the SEC in Washington, D.C. and certain of its regional offices,
and copies of such materials can be obtained at prescribed rates
from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Strategic Income & Growth Fund knows of no business
other than the matters specified above which will be presented at
the Meeting. Since matters not known at the time of the
solicitation may come before the Meeting, the proxy as solicited
confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named
as attorneys-in-fact in the proxy to vote this proxy in accordance
with their judgment on such matters.
By Order of the Board of Trustees
Andrew J. Donohue, Secretary
April ___, 1997 275
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated
as of __________ by and between Oppenheimer Strategic Income &
Growth Fund ("Strategic Income & Growth Fund"), a Massachusetts
business trust, and Oppenheimer Multiple Strategies Fund ("Multiple
Strategies Fund"), a series of Oppenheimer Integrity Funds, a
Massachusetts business trust (the "Trust").
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of
the management type; and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), of Strategic Income
& Growth Fund through the acquisition by Multiple Strategies Fund
of substantially all of the assets of Strategic Income & Growth
Fund in exchange for the voting shares of beneficial interest
("shares") of Class A, Class B and Class C shares of Multiple
Strategies Fund and the assumption by Multiple Strategies Fund of
certain liabilities of Strategic Income & Growth Fund, which Class
A, Class B and Class C shares of Multiple Strategies Fund are
thereafter to be distributed by Strategic Income & Growth Fund pro
rate to its shareholders in complete liquidation of Strategic
Income & Growth Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan
of Reorganization (the "Agreement") pursuant to Section 368(a)(1)
of the Code as follows: The reorganization will be comprised of
the acquisition by Multiple Strategies Fund of substantially all of
the properties and assets of Strategic Income & Growth Fund in
exchange for Class A, Class B and Class C shares of Multiple
Strategies Fund and the assumption by Multiple Strategies Fund of
certain liabilities of Strategic Income & Growth Fund, followed by
the distribution of such Class A, Class B and Class C shares of
Multiple Strategies Fund shares to the Class A, Class B and Class
C shareholders of Strategic Income & Growth Fund in exchange for
their Class A, Class B and Class C shares of Strategic Income &
Growth Fund, all upon and subject to the terms of the Agreement
hereinafter set forth.
The share transfer books of Strategic Income & Growth
Fund will be permanently closed at the close of business on the
Valuation Date (as hereinafter defined) and only redemption
requests received in proper form on or prior to the close of
business on the Valuation Date shall be fulfilled by Strategic
Income & Growth Fund; redemption requests received by Strategic
Income & Growth Fund after that date shall be treated as requests
for the redemption of the shares of Multiple Strategies Fund to be
distributed to the shareholder in question as provided in Section
5.
2. On the Closing Date (as hereinafter defined), all of the
assets of Strategic Income & Growth Fund on that date, excluding a
cash reserve (the "Cash Reserve") to be retained by Strategic
Income & Growth Fund sufficient in its discretion for the payment
of the expenses of Strategic Income & Growth Fund's dissolution and
its liabilities, but not in excess of the amount contemplated by
Section 10E, shall be delivered as provided in Section 8 to
Multiple Strategies Fund, in exchange for and against delivery to
Strategic Income & Growth Fund on the Closing Date of a number of
Class A, Class B and Class C shares of Multiple Strategies Fund,
having an aggregate net asset value equal to the value of the
assets of Strategic Income & Growth Fund so transferred and
delivered.
3. The net asset value of Class A, Class B and Class C
shares of Multiple Strategies Fund and the value of the assets of
Strategic Income & Growth Fund to be transferred shall in each case
be determined as of the close of business of the New York Stock
Exchange on the Valuation Date. The computation of the net asset
value of the Class A, Class B and Class C shares of Multiple
Strategies Fund and the Class A, Class B and Class C shares of
Strategic Income & Growth Fund shall be done in the manner used by
Multiple Strategies Fund and Strategic Income & Growth Fund,
respectively, in the computation of such net asset value per share
as set forth in their respective prospectuses. The methods used
by Multiple Strategies Fund in such computation shall be applied to
the valuation of the assets of Strategic Income & Growth Fund to be
transferred to Multiple Strategies Fund.
Strategic Income & Growth Fund shall declare and pay,
immediately prior to the Valuation Date, a dividend or dividends
which, together with all previous such dividends, shall have the
effect of distributing to Strategic Income & Growth Fund's
shareholders all of Strategic Income & Growth Fund's investment
company taxable income for taxable years ending on or prior to the
Closing Date (computed without regard to any dividends paid) and
all of its net capital gain, if any, realized in taxable years
ending on or prior to the Closing Date (after reduction for any
capital loss carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), Two World Trade Center, 34th
Floor, New York, New York 10048, at 4:00 P.M. New York time on June
20, 1997 or at such other time or place as the parties may
designate or as provided below (the "Closing Date"). The business
day preceding the Closing Date is herein referred to as the
"Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the
"Act"), or any rule, regulation or order thereunder, suspended the
redemption of its shares or postponed payment therefor, the Closing
Date shall be postponed until the first business day after the date
when both parties have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a
period of 60 days beyond the Valuation Date, then the other party
to the Agreement shall be permitted to terminate the Agreement
without liability to either party for such termination.
5. As soon as practicable after the closing, Strategic
Income & Growth Fund shall distribute on a pro rate basis to the
shareholders of Strategic Income & Growth Fund on the Valuation
Date the Class A, Class B and Class C shares of Multiple Strategies
Fund received by Strategic Income & Growth Fund on the Closing Date
in exchange for the assets of Strategic Income & Growth Fund in
complete liquidation of Strategic Income & Growth Fund; for the
purpose of the distribution by Strategic Income & Growth Fund of
Class A, Class B and Class C shares of Multiple Strategies Fund to
its shareholders, Multiple Strategies Fund will promptly cause its
transfer agent to: (a) credit an appropriate number of Class A,
Class B and Class C shares of Multiple Strategies Fund on the books
of Multiple Strategies Fund to each Class A, Class B and Class C
shareholder, respectively of Strategic Income & Growth Fund in
accordance with a list (the "Shareholder List") of its shareholders
received from Strategic Income & Growth Fund; and (b) confirm an
appropriate number of Class A, Class B and Class C shares of
Multiple Strategies Fund to each shareholder of Strategic Income &
Growth Fund; certificates for Class A, Class B and Class C shares
of Multiple Strategies Fund will be issued upon written request of
a former shareholder of Strategic Income & Growth Fund but only for
whole shares, with fractional shares credited to the name of the
shareholder on the books of Multiple Strategies Fund.
The Shareholder List shall indicate, as of the close of
business on the Valuation Date, the name and address of each
shareholder of Strategic Income & Growth Fund, indicating his or
her share balance. Strategic Income & Growth Fund agrees to supply
the Shareholder List to Multiple Strategies Fund not later than the
Closing Date. Shareholders of Strategic Income & Growth Fund
holding certificates representing their shares shall not be
required to surrender their certificates to anyone in connection
with the reorganization. After the Closing Date, however, it will
be necessary for such shareholders to surrender their certificates
in order to redeem, transfer or pledge the shares of Multiple
Strategies Fund which they received.
6. Within one year after the Closing Date, Strategic Income
& Growth Fund shall (a) either pay or make provision for payment of
all of its liabilities and taxes, and (b) either (i) transfer any
remaining amount of the Cash Reserve to Multiple Strategies Fund,
if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below)
or (ii) distribute such remaining amount to the shareholders of
Strategic Income & Growth Fund on the Valuation Date. Such
remaining amount shall be deemed to be material if the amount to be
distributed, after deduction of the estimated expenses of the
distribution, equals or exceeds one cent per share of Strategic
Income & Growth Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination
between the parties as to their respective portfolios so that,
after the closing, Multiple Strategies Fund will be in compliance
with all of its investment policies and restrictions. At the
Closing, Strategic Income & Growth Fund shall deliver to Multiple
Strategies Fund two copies of a list setting forth the securities
then owned by Strategic Income & Growth Fund. Promptly after the
Closing, Strategic Income & Growth Fund shall provide Multiple
Strategies Fund a list setting forth the respective federal income
tax bases thereof.
8. Portfolio securities or written evidence acceptable to
Multiple Strategies Fund of record ownership thereof by The
Depository Trust Company or through the Federal Reserve Book Entry
System or any other depository approved by Strategic Income &
Growth Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act
shall be endorsed and delivered, or transferred by appropriate
transfer or assignment documents, by Strategic Income & Growth Fund
on the Closing Date to Multiple Strategies Fund, or at its
direction, to its custodian bank, in proper form for transfer in
such condition as to constitute good delivery thereof in accordance
with the custom of brokers and shall be accompanied by all
necessary state transfer stamps, if any. The cash delivered shall
be in the form of certified or bank cashiers' checks or by bank
wire or intra-bank transfer payable to the order of Multiple
Strategies Fund for the account of Multiple Strategies Fund.
Shares of Multiple Strategies Fund representing the number of
shares of Multiple Strategies Fund being delivered against the
assets of Strategic Income & Growth Fund, registered in the name of
Strategic Income & Growth Fund, shall be transferred to Strategic
Income & Growth Fund on the Closing Date. Such shares shall
thereupon be assigned by Strategic Income & Growth Fund to its
shareholders so that the shares of Multiple Strategies Fund may be
distributed as provided in Section 5.
If, at the Closing Date, Strategic Income & Growth Fund
is unable to make delivery under this Section 8 to Multiple
Strategies Fund of any of its portfolio securities or cash for the
reason that any of such securities purchased by Strategic Income &
Growth Fund, or the cash proceeds of a sale of portfolio
securities, prior to the Closing Date have not yet been delivered
to it or Strategic Income & Growth Fund's custodian, then the
delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and Strategic Income
& Growth Fund will deliver to Multiple Strategies Fund by or on the
Closing Date and with respect to said undelivered securities or
cash executed copies of an agreement or agreements of assignment in
a form reasonably satisfactory to Multiple Strategies Fund,
together with such other documents, including a due bill or due
bills and brokers' confirmation slips as may reasonably be required
by Multiple Strategies Fund.
9. Multiple Strategies Fund shall not assume the liabilities
(except for portfolio securities purchased which have not settled
and for shareholder redemption and dividend checks outstanding) of
Strategic Income & Growth Fund, but Strategic Income & Growth Fund
will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date.
The cost of printing and mailing the proxies and proxy statements
will be borne by Strategic Income & Growth Fund. Strategic Income
& Growth Fund and Multiple Strategies Fund will bear the cost of
their respective tax opinion. Any documents such as existing
prospectuses or annual reports that are included in that mailing
will be a cost of the fund issuing the document. Any other out-of-
pocket expenses of Multiple Strategies Fund and Strategic Income &
Growth Fund associated with this reorganization, including legal,
accounting and transfer agent expenses, will be borne by Strategic
Income & Growth Fund and Multiple Strategies Fund, respectively, in
the amounts so incurred by each.
10. The obligations of Multiple Strategies Fund hereunder
shall be subject to the following conditions:
A. The Board of Trustees of Strategic Income & Growth
Fund shall have authorized the execution of the Agreement, and the
shareholders of Strategic Income & Growth Fund shall have approved
the Agreement and the transactions contemplated thereby, and
Strategic Income & Growth Fund shall have furnished to Multiple
Strategies Fund copies of resolutions to that effect certified by
the Secretary or an Assistant Secretary of Strategic Income &
Growth Fund; such shareholder approval shall have been by the
affirmative vote of "a majority of the outstanding voting
securities" (as defined in the Act) of Strategic Income & Growth
Fund at a meeting for which proxies have been solicited by the
Proxy Statement and Prospectus (as hereinafter defined).
B. Multiple Strategies Fund shall have received an
opinion dated the Closing Date of counsel to Strategic Income &
Growth Fund, to the effect that (i) Strategic Income & Growth Fund
is a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with
full powers to carry on its business as then being conducted and to
enter into and perform the Agreement; and (ii) that all action
necessary to make the Agreement, according to its terms, valid,
binding and enforceable on Strategic Income & Growth Fund and to
authorize effectively the transactions contemplated by the
Agreement have been taken by Strategic Income & Growth Fund.
C. The representations and warranties of Strategic
Income & Growth Fund contained herein shall be true and correct at
and as of the Closing Date, and Multiple Strategies Fund shall have
been furnished with a certificate of the President, or a Vice
President, or the Secretary or the Assistant Secretary or the
Treasurer of Strategic Income & Growth Fund, dated the Closing
Date, to that effect.
D. On the Closing Date, Strategic Income & Growth Fund
shall have furnished to Multiple Strategies Fund a certificate of
the Treasurer or Assistant Treasurer of Strategic Income & Growth
Fund as to the amount of the capital loss carry-over and net
unrealized appreciation or depreciation, if any, with respect to
Strategic Income & Growth Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
Strategic Income & Growth Fund at the close of business on the
Valuation Date.
F. A Registration Statement on Form N-14 filed by
Oppenheimer Integrity Funds under the Securities Act of 1933, as
amended (the "1933 Act"), containing a preliminary form of the
Proxy Statement and Prospectus, shall have become effective under
the 1933 Act not later than August 30, 1997.
G. On the Closing Date, Multiple Strategies Fund shall
have received a letter of Andrew J. Donohue or other senior
executive officer of OppenheimerFunds, Inc. acceptable to Multiple
Strategies Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of
the Closing Date there were any material actual or contingent
liabilities of Strategic Income & Growth Fund arising out of
litigation brought against Strategic Income & Growth Fund or claims
asserted against it, or pending or to the best of his or her
knowledge threatened claims or litigation not reflected in or
apparent from the most recent audited financial statements and
footnotes thereto of Strategic Income & Growth Fund delivered to
Multiple Strategies Fund. Such letter may also include such
additional statements relating to the scope of the review conducted
by such person and his or her responsibilities and liabilities as
are not unreasonable under the circumstances.
H. Multiple Strategies Fund shall have received an
opinion, dated the Closing Date, of KPMG Peat Marwick LLP, to the
same effect as the opinion contemplated by Section 11.E of the
Agreement.
I. Multiple Strategies Fund shall have received at the
closing all of the assets of Strategic Income & Growth Fund to be
conveyed hereunder, which assets shall be free and clear of all
liens, encumbrances, security interests, restrictions and
limitations whatsoever.
11. The obligations of Strategic Income & Growth Fund
hereunder shall be subject to the following conditions:
A. The Board of Trustees of Multiple Strategies Fund
shall have authorized the execution of the Agreement, and the
transactions contemplated thereby, and Multiple Strategies Fund
shall have furnished to Strategic Income & Growth Fund copies of
resolutions to that effect certified by the Secretary or an
Assistant Secretary of Multiple Strategies Fund.
B. Strategic Income & Growth Fund's shareholders shall
have approved the Agreement and the transactions contemplated
hereby, by an affirmative vote of "a majority of the outstanding
voting securities" (as defined in the Act) of Strategic Income &
Growth Fund, and Strategic Income & Growth Fund shall have
furnished Multiple Strategies Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of
Strategic Income & Growth Fund.
C. Strategic Income & Growth Fund shall have received
an opinion dated the Closing Date of counsel to Multiple Strategies
Fund, to the effect that (i) Multiple Strategies Fund is a business
trust duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts with full powers to
carry on its business as then being conducted and to enter into and
perform the Agreement; (ii) all action necessary to make the
Agreement, according to its terms, valid, binding and enforceable
upon Multiple Strategies Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by
Multiple Strategies Fund, and (iii) the shares of Multiple
Strategies Fund to be issued hereunder are duly authorized and when
issued will be validly issued, fully-paid and non-assessable,
except as set forth in Multiple Strategies Fund's then current
Prospectus and Statement of Additional Information.
D. The representations and warranties of Multiple
Strategies Fund contained herein shall be true and correct at and
as of the Closing Date, and Strategic Income & Growth Fund shall
have been furnished with a certificate of the President, a Vice
President or the Secretary or an Assistant Secretary or the
Treasurer of Multiple Strategies Fund to that effect dated the
Closing Date.
E. Strategic Income & Growth Fund shall have received
an opinion of KPMG Peat Marwick LLP to the effect that the Federal
tax consequences of the transaction, if carried out in the manner
outlined in this Plan of Reorganization and in accordance with (i)
Strategic Income & Growth Fund's representation that there is no
plan or intention by any Fund shareholder who owns 5% or more of
Strategic Income & Growth Fund's outstanding shares, and, to
Strategic Income & Growth Fund's best knowledge, there is no plan
or intention on the part of the remaining Fund shareholders, to
redeem, sell, exchange or otherwise dispose of a number of Multiple
Strategies Fund shares received in the transaction that would
reduce Strategic Income & Growth Fund shareholders' ownership of
Multiple Strategies Fund shares to a number of shares having a
value, as of the Closing Date, of less than 50% of the value of all
of the formerly outstanding Fund shares as of the same date, and
(ii) the representation by each of Strategic Income & Growth Fund
and Multiple Strategies Fund that, as of the Closing Date,
Strategic Income & Growth Fund and Multiple Strategies Fund will
qualify as regulated investment companies or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code, will
be as follows:
1. The transactions contemplated by the Agreement
will qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code, and under the regulations
promulgated thereunder.
2. Strategic Income & Growth Fund and Multiple
Strategies Fund will each qualify as a "party to a reorganization"
within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the
shareholders of Strategic Income & Growth Fund upon the
distribution of shares of beneficial interest in Multiple
Strategies Fund to the shareholders of Strategic Income & Growth
Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or
loss will be recognized by Strategic Income & Growth Fund by reason
of the transfer of substantially all its assets in exchange for
shares of Multiple Strategies Fund.
5. Under Section 1032 of the Code no gain or loss
will be recognized by Multiple Strategies Fund by reason of the
transfer of substantially all Strategic Income & Growth Fund's
assets in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund and Multiple Strategies Fund's assumption
of certain liabilities of Strategic Income & Growth Fund.
6. The shareholders of Strategic Income & Growth
Fund will have the same tax basis and holding period for the Class
A or Class B shares of beneficial interest in Multiple Strategies
Fund that they receive as they had for Strategic Income & Growth
Fund shares that they previously held, pursuant to Section 358(a)
and 1223(1), respectively, of the Code.
7. The securities transferred by Strategic Income
& Growth Fund to Multiple Strategies Fund will have the same tax
basis and holding period in the hands of Multiple Strategies Fund
as they had for Strategic Income & Growth Fund, pursuant to Section
362(b) and 1223(1), respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
Strategic Income & Growth Fund at the close of business on the
Valuation Date.
G. A Registration Statement on Form N-14 filed by
Oppenheimer Integrity Funds under the 1933 Act, containing a
preliminary form of the Proxy Statement and Prospectus, shall have
become effective under the 1933 Act not later than August 30, 1997.
H. On the Closing Date, Strategic Income & Growth Fund
shall have received a letter of Andrew J. Donohue or other senior
executive officer of OppenheimerFunds, Inc. acceptable to Strategic
Income & Growth Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of
the Closing Date there were any material actual or contingent
liabilities of Multiple Strategies Fund arising out of litigation
brought against Multiple Strategies Fund or claims asserted against
it, or pending or, to the best of his or her knowledge, threatened
claims or litigation not reflected in or apparent by the most
recent audited financial statements and footnotes thereto of
Multiple Strategies Fund delivered to Strategic Income & Growth
Fund. Such letter may also include such additional statements
relating to the scope of the review conducted by such person and
his or her responsibilities and liabilities as are not unreasonable
under the circumstances.
I. Strategic Income & Growth Fund shall acknowledge
receipt of the shares of Multiple Strategies Fund.
12. Strategic Income & Growth Fund hereby represents and
warrants that:
A. The financial statements of Strategic Income &
Growth Fund as at September 30, 1996 (audited) heretofore furnished
to Multiple Strategies Fund, present fairly the financial position,
results of operations, and changes in net assets of Strategic
Income & Growth Fund as of that date, in conformity with generally
accepted accounting principles applied on a basis consistent with
the preceding year; and that from September 30, 1996 through the
date hereof there have not been, and through the Closing Date there
will not be, any material adverse change in the business or
financial condition of Strategic Income & Growth Fund, it being
agreed that a decrease in the size of Strategic Income & Growth
Fund due to a diminution in the value of its portfolio and/or
redemption of its shares shall not be considered a material adverse
change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Strategic Income & Growth
Fund's shareholders, Strategic Income & Growth Fund has authority
to transfer all of the assets of Strategic Income & Growth Fund to
be conveyed hereunder free and clear of all liens, encumbrances,
security interests, restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented,
contained in Strategic Income & Growth Fund's Registration
Statement under the 1933 Act, as amended, is true, correct and
complete, conforms to the requirements of the 1933 Act and does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading. The Registration Statement,
as amended, was, as of the date of the filing of the last Post-
Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
D. There is no material contingent liability of
Strategic Income & Growth Fund and no material claim and no
material legal, administrative or other proceedings pending or, to
the knowledge of Strategic Income & Growth Fund, threatened against
Strategic Income & Growth Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which
Strategic Income & Growth Fund is a party other than those ordinary
in the conduct of its business;
F. Strategic Income & Growth Fund is a business trust
duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts; and has all necessary
and material Federal and state authorizations to own all of its
assets and to carry on its business as now being conducted; and
Strategic Income & Growth Fund is duly registered under the Act and
such registration has not been rescinded or revoked and is in full
force and effect;
G. All Federal and other tax returns and reports of
Strategic Income & Growth Fund required by law to be filed have
been filed, and all Federal and other taxes shown due on said
returns and reports have been paid or provision shall have been
made for the payment thereof and to the best of the knowledge of
Strategic Income & Growth Fund no such return is currently under
audit and no assessment has been asserted with respect to such
returns and to the extent such tax returns with respect to the
taxable year of Strategic Income & Growth Fund ended September 30,
1996 have not been filed, such returns will be filed when required
and the amount of tax shown as due thereon shall be paid when due;
and
H. Strategic Income & Growth Fund has elected to be
treated as a regulated investment company and, for each fiscal year
of its operations, Strategic Income & Growth Fund has met the
requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and Strategic Income &
Growth Fund intends to meet such requirements with respect to its
current taxable year.
13. Multiple Strategies Fund hereby represents and warrants
that:
A. The financial statements of Multiple Strategies Fund
as at September 30, 1996 (audited) heretofore furnished to
Strategic Income & Growth Fund, present fairly the financial
position, results of operations, and changes in net assets of
Multiple Strategies Fund, as of that date, in conformity with
generally accepted accounting principles applied on a basis
consistent with the preceding year; and that from September 30,
1996 through the date hereof there have not been, and through the
Closing Date there will not be, any material adverse changes in the
business or financial condition of Multiple Strategies Fund, it
being understood that a decrease in the size of Multiple Strategies
Fund due to a diminution in the value of its portfolio and/or
redemption of its shares shall not be considered a material or
adverse change;
B. The Prospectus, as amended and supplemented,
contained in Oppenheimer Integrity Funds Registration Statement
under the 1933 Act, is true, correct and complete, conforms to the
requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. The Registration Statement, as amended,
was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
C. There is no material contingent liability of
Multiple Strategies Fund and no material claim and no material
legal, administrative or other proceedings pending or, to the
knowledge of Multiple Strategies Fund, threatened against Multiple
Strategies Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which
Multiple Strategies Fund is a party other than those ordinary in
the conduct of its business;
E. Multiple Strategies Fund is a business trust duly
organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts; has all necessary and material
Federal and state authorizations to own all its properties and
assets and to carry on its business as now being conducted; the
shares of Multiple Strategies Fund which it issues to Strategic
Income & Growth Fund pursuant to the Agreement will be duly
authorized, validly issued, fully-paid and non-assessable, except
as otherwise set forth in Multiple Strategies Fund's Registration
Statement; and will conform to the description thereof contained in
Multiple Strategies Fund's Registration Statement, will be duly
registered under the 1933 Act and in the states where registration
is required; and Multiple Strategies Fund is duly registered under
the Act and such registration has not been revoked or rescinded and
is in full force and effect;
F. All Federal and other tax returns and reports of
Multiple Strategies Fund required by law to be filed have been
filed, and all Federal and other taxes shown due on said returns
and reports have been paid or provision shall have been made for
the payment thereof and to the best of the knowledge of Multiple
Strategies Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to
the extent such tax returns with respect to the taxable year of
Multiple Strategies Fund ended September 30, 1996 have not been
filed, such returns will be filed when required and the amount of
tax shown as due thereon shall be paid when due;
G. Multiple Strategies Fund has elected to be treated
as a regulated investment company and, for each fiscal year of its
operations, Multiple Strategies Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and Multiple Strategies Fund intends
to meet such requirements with respect to its current taxable year;
H. Multiple Strategies Fund has no plan or intention
(i) to dispose of any of the assets transferred by Strategic Income
& Growth Fund, other than in the ordinary course of business, or
(ii) to redeem or reacquire any of the shares issued by it in the
reorganization other than pursuant to valid requests of
shareholders; and
I. After consummation of the transactions contemplated
by the Agreement, Multiple Strategies Fund intends to operate its
business in a substantially unchanged manner.
14. Each party hereby represents to the other that no broker
or finder has been employed by it with respect to the Agreement or
the transactions contemplated hereby. Each party also represents
and warrants to the other that the information concerning it in the
Proxy Statement and Prospectus will not as of its date contain any
untrue statement of a material fact or omit to state a fact
necessary to make the statements concerning it therein not
misleading and that the financial statements concerning it will
present the information shown fairly in accordance with generally
accepted accounting principles applied on a basis consistent with
the preceding year. Each party also represents and warrants to the
other that the Agreement is valid, binding and enforceable in
accordance with its terms and that the execution, delivery and
performance of the Agreement will not result in any violation of,
or be in conflict with, any provision of any charter, by-laws,
contract, agreement, judgment, decree or order to which it is
subject or to which it is a party. Multiple Strategies Fund hereby
represents to and covenants with Strategic Income & Growth Fund
that, if the reorganization becomes effective, Multiple Strategies
Fund will treat each shareholder of Strategic Income & Growth Fund
who received any of Multiple Strategies Fund's shares as a result
of the reorganization as having made the minimum initial purchase
of shares of Multiple Strategies Fund received by such shareholder
for the purpose of making additional investments in shares of
Multiple Strategies Fund, regardless of the value of the shares of
Multiple Strategies Fund received.
15. Multiple Strategies Fund agrees that it will prepare and
file a Registration Statement on Form N-14 under the 1933 Act which
shall contain a preliminary form of proxy statement and prospectus
contemplated by Rule 145 under the 1933 Act. The final form of
such proxy statement and prospectus is referred to in the Agreement
as the "Proxy Statement and Prospectus." Each party agrees that it
will use its best efforts to have such Registration Statement
declared effective and to supply such information concerning itself
for inclusion in the Proxy Statement and Prospectus as may be
necessary or desirable in this connection. Oppenheimer Strategic
Income & Growth Fund covenants and agrees to deregister as an
investment company under the Investment Company Act of 1940, as
amended, as soon as practicable and, thereafter, to cause the
cancellation of its outstanding shares.
16. The obligations of the parties under the Agreement shall
be subject to the right of either party to abandon and terminate
the Agreement without liability if the other party breaches any
material provision of the Agreement or if any material legal,
administrative or other proceeding shall be instituted or
threatened between the date of the Agreement and the Closing Date
(i) seeking to restrain or otherwise prohibit the transactions
contemplated hereby and/or (ii) asserting a material liability of
either party, which proceeding has not been terminated or the
threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all taken together
shall constitute one Agreement. The rights and obligations of each
party pursuant to the Agreement shall not be assignable.
18. All prior or contemporaneous agreements and
representations are merged into the Agreement, which constitutes
the entire contract between the parties hereto. No amendment or
modification hereof shall be of any force and effect unless in
writing and signed by the parties and no party shall be deemed to
have waived any provision herein for its benefit unless it executes
a written acknowledgment of such waiver.
19. Strategic Income & Growth Fund understands that the
obligations of Multiple Strategies Fund under the Agreement are not
binding upon any Trustee or shareholder of Multiple Strategies Fund
personally, but bind only Multiple Strategies Fund and Multiple
Strategies Fund's property. Strategic Income & Growth Fund
represents that it has notice of the provisions of the Declaration
of Trust of Multiple Strategies Fund disclaiming shareholder and
Trustee liability for acts or obligations of Multiple Strategies
Fund.
20. Multiple Strategies Fund understands that the obligations
of Strategic Income & Growth Fund under the Agreement are not
binding upon any Trustee or shareholder of Strategic Income &
Growth Fund personally, but bind only Strategic Income & Growth
Fund and Strategic Income & Growth Fund's property. Multiple
Strategies Fund represents that it has notice of the provisions of
the Declaration of Trust of Strategic Income & Growth Fund
disclaiming shareholder and Trustee liability for acts or
obligations of Strategic Income & Growth Fund.
IN WITNESS WHEREOF, each of the parties has caused the
Agreement to be executed and attested by its officers thereunto
duly authorized on the date first set forth above.
OPPENHEIMER MULTIPLE STRATEGIES FUND
/s/ Andrew J. Donohue
By:__________________________________
Andrew J. Donohue, Secretary
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
/s/Andrew J. Donohue
By:_________________________________
Andrew J. Donohue, Secretary
<PAGE>
EXHIBIT B
Oppenheimer Strategic Income & Growth Fund
Average Annual Total Returns at December 31, 1996
1 Year 3 Years Life of Class
------ ------- -------------
Class A
NAV 17.91% 11.63% 10.53%
MOP 12.31% 9.83% 9.36%
Class B
NAV 17.06% 10.82% 9.96%
MOP 12.06% 10.00% 9.59%
Class C
NAV 16.57% -- 17.02%
MOP 15.57% -- 17.02%
For periods ending 12/31/96. Total returns show change in share
value and include reinvestment of all dividends and capital gains
distributions. NAV returns reflect returns at Net Asset Value and
do not reflect payment of sales charges. Class A returns at
Maximum Offering Price (MOP) show results of hypothetical
investments at 12/31/95, 12/31/93 and 6/1/92 (inception of class)
after deducting the maximum initial sales charge of 4.75%. Class
B returns at MOP show results of hypothetical investments at
12/31/95, 12/31/93 and 11/30/92 (inception of class) and are shown
net of the applicable 5%, 3% and 2% contingent deferred sales
charges respectively. Class C returns at MOP show results of
hypothetical investments at 12/31/95 and 10/2/95 (inception of
class) and are shown net of the applicable 1% contingent deferred
sales charge for the one-year result. Past performance is not
predictive of future performance.
Oppenheimer Multiple Strategies Fund
Average Annual Total Returns at December 31, 1996
1 Year 3 Years 5 Years Life of Class
------ ------- -------- -------------
Class A
NAV 17.23% 12.31% 12.12% 10.29%
MOP 10.49% 10.11% 10.80% 9.62%
Class B
NAV 16.06% -- -- 15.45%
MOP 11.06% -- -- 12.59%
Class C
NAV 16.31% -- -- 11.79%
MOP 15.31% -- -- 11.79%
For periods ending 12/31/96. Total returns show change in share
value and include reinvestment of all dividends and capital gains
distributions. NAV returns reflect returns at Net Asset Value and
do not reflect payment of sales charges. Class A returns at
Maximum Offering Price (MOP) show results of hypothetical
investments at 12/31/95, 12/31/93 and 12/31/91 after deducting the
maximum initial sales charge of 5.75%. The inception date of the
Fund (Class A Shares) was 4/24/87. Class B returns at MOP show
results of hypothetical investments at 12/31/95 and 8/29/95
(inception of class) and are shown net of the applicable 5% and 4%
contingent deferred sales charges respectively. Class C returns at
MOP show results of hypothetical investments at 12/31/95, 13/31/93
and 12/1/93 (inception of class) and are shown net of the
applicable 1% contingent deferred sales charge for the one-year
result. Past performance is not predictive of future performance.
<PAGE>
Oppenheimer Strategic Income & Growth
Proxy for Class A Shareholders Meeting To Be Held June 17, 1997
Your shareholder vote is important!
Your prompt response can save your Fund the expense of another
mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before
mailing.
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD JUNE 17, 1997
The undersigned shareholder of Oppenheimer Strategic Income &
Growth Fund (the "Fund"), does hereby appoint George C. Bowen,
Robert Bishop and Scott Farrar, and each of them, as attorneys-in-
fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of the Fund to be held
on June 17, 1997, at 6803 South Tucson Way, Englewood, Colorado
80112 at 10:00 A.M., Denver time, and at all adjournments thereof,
and to vote the shares held in the name of the undersigned on the
record date for said meeting on the Proposal specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between the
Fund and Oppenheimer Multiple Strategies Fund ("Multiple
Strategies Fund"), and the transactions contemplated thereby,
including (a) the transfer of substantially all the assets of
the Fund, in exchange for Class A, Class B and Class C shares
of Multiple Strategies Fund, (b) the distribution of such
shares to the Class A, Class B and Class C shareholders of the
Fund in complete liquidation of the Fund, (c) the de-
registration of the Fund as an investment company under the
Investment Company Act of 1940, as amended, and (d) the
cancellation of the outstanding shares of the Fund (the
"Proposal").
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1997
(Month) (Day)
________________________________
Signature(s)
________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
Oppenheimer Strategic Income & Growth
Proxy for Class B Shareholders Meeting To Be Held June 17, 1997
Your shareholder vote is important!
Your prompt response can save your Fund the expense of another
mailing.
Please mark your proxy on the reverse side,
date and sign it, and return it promptly in
the accompanying envelope, which requires no
postage if mailed in the United States.
Please detach at perforation before mailing.
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD JUNE 17, 1997
The undersigned shareholder of Oppenheimer Strategic Income &
Growth Fund (the "Fund"), does hereby appoint George C. Bowen,
Robert Bishop and Scott Farrar, and each of them, as attorneys-in-
fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of the Fund to be held
on June 17, 1997, at 6803 South Tucson Way, Englewood, Colorado
80112 at 10:00 A.M., Denver time, and at all adjournments thereof,
and to vote the shares held in the name of the undersigned on the
record date for said meeting on the Proposal specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between the
Fund and Oppenheimer Multiple Strategies Fund ("Multiple
Strategies Fund"), and the transactions contemplated thereby,
including the (a) transfer of substantially all the assets of
the Fund in exchange for Class A, Class B and Class C shares
of Multiple Strategies Fund (b) the distribution of such
shares to the Class A, Class B and Class C shareholders of the
Fund in complete liquidation of the Fund (c) the de-
registration of the Fund as an investment company under the
Investment Company Act of 1940, as amended, and (d) the
cancellation of the outstanding shares of the Fund (the
"Proposal").
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1997
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
Oppenheimer Strategic Income & Growth
Proxy for Class C Shareholders Meeting To Be Held June 17, 1997
Your shareholder vote is important!
Your prompt response can save your Fund the expense of another
mailing.
Please mark your proxy on the reverse side,
date and sign it, and return it promptly in
the accompanying envelope, which requires no
postage if mailed in the United States.
Please detach at perforation before mailing.
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD JUNE 17, 1997
The undersigned shareholder of Oppenheimer Strategic Income &
Growth Fund (the "Fund"), does hereby appoint George C. Bowen,
Robert Bishop and Scott Farrar, and each of them, as attorneys-in-
fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of the Fund to be held
on June 17, 1997, at 6803 South Tucson Way, Englewood, Colorado
80112 at 10:00 A.M., Denver time, and at all adjournments thereof,
and to vote the shares held in the name of the undersigned on the
record date for said meeting on the Proposal specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS
A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE
OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between the
Fund and Oppenheimer Multiple Strategies Fund ("Multiple
Strategies Fund"), and the transactions contemplated thereby,
including the (a) transfer of substantially all the assets of
the Fund in exchange for Class A, Class B and Class C shares
of Multiple Strategies Fund (b) the distribution of such
shares to the Class A, Class B and Class C shareholders of the
Fund in complete liquidation of the Fund, (c) the de-
registration of the Fund as an investment company under the
Investment Company Act of 1940, as amended, and (d) the
cancellation of the outstanding shares of the Fund (the
"Proposal").
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1997
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
- - -----------------------------------
This Statement of Additional Information of Oppenheimer Multiple
Strategies Fund ("OMSF") consists of this cover page and the
following documents:
1. OMSF's Statement of Additional Information dated January 15,
1997, revised March 6, 1997.
2. Prospectus of Oppenheimer Fund dated October 25, 1996 as
supplemented January 1, 1997 and March 6, 1997.
3. Statement of Additional Information of Oppenheimer Fund dated
October 25, 1996.
4. Prospectus of Oppenheimer Strategic Income & Growth Fund dated
January 15, 1997 as supplemented January 15, 1997 and March 6,
1997.
5. Statement of Additional Information of Oppenheimer Strategic
Income & Growth Fund dated January 15, 1997.
6. OMSF's Annual Report as of September 30, 1996.
7. Oppenheimer Fund's Annual Report as of June 30, 1996.
8. Oppenheimer Strategic Income & Growth Fund's Annual Report as
of September 30, 1996.
9. Pro Forma Financial Statements, including Pro Forma Statement
of Investments: Oppenheimer Fund into OMSF.
10. Pro Forma Financial Statements, including Pro Forma Statement
of Investments: Oppenheimer Strategic Income & Growth Fund
into OMSF.
11. Pro Forma Financial Statements, including Pro Forma Statement
of Investments: Oppenheimer Fund and Oppenheimer Strategic
Income & Growth Fund into OMSF.
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. This Additional Statement should
be read in conjunction with the Proxy Statement and Prospectus of
OMSF dated April 23, 1997, which may be obtained by written request
to OppenheimerFunds Services ("OFS"), P.O. Box 5270, Denver,
Colorado 80217, or by calling OFS at the toll-free number shown
above.
<PAGE>
Oppenheimer Multiple Strategies Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated January 15, 1997, revised
March 6, 1997
This Statement of Additional Information of Oppenheimer
Multiple Strategies Fund is not a Prospectus. This document
contains additional information about the Fund and supplements
information in the Prospectus dated January 15, 1997, revised March
6, 1997. It should be read together with the Prospectus, which may
be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217
or by calling the Transfer Agent at the toll-free number shown
above.
<TABLE>
<CAPTION>
Contents
Page
<S> <C>
About the Fund
Investment Objective and Policies. . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . 9
Other Investment Restrictions . . . . . . . . . . . . 23
How the Fund is Managed . . . . . . . . . . . . . . . . . 24
Organization and History. . . . . . . . . . . . . . . 24
Trustees and Officers of the Fund . . . . . . . . . . 24
The Manager and Its Affiliates. . . . . . . . . . . . 29
Brokerage Policies of the Fund . . . . . . . . . . . . . . 30
Performance of the Fund. . . . . . . . . . . . . . . . . . 32
Distribution and Service Plans . . . . . . . . . . . . . . 35
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . 37
How To Sell Shares . . . . . . . . . . . . . . . . . . . . 44
How To Exchange Shares . . . . . . . . . . . . . . . . . . 49
Dividends, Capital Gains and Taxes . . . . . . . . . . . . 51
Additional Information About the Fund. . . . . . . . . . . 53
Independent Auditors' Report . . . . . . . . . . . . . . . 54
Financial Statements . . . . . . . . . . . . . . . . . . . 55
Appendix A: Industry Classifications . . . . . . . . . . . A-1
Appendix B: Description of Ratings Categories of Ratings
Services . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
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 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 Appendix B 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.
The Manager has set creditworthiness standards for issuers of loan
participations, and monitors their creditworthiness. 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. 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 listed only on a U.S. securities
exchange, or are traded only 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 segregate or identify with its
Custodian, 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. 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.
Financial Futures. Financial Futures are similar to
Interest Rate Futures except that settlement is made in cash, and
net gain or loss on options on Financial Futures depends on price
movements of the securities included in the index. The strategies
which the Fund employs regarding Financial Futures are similar to
those described above with regard to Interest Rate Futures.
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, or another currency that
is the subject of the hedge. The Fund, however, in order to avoid
excess transactions and transaction costs, may maintain a net
exposure to Forward Contracts in excess of the value of the Fund's
portfolio securities denominated in that currency provided the
excess amount is "covered" by liquid assets, including equity
securities and debt securities of any grade, 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.
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, liquid assets 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 and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position(s) making up a straddle is allowed
only to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates which occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of disposition also are treated
as an ordinary gain or loss. Currency gains and losses are offset
against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may
increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
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.
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:
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;
buy securities on margin, except that the Fund may make
margin deposits in connection with any of the hedging instruments
which it may use;
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;
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;
or
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.
In addition, as a matter of fundamental policy, the Fund may
invest all of its assets in the securities of a single open-end
management investment company for which the Manager or one of its
subsidiaries or a successor is advisor or sub-advisor,
notwithstanding any other fundamental investment policy or
limitation; such other investment company must have substantially
the same fundamental investment objective, policies and
limitations as the Fund.
In connection with the qualification of its shares in certain
states, the Fund had previously undertaken that in addition to the
above, as a non-fundamental policy, the Fund would 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 ceased 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. Due to recent changes in federal securities laws,
such state regulatory limitations no longer apply, and the Fund
hereby withdraws these voluntary undertakings.
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 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 and
occupations during the past five years are listed 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.
Ms. Macaskill is not a director of Oppenheimer Money Market Fund,
Inc. All of the Trustees are also trustees or directors of
Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Enterprise
Fund, Oppenheimer Growth Fund, Oppenheimer Discovery Fund,
Oppenheimer Global Growth & Income Fund, Oppenheimer International
Growth Fund, Oppenheimer Global Emerging Growth Fund, Oppenheimer
Gold & Special Minerals Fund, Oppenheimer Municipal Bond Fund,
Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust,
Oppenheimer Capital Appreciation Fund (formerly named "Oppenheimer
Target Fund"), Oppenheimer U.S. Government Trust, Oppenheimer
Multi-Sector Income Trust and Oppenheimer World Bond Fund
(collectively the "New York-based Oppenheimer funds"). Ms.
Macaskill and Messrs. Spiro, Donohue, Bowen, Zack, Bishop and
Farrar hold the same offices with the other New York-based
Oppenheimer funds as with the Fund. As of February 18, 1997, the
Trustees and officers of the Fund as a group owned of record or
beneficially less than 1% of the outstanding shares of each class
of the Fund. That statement does not reflect shares held of record
by an employee benefit plan for employees of the Manager (for which
plan a Trustee and an officer listed below, Ms. Macaskill and Mr.
Donohue, respectively, are trustees), 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 71
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).
Robert G. Galli, Trustee*; Age 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager");
formerly he held the following positions: Vice President and
Counsel of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; Executive Vice President & General Counsel
and a director of the Manager and OppenheimerFunds Distributor,
Inc. (the "Distributor"), Vice President and a director of
HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment
adviser subsidiaries of the Manager, a director of Shareholder
Financial Services, Inc. ("SFSI") and Shareholder Services, Inc.
("SSI"), transfer agent subsidiaries of the Manager and an officer
of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 73
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.
Bridget A. Macaskill, President and Trustee;* Age 48
President, Chief Executive Officer and a Director of the Manager;
Chairman and a director of SSI and SFSI; President and a director
of OAC, HarbourView and Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc.; formerly an Executive Vice
President of the Manager.
Elizabeth B. Moynihan, Trustee; Age 67
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 69
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), Prime
Retail, Inc. (commercial building operator) and REIT Developing &
Operating Factory Discount Malls (real estate investment trust);
formerly President and Chief Executive Officer of The Conference
Board, Inc. (international economic and business research) and a
director of Kemper Corporation (insurance and financial services
company), Fidelity Life Association (mutual life insurance
company), Lumbermens Mutual Casualty Company, American Motorists
Insurance Company and American Manufacturers Mutual Insurance
Company.
Edward V. Regan, Trustee; Age 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow 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 65
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (corporate governance
consulting); a director of Professional Staff Limited (U.K.); a
trustee of Mystic Seaport Museum, International House, and the
Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age 71
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee; Age 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age 66
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, 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), IMC Global Inc. (chemicals and animal feed) and Texas
Instruments, Inc. (electronics); 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.
- - --------------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Richard H. Rubinstein, Vice President and Portfolio Manager; Age 47
Senior Vice President of the Manager; an officer of other
Oppenheimer funds; formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer Capital Corp., an
investment adviser.
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President, General Counsel and a Director of the
Manager, the Distributor, HarbourView, SSI, SFSI, Oppenheimer
Partnership Holdings, Inc. and MultiSource Services, Inc. (a
broker-dealer); President and a director of Centennial;
President and a director of Oppenheimer Real Asset Management,
Inc.; General Counsel of OAC; an officer of other Oppenheimer
funds.
George C. Bowen, Treasurer; Age: 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and
SFSI; an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager.
Scott Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Remuneration of Trustees. The officers of the Fund and
certain Trustees of the Fund (Ms. Macaskill and Messrs. Galli and
Spiro; Ms. Macaskill is also an officer) who are affiliated with
the Manager receive no salary or fees from the Fund. The remaining
Trustees of the Fund received the compensation shown below from the
Fund. The compensation from the Fund was paid during its fiscal
year ended September 30, 1996. The compensation from all of the New
York-based Oppenheimer funds includes the Fund and is compensation
received as a director, trustee, or managing general partner or
member of a committee of the Board of those funds during the
calendar year 1996.
<TABLE>
<CAPTION>
Retirement Total Compensation
Aggregate Benefits Accrued From All
Compensation as Part of New York-based
Name and Position From Fund1 Fund Expenses1 Oppenheimer funds2
<S> <C> <C> <C>
Leon Levy, Chairman and Trustee $6,643 $9,517 $152,750
Benjamin Lipstein, $4,061 $5,818 $91,350
Study Committee
Chairman , Audit Committee
Member and Trustee
Elizabeth B. Moynihan, $4,061 $5,818 $91,350
Study Committee
Member and Trustee
Kenneth A. Randall, $3,693 $5,291 83,450
Audit Committee Chairman
and Trustee
Edward V. Regan, $3,241 $4,644 $78,150
Proxy Committee Chairman,3
Audit Committee
Member and Trustee
Russell S. Reynolds, Jr., $2,454 $3,516 $58,800
Proxy Committee Member3
and Trustee
Pauline Trigere, Trustee $2,454 $3,516 $55,300
Clayton K. Yeutter, $2,454 $3,516 $58,800
Proxy Committee Member3
and Trustee
</TABLE>
______________________
1For the fiscal year ended September 30, 1996.
2For the 1996 calendar year.
3Committee position held during a portion of the period shown. The
Study, Audit and Proxy Committees meet for all the New York-based
funds and all fees are allocated among the funds by the Board.
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 Oppenheimer funds
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 these benefits cannot be determined as of this time,
nor can the Fund estimate the number of years of credited service
that will be used to determine those benefits. During the nine
months ended September 30, 1996, a provision of $58,255 was made
for the Fund's projected benefit obligations, and payments of
$4,853 were made to retired Trustees, resulting in an accumulated
liability of $166,286 at September 30, 1996.
Major Shareholders. As of February 18, 1997, 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
except Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, Florida, 32246, which owned
107,176 Class C shares (approximately 5.16% of the Class C shares
outstanding as of such date).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund and three of whom (Ms.
Macaskill and 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 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
Investment Advisory Agreement or by the Distributor under the
General Distributor's Agreement are paid by the Fund. The
Investment Advisory Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring
expenses, including litigation costs. For the Fund's fiscal years
ended December 31, 1994, 1995 and the nine month period ended
September 30, 1996, the management fees paid by the Fund to the
Manager were $1,869,498, $1,943,505 and $1,544,001, respectively.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund s total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager s
undertaking is therefore inapplicable and has been withdrawn.
During the Fund s last fiscal year, the Fund s expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The Investment 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 Investment 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 adviser or general
distributor. If the Manager shall no longer act as investment
adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class
A, Class B and Class C shares but is not obligated to sell a
specific number of shares. Expenses normally attributable to
sales, excluding payments under Distribution and Service Plans but
including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders,
are borne by the Distributor. During the Fund's fiscal years ended
December 31, 1994, 1995 and the nine month period ended September
30, 1996, the aggregate amount of sales charges on sales of the
Fund's Class A shares was $446,064, $348,120 and $286,317 in those
respective years, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $16,107, $138,846 and
$100,671, respectively. During the Fund's fiscal year ended
September 30, 1996, contingent deferred sales charges collected on
the Fund's Class B shares totalled $1,119. During the fiscal years
ended December 31, 1994, 1995 and the nine month period ended
September 30, 1996, contingent deferred sales charges collected on
the Fund's Class C shares totaled $2,135, $3,807 and $3,419, 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. OppenheimerFunds Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the advisory agreement is to
arrange the portfolio transactions for the Fund. The Investment
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
Investment Advisory Agreement to employ such broker-dealers,
including "affiliated" brokers, as that term is defined in the
Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission
bidding, but is expected to 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 Investment Advisory Agreement, the Manager is
authorized to select brokers that provide brokerage and/or research
services for the Fund and/or the other accounts over which the
Manager or its affiliates have investment discretion. The
commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination
is made by the Manager that the commission is fair and reasonable
in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of
the Fund and other investment companies managed by the Manager or
its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the Investment Advisory Agreement and
the procedures and rules described above, allocations of brokerage
are generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement
and the procedures and rules described above. 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 determines that a better price or execution can be
obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the Fund
and one or more of such other accounts. Such research, which may
be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as
well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If
a research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to
the Manager in the investment decision-making process may be paid
for in commission dollars. The Board of Trustees has permitted the
Manager to use concessions on fixed-price offerings to obtain
research in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use
stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to the Manager
that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope
and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
by enabling the Manager to obtain market information for the
valuation of securities held in the Fund's portfolio or being
considered for purchase. The 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.
During the Fund's fiscal years ended December 31, 1994, 1995
and and the nine month period ended September 30, 1996, total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis)
amounted to $227,996, $304,986 and $262,222, respectively. During
the fiscal year ended September 30, 1996, $107,025 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 $37,924,083.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return", "cumulative total
return," "average annual total return at net asset value" and
"total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how these
total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5 and 10-year periods (or the life of
the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement. This
enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of 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 the 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:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The "cumulative total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, the payment of the applicable contingent deferred sales
charge (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 September 30, 1996, and for the
period from April 24, 1987 (commencement of operations) to
September 30, 1996 were 7.16%, 10.83% and 9.28%, respectively. The
"cumulative total return" on Class A shares for the latter period
from April 24, 1987, to September 30, 1996 was 130.93%. The
"average total returns" on an investment in Class B shares of the
Fund for the one-year period ended September 30, 1996 and for the
period from August 29, 1995 (inception of Class B shares) to
September 30, 1996, were 7.55% and 10.33%. The "cumulative total
return" on Class B shares for the period from August 29, 1995
through September 30, 1996 was 11.26%. For the one-year period
ended September 30, 1996 and for the period from December 1, 1993
(inception of Class C shares) to September 30, 1996 the average
total returns on an investment in Class C shares of the Fund were
11.71% and 10.90%, respectively. The "cumulative total return" on
Class C shares for the period from December 1, 1993 to September
30, 1996 was 34.03%.
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 September 30, 1996
was 145.02%. For Class B shares, the "cumulative total return at
net asset value" for the period from August 29, 1995 through
September 30, 1996 was 15.26%. For Class C shares, the "cumulative
total return at net asset value" for the period from December 1,
1993 through September 30, 1996 was 34.03%.
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 and volatility 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.
Morningstar ranks mutual funds in broad investment categories
(domestic stock funds, taxable bond, tax-exempt and municipal bond
funds), based on risk-adjusted investment returns. Investment
return measures a fund's or class's three, five and ten-year
average annual total returns (depending on the inception of the
fund or class) in excess of 90-day U.S. Treasury bill returns after
considering the fund's sales charges and expenses. Risk measures
a fund's or class's performance below 90-day U.S. Treasury bill
returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in 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.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B and Class C shares of the Fund, a number of
factors should be considered before using such information as a
basis for comparison with other investments. For example,
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.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of
the Fund under Rule 12b-1 of the Investment Company Act, pursuant
to which the Fund makes payments to the Distributor in connection
with the distribution and/or servicing of the shares of that class,
as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority
of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class. 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 its continuance is
specifically approved at least annually by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
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. None of the Plans may be amended
to increase materially the amount of payments to be made unless
such amendment is approved by shareholders of the class affected by
the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required by a Securities and Exchange Commission rule to obtain
the approval of Class B as well as Class A shareholders for a
proposed amendment to the Class A Plan that would materially
increase 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 payments were made and the identity
of each Recipient that received any such payment. The report for
the Class B and Class C Plan shall also include the distribution
costs for that quarter, and such costs for previous fiscal years
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
requirement for a minimum amount of assets.
For the fiscal year ended September 30, 1996, payments under
the Class A Plan totaled $345,838, all of which was paid by the
Distributor to Recipients, including $34,848 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 the shares sold. An exchange of
shares does not entitle the Recipient to an advance service fee
payment. In the event shares are redeemed during the first year
such shares are outstanding, the Recipient will be obligated to
repay a pro rata portion of such advance payment to the
Distributor. Payments made under the Class B Plan during the
period from August 29, 1995 through September 30, 1996, totaled
$26,446, of which $25,989 was retained by the Distributor.
Payments made under the Class C Plan during the nine month period
ended September 30, 1996, totaled $133,941, of which $53,420 was
retained by the Distributor, and $6,442 was paid by the Distributor
to an affiliate.
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 Conduct Rules of the
National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service 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 the
investor to choose the method of purchasing shares that is more
beneficial to the investor depending on the amount of the purchase,
the length of time the investor expects to hold shares and other
relevant circumstances. Investors should understand that the
purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B and Class C shares are the
same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor normally will not accept 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 Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total 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 Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (a) Distribution and/or Service Plan
fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open by
dividing the value of the Fund's net assets attributable to that
class by the number of shares of that class outstanding. The
Exchange normally closes at 4:00 P.M., but may close earlier on
some other days (for example, in case of weather emergencies or
days falling before a holiday). The Exchange'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" prices that day); (ii) securities traded on a foreign
securities exchange are valued generally at the last sales price
available to the pricing service approved by the Fund's Board of
Trustees or to the Manager as reported by the principal exchange on
which the security is traded at its last trading session on or
immediately preceding the valuation date, or at the mean between
"bid" and "ask" prices obtained from the principal exchange or two
active market makers in the security on the basis of reasonable
inquiry; (iii) long-term debt securities having a remaining
maturity in excess of 60 days are valued based on the mean between
the "bid" and "ask" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis
of reasonable inquiry; (iv) debt instruments having a maturity of
more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days or less when issued,
which have a remaining maturity of 60 days or less are valued at
the mean between the "bid" and "ask" prices determined by a pricing
service approved by the Fund's Board of Trustees or obtained from
two active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of
less than 397 days 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 (vi) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's
procedures. If the Manager is unable to locate two market makers
willing to give quotes (see (ii), (iii) and (iv) above), the
security may be priced the "bid" and "ask" prices provided by a
single active market maker (which in certain cases may be the "bid"
price if no "ask" price is available).
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 Manager may use pricing services
approved by the Board of Trustees to price U.S. Government
Securities, mortgage-backed securities, foreign government
securities and corporate bonds. The Manager will monitor the
accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of
selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. 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 Exchange will not be reflected in
the Fund's calculation of net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board
of Trustees, determines that the particular event is likely to
effect a material change in the value of such security. Forward
currency, including forward contracts will be valued at the closing
price in the London foreign exchange market that day as provided by
a reliable bank, dealer or pricing service. The values of
securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service.
Puts, calls and Futures are valued at the last sales price on
the principal exchange on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing "bid" and "ask"
prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing "bid" price on the
principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall
be valued at the mean between "bid" and "ask" prices obtained by
the Manager from two active market makers (which in certain cases
may be the "bid" price if no "ask" price is available).
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 shares. Dividends
will begin to accrue on such shares on the day the Fund receives
Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange that day, which is normally
three days after the ACH transfer is initiated. 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, the shares will be purchased and
dividends will begin to accrue on the next regular business day.
The proceeds of ACH transfers are normally received by the Fund 3
days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and 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 incurs little or no selling
expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, siblings, a
sibling's spouse, a spouse's siblings, aunts, uncles, nieces and
nephews.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal
Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government
Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer International Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Rochester Fund Municipals*
Oppenheimer Bond Fund For Growth
Limited-Term New York Municipal 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.
* Shares of the Fund are not presently exchangeable for shares of
these funds.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent deferred
sales charge).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares of the Fund (and Class
A and Class B shares of the Fund and other Oppenheimer funds)
during a 13-month period (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90
days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases of
shares which, when added to the investor's holdings of shares of
those funds, will equal or exceed the amount specified in the
Letter. Purchases made by reinvestment of dividends or
distributions of capital gains and purchases made at net asset
value without sales charge do not count toward satisfying the
amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the
Fund (and other Oppenheimer funds) that applies under the Right of
Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the public
offering price applicable to a single lump-sum purchase of shares
in the intended purchase amounts, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value to 5% of the intended purchase amount specified in the Letter
shall be held in escrow by the Transfer Agent. For example, if the
intended purchase amount is $50,000, the escrow shall be shares
valued in the amount of $2,500 (computed at the public offering
price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for shares for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A
initial or contingent deferred sales charge or (ii) Class B shares
of one of the other Oppenheimer funds that were acquired subject to
a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How to Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent differed sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
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. This
privilege does not apply to Class C shares. The reinvestment may
be made without sales charge only in Class A shares of the Fund or
any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described 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
Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That
would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge 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
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, SEP-IRA's, SAR-SEP, 403(b)(7)
custodial plans, 401(k) plans, or pension or profit-sharing plans
should be addressed to "Trustee, OppenheimerFunds Retirement
Plans," c/o the Transfer Agent at its address listed in "How to
Sell Shares" in the Prospectus or on the back cover of this
Statement of Additional Information. The request must: (i) state
the reason for the distribution; (ii) state the owner's awareness
of tax penalties if the distribution is premature; and (iii)
conform to the requirements of the plan and the Fund's other
redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing or
401(k) plans may not directly redeem or exchange shares held for
their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension
and profit sharing plans are subject to special requirements under
the Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be
made. Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to
the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided
the Transfer Agent with a certified tax identification number, the
Internal Revenue Code requires that tax be withheld from any
distribution even if the shareholder elects not to have tax
withheld. The Fund, the Manager, the Distributor, the Trustee and
the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and
will not be responsible for any tax penalties assessed in
connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholders should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from a dealer or broker
after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value if
the order was received by the dealer or broker from its 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 to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of 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 share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans that would require the redemption of
shares held less than 6 years or 12 months, respectively, 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 the Prospectus
under "Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the
OppenheimerFunds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and thereafter shares
acquired with reinvested dividends and capital gains distributions
will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments.
Depending upon the amount withdrawn, the investor's principal may
be depleted. Payments made under withdrawal plans should not be
considered as a yield or income on your investment. It may not be
desirable to purchase additional shares of Class A shares while
maintaining automatic withdrawals because of the sales charges that
apply to purchases when made. Accordingly, a shareholder normally
may not maintain an Automatic Withdrawal Plan while simultaneously
making regular purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. 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 Class A
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
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money
Markets Trust, Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax Exempt Trust, Centennial America Fund, L.P. and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Municipal Fund, which only
offers Class A and Class B shares (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401 (k) plans). A current list showing
which funds offer which class can be obtained by calling the
Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Funds Municipals and Limited Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
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.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds. No contingent deferred sales charge is imposed
on exchanges of shares of either class purchased subject to a
contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares
(see "Class A Contingent Deferred Sales Charge" in the Prospectus).
The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within 6 years of
the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares
acquired by exchange if they are redeemed within 12 months of the
initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How to Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charge will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange request from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
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.
At September 30, 1996, the Fund had available for federal
income tax purposes an unused capital loss carryover of
approximately $890,000, which expires in 1997 and 1998.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends
and/or distributions from certain of the Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on
the portfolio securities and handling the delivery of such
securities to and from the Fund. The Manager has represented to
the Fund that the banking relationships between the Manager and the
Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in
a manner uninfluenced by any banking relationship the Custodian may
have with the Manager and its affiliates. The 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 September 30, 1996, and
the related statement of operations for the nine month period then ended, the
statements of changes in net assets for the nine month period then ended and the
year ended December 31, 1995, and the financial highlights for the nine month
period ended September 30, 1996 and for each of the years in the five year
period ended December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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
September 30, 1996, 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 September 30, 1996, the results of its
operations for the nine month period then ended, the changes in its net assets
for the nine month period then ended and the year ended December 31, 1995, and
the financial highlights for the nine month period ended September 30, 1996 and
for each of the years in the five year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- - -------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1996
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Federal National Mortgage Assn.:
11.50%, 7/1/11 $ 146,907 $ 162,530
11.75%, 1/1/16 175,012 196,833
- - -------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 9%, 11/15/08--5/15/09
524,930 558,216
- - -------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 375,127
364,225
-------------
Total Mortgage-Backed Obligations (Cost $1,162,963)
1,281,804
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
U.S. GOVERNMENT OBLIGATIONS--11.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.10%, 11/15/18(2) 17,000,000
3,502,476
7.313%, 8/15/19(2) 18,700,000
3,651,736
- - -------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,000,000 16,590,000
8.875%, 11/15/98 950,000 1,001,062
9.25%, 8/15/98 9,450,000 9,972,697
-------------
Total U.S. Government Obligations (Cost $34,052,281)
34,717,971
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOREIGN GOVERNMENT OBLIGATIONS--14.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(3)(4)
1,544,136 1,408,007
Par Bonds, 5.25%, 3/31/23(5) 10,000,000
5,850,000
Past Due Interest Bonds, Series L, 6.625%, 3/31/05(3) 5,880,000
4,931,850
- - -------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon,
48.252%, 10/3/96(2) MXP 4,384,900
579,822
- - -------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Par Bonds, 5%, 4/15/24(5) 7,500,000
4,476,563
- - -------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
9.75%, 12/1/01 CAD 6,000,000
5,068,535
9.75%, 6/1/01 CAD 2,000,000
1,677,282
- - -------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 3/15/06 DKK
21,900,000 4,004,914
- - -------------------------------------------------------------------------------------------------------
Eskom Depositary Receipts, Series E168, 11%, 6/1/08 ZAR
6,430,000 1,093,837
- - -------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 8.50%, 8/1/99 ITL 1,800,000,000
1,204,257
- - -------------------------------------------------------------------------------------------------------
New Zealand Government Bonds, 8%, 2/15/01 NZD
7,460,000 5,203,616
- - -------------------------------------------------------------------------------------------------------
Poland (Republic of) Treasury Bills, Zero Coupon:
20.70%, 1/8/97(2) PLZ 2,360,000
799,056
24.131%, 11/13/96(2) PLZ 2,300,000
801,216
- - -------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts., 10.50%, 5/15/03 AUD
2,500,000 2,263,395
- - -------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 AUD
1,500,000 1,219,490
- - -------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00 GBP 1,050,000
1,967,831
-------------
Total Foreign Government Obligations (Cost $39,944,054)
42,549,671
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--12.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC MATERIALS--2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--0.5% Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03
$ 500,000 $ 546,146
- - -------------------------------------------------------------------------------------------------------
Viridian, Inc., 9.75% Nts., 4/1/03 750,000
780,000
-------------
1,326,146
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
METALS--0.2% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03
500,000 545,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PAPER--1.5% Gaylord Container Corp., 12.75% Sr. Sub. Disc. Debs., 5/15/05
750,000 826,875
- - -------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.875% Second Priority Sr. Nts., 5/1/06
1,000,000 985,000
- - -------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.875% Sr. Sub. Nts., 4/1/08
1,000,000 990,000
- - -------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 1,000,000
1,083,750
- - -------------------------------------------------------------------------------------------------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05 500,000
485,000
-------------
4,370,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER CYCLICALS--4.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AUTOS & HOUSING--0.6% Hovnanian K. Enterprises, Inc., 11.25% Sub. Gtd. Nts., 4/15/02
725,000 712,312
- - -------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 1,000,000
1,047,500
-------------
1,759,812
LEISURE &
ENTERTAINMENT--0.2% Apple South, Inc., 9.75% Sr. Nts., 6/1/06
500,000 495,000
- - -------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(6) 213,908
223,266
-------------
718,266
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--2.8% Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(7)
200,000 153,500
- - -------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08
1,000,000 1,030,000
- - -------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 10.75% Sr. Sub. Debs., 4/1/04 500,000
518,125
- - -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.50% Sr. Nts., 2/15/05 1,000,000
1,061,373
- - -------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(7)
1,250,000 1,137,500
- - -------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07
1,000,000 1,005,000
- - -------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Nts., 6/30/05 500,000
535,625
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.95% Nts., 2/1/00 1,000,000
1,028,109
- - -------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,100,000
1,221,967
- - -------------------------------------------------------------------------------------------------------
United International Holdings, Inc.,
Zero Coupon Sr. Sec. Disc. Nts., 12.819%, 11/15/99(2) 550,000
385,000
-------------
8,076,199
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: GENERAL--0.3% Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02
900,000 976,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY--0.2% Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01
500,000 534,375
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
CONSUMER NON-CYCLICALS--1.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD--0.7% Grand Union Co., 12% Sr. Nts., 9/1/04 $
1,137,000 $ 1,152,634
- - -------------------------------------------------------------------------------------------------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 500,000 511,250
11% Sr. Sub. Nts., 6/15/05 500,000
505,625
-------------
2,169,509
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES &
SERVICES--0.5% Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04
1,000,000 1,095,000
- - -------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02 345,000
383,813
-------------
1,478,813
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS--0.3% Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 12.09%, 5/27/98(2) 1,000,000
855,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY--1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY SERVICES & Global Marine, Inc., 12.75% Sr. Sec. Nts., 12/15/99
400,000 434,000
PRODUCERS--1.6%
- - -------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06
1,000,000 1,022,500
- - -------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15 1,000,000
1,045,000
- - -------------------------------------------------------------------------------------------------------
Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06 1,000,000
1,056,250
- - -------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 1,000,000
1,065,000
-------------
4,622,750
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL--0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED
FINANCIAL--0.4% GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98
1,250,000 1,262,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--0.4% Conseco, Inc., 8.125% Sr. Nts., 2/15/03
1,000,000 1,023,948
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL
MATERIALS--0.4% Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 500,000 521,250
11% Sr. Debs., 12/1/03 650,000 713,375
-------------
1,234,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL SERVICES--0.3% EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03
1,000,000 955,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TECHNOLOGY--0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AEROSPACE/DEFENSE--0.4% Communications & Power Industries, Inc., 12% Sr. Sub. Nts.,
Series B, 8/1/05 1,000,000 1,092,500
- - -------------------------------------------------------------------------------------------------------
Unisys Corp., 15% Credit Sensitive Nts., 7/1/97(3) 200,000
212,000
-------------
1,304,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELECOMMUNICATIONS- Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts.,
Series B, 4/15/03(7)(8) 500,000 307,500
- - -------------------------------------------------------------------------------------------------------
TECHNOLOGY--0.4% PriCellular Wireless Corp., 0%/12.25% Sr. Sub. Disc. Nts.,
10/1/03(7) 1,000,000 815,000
-------------
1,122,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES--0.4% First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16 1,000,000
1,057,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES--0.3% Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06
750,000 770,625
-------------
Total Non-Convertible Corporate Bonds and Notes (Cost $35,105,263)
36,164,193
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONVERTIBLE CORPORATE BONDS AND NOTES--0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIQ, Inc., 7.50% Exchangeable Sub. Debs., 7/15/03 (Cost $1,552,096)
1,650,000 1,476,750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
COMMON STOCKS--51.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC MATERIALS--2.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--1.5% Agrium, Inc. 80,000 $
1,086,250
- - -------------------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 90,000
3,304,341
-------------
4,390,591
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
METALS--0.5% Brush Wellman, Inc. 72,300
1,391,775
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PAPER--0.6% Aracruz Celulose SA, Sponsored ADR, Cl. B
99,000 866,250
- - -------------------------------------------------------------------------------------------------------
Stone Container Corp. 54,200 846,875
-------------
1,713,125
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER CYCLICALS--9.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Autos & Housing--0.8% Duracell International, Inc. 16,000
1,026,000
- - -------------------------------------------------------------------------------------------------------
General Motors Corp. 18,000 864,000
- - -------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones, SA 193,056
563,796
-------------
2,453,796
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LEISURE &
ENTERTAINMENT--4.8% Alaska Air Group, Inc.(9)
77,000 1,645,875
- - -------------------------------------------------------------------------------------------------------
AMR Corp.(9)(10) 17,600 1,401,400
- - -------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 43,800 1,357,800
- - -------------------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc.(9) 18,000
636,750
- - -------------------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 55,300
1,251,162
- - -------------------------------------------------------------------------------------------------------
Eastman Kodak Co. 22,000 1,727,000
- - -------------------------------------------------------------------------------------------------------
International Game Technology 68,000
1,394,000
- - -------------------------------------------------------------------------------------------------------
King World Productions, Inc.(9) 27,000
995,625
- - -------------------------------------------------------------------------------------------------------
Mattel, Inc. 39,437 1,020,432
- - -------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc.(9) 2,400 57,900
- - -------------------------------------------------------------------------------------------------------
Shangri-La Asia Ltd. 550,000 732,573
- - -------------------------------------------------------------------------------------------------------
Shimano, Inc. 54,000 1,003,636
- - -------------------------------------------------------------------------------------------------------
U S West Media Group(9) 47,000
793,125
-------------
14,017,278
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--1.6% Comcast Corp., Cl. A Special 112,800
1,734,300
- - -------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 21,000 777,000
- - -------------------------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 1,440,000
1,070,733
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc. 30,000 1,158,750
-------------
4,740,783
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: GENERAL--1.2% Cone Mills Corp.(9)
161,500 1,271,812
- - -------------------------------------------------------------------------------------------------------
Donna Karan International, Inc.(9) 44,500
1,017,937
- - -------------------------------------------------------------------------------------------------------
Price/Costco, Inc.(9) 54,300 1,113,150
-------------
3,402,899
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY--0.7% Gymboree Corp.(9)(10)
33,000 1,002,375
- - -------------------------------------------------------------------------------------------------------
Toys 'R' Us, Inc.(9)(10) 32,600 949,475
-------------
1,951,850
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
CONSUMER NON-CYCLICALS--8.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BEVERAGES--0.4% Guinness PLC 144,000
$ 1,029,967
- - -------------------------------------------------------------------------------------------------------
Whitman Corp. 11,500 265,938
-------------
1,295,905
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD--1.3% Chiquita Brands International, Inc. 45,000
551,250
- - -------------------------------------------------------------------------------------------------------
Groupe Danone 3,707 541,550
- - -------------------------------------------------------------------------------------------------------
IBP, Inc.(10) 27,000 627,750
- - -------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 20,000
1,115,232
- - -------------------------------------------------------------------------------------------------------
Sara Lee Corp. 30,000 1,072,500
-------------
3,908,282
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/DRUGS--4.3% Abbott Laboratories
20,000 985,000
- - -------------------------------------------------------------------------------------------------------
American Home Products Corp. 15,400
981,750
- - -------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 23,000 971,240
- - -------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co.(10) 21,400
2,062,425
- - -------------------------------------------------------------------------------------------------------
Ciba-Geigy AG 2,275 2,911,013
- - -------------------------------------------------------------------------------------------------------
Genzyme Corp.(9) 42,000 1,071,000
- - -------------------------------------------------------------------------------------------------------
Johnson & Johnson 36,800 1,886,000
- - -------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 45,800 784,325
- - -------------------------------------------------------------------------------------------------------
SmithKline Beecham PLC, ADR 16,000
974,000
-------------
12,626,753
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES & Manor Care, Inc.(10)
21,600 828,900
SERVICES--1.3%
- - -------------------------------------------------------------------------------------------------------
Medtronic, Inc.(10) 19,800 1,269,675
- - -------------------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc.(9) 36,000
792,000
- - -------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(9) 30,009
975,293
-------------
3,865,868
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS--1.0% Kimberly-Clark Corp.
9,800 863,625
- - -------------------------------------------------------------------------------------------------------
Procter & Gamble Co. 12,000 1,170,000
- - -------------------------------------------------------------------------------------------------------
Wella AG 1,350 812,515
-------------
2,846,140
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TOBACCO--0.6% Philip Morris Cos., Inc. 20,600
1,848,850
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Energy--3.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Energy Services & Kerr-McGee Corp. 9,000
547,875
Producers--0.7%
- - -------------------------------------------------------------------------------------------------------
Landmark Graphics Corp.(9) 28,600
840,125
- - -------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc.(9) 27,000
739,125
-------------
2,127,125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
OIL-INTEGRATED--2.9% Atlantic Richfield Co. 13,500
$ 1,721,250
- - -------------------------------------------------------------------------------------------------------
Enterprise Oil PLC 90,000 768,254
- - -------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 12,000
631,500
- - -------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 6,300
983,588
- - -------------------------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 63,000
925,397
- - -------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR 17,800
696,425
- - -------------------------------------------------------------------------------------------------------
Unocal Corp. 50,000 1,800,000
- - -------------------------------------------------------------------------------------------------------
YPF Sociedad Anonima, Cl. D, ADR 35,000
800,625
-------------
8,327,039
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL--8.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BANKS--5.4% Akbank T.A.S. 1,995,500
204,215
- - -------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 81,675
710,663
- - -------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New)(10) 90,000
7,211,250
- - -------------------------------------------------------------------------------------------------------
Citicorp(10) 9,900 897,188
- - -------------------------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 22,500
1,060,634
- - -------------------------------------------------------------------------------------------------------
NationsBank Corp.(10) 65,200
5,664,250
-------------
15,748,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED
FINANCIAL--1.0% American Express Co. 29,000
1,341,250
- - -------------------------------------------------------------------------------------------------------
Dean Witter, Discover & Co. 14,000
770,000
- - -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 8,600
841,725
-------------
2,952,975
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--2.0% ACE Ltd. 20,000
1,057,500
- - -------------------------------------------------------------------------------------------------------
American International Group, Inc.(10) 8,100
816,075
- - -------------------------------------------------------------------------------------------------------
American Re Corp.(10) 36,000
2,286,000
- - -------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 27,000
747,206
- - -------------------------------------------------------------------------------------------------------
UNUM Corp. 12,000 769,500
-------------
5,676,281
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL--4.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRICAL
EQUIPMENT--0.4% General Electric Co. 13,400
1,219,400
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL
MATERIALS--1.2% Owens Corning 54,000
1,991,250
- - -------------------------------------------------------------------------------------------------------
Rubbermaid, Inc. 25,300 619,850
- - -------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.(9) 23,500 1,010,500
-------------
3,621,600
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MANUFACTURING--1.8% AGCO Corp. 32,400
826,200
- - -------------------------------------------------------------------------------------------------------
Mannesmann AG 3,500 1,312,100
- - -------------------------------------------------------------------------------------------------------
Pacific Dunlop Ltd. 333,000 690,320
- - -------------------------------------------------------------------------------------------------------
Tenneco, Inc. 38,000 1,904,750
- - -------------------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 42,600
479,250
-------------
5,212,620
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
TRANSPORTATION--1.4% Burlington Northern Santa Fe Corp.
24,500 $2,067,188
- - -------------------------------------------------------------------------------------------------------
Canadian National Railway Co. 27,000
554,949
- - -------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA 58,200 909,375
- - -------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 25,650
400,781
-------------
3,932,293
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TECHNOLOGY--11.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AEROSPACE/DEFENSE--0.3% Rockwell International Corp.
15,000 845,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPUTER HARDWARE--1.5% Digital Equipment Corp.(9)(10)
17,000 607,750
- - -------------------------------------------------------------------------------------------------------
International Business Machines Corp. 12,300
1,531,350
- - -------------------------------------------------------------------------------------------------------
Moore Corp. Ltd. 40,000 735,000
- - -------------------------------------------------------------------------------------------------------
Xerox Corp.(10) 30,000 1,608,750
-------------
4,482,850
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPUTER SOFTWARE--4.1% America Online, Inc.(9)
23,600 840,750
- - -------------------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR(9) 50,000
962,500
- - -------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.(10) 54,300
3,244,425
- - -------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(9)(10) 38,500 1,438,938
- - -------------------------------------------------------------------------------------------------------
Microsoft Corp.(9)(10) 6,700 883,563
- - -------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 31,500 2,022,222
- - -------------------------------------------------------------------------------------------------------
Novell, Inc.(9) 97,000 1,067,000
- - -------------------------------------------------------------------------------------------------------
Sybase, Inc.(9) 32,000 476,000
- - -------------------------------------------------------------------------------------------------------
Symantec Corp.(9) 90,502 984,209
-------------
11,919,607
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRONICS--3.5% Hewlett-Packard Co. 31,500
1,535,625
- - -------------------------------------------------------------------------------------------------------
Intel Corp.(10) 54,000 5,153,625
- - -------------------------------------------------------------------------------------------------------
Kyocera Corp. 12,000 856,566
- - -------------------------------------------------------------------------------------------------------
LSI Logic Corp.(9) 36,500 848,625
- - -------------------------------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR, A Shares(10) 20,500
907,125
- - -------------------------------------------------------------------------------------------------------
VLSI Technology, Inc.(9) 51,200
832,000
-------------
10,133,566
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
TELECOMMUNICATIONS- Airtouch Communications, Inc.(9)
32,900 $ 908,863
TECHNOLOGY--1.9%
- - -------------------------------------------------------------------------------------------------------
Bay Networks, Inc.(9) 19,180 522,655
- - -------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(9) 13,700 850,256
- - -------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd.(10) 45,000
945,000
- - -------------------------------------------------------------------------------------------------------
MCI Communications Corp. 89,000
2,280,625
-------------
5,507,399
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES--2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES--1.0% Korea Electric Power Corp.
15,800 522,203
- - -------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 42,000
1,123,500
- - -------------------------------------------------------------------------------------------------------
Verbund Oest Electriz 17,100 1,182,642
-------------
2,828,345
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
GAS UTILITIES--0.2% Hong Kong & China Gas Co. Ltd.
374,488 636,817
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES--1.1% BCE, Inc. 30,600
1,308,150
- - -------------------------------------------------------------------------------------------------------
Portugal Telecom SA 10,500 270,107
- - -------------------------------------------------------------------------------------------------------
U S West Communications Group 50,000
1,487,500
-------------
3,065,757
-------------
Total Common Stocks (Cost $103,868,767)
148,691,394
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PREFERRED STOCKS--0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Alumax, Inc., $4.00 Cv., Series A 6,333
861,288
- - -------------------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A 17,666
925,257
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Cum., Series K, Exchangeable Preferred Stock(4)(6)
734 774,370
-------------
Total Preferred Stocks (Cost $1,973,515)
2,560,915
</TABLE>
<TABLE>
<CAPTION>
UNITS
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Hong Kong & China Gas Wts., Exp. 9/97 57,874
17,587
- - -------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(6) 500
5,000
-------------
Total Rights, Warrants and Certificates (Cost $15,337)
22,587
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
REPURCHASE AGREEMENT--8.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Repurchase agreement with Zion First National Bank,
5.62%, dated 9/30/96, to be repurchased at $24,003,747 on
10/1/96, collateralized by U.S. Treasury Nts., 5.75%--8.875%,
5/15/97--8/15/04, with a value of $24,493,438 (Cost $24,000,000)
$24,000,000 $24,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TOTAL INVESTMENTS, AT VALUE (COST $241,674,276)
100.0% 291,465,285
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LIABILITIES IN EXCESS OF OTHER ASSETS
(0.0) (23,538)
------------- -------------
NET ASSETS 100.0% $
291,441,747
------------- -------------
------------- -------------
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD -- Australian Dollar MXP -- Mexican Peso
CAD -- Canadian Dollar NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
GBP -- British Pound Sterling ZAR -- South African Rand
ITL -- Italian Lira
2. For zero coupon bonds, the interest rate shown is the effective yield on the date
of purchase.
3. Represents the current interest rate for a variable rate security.
4. Interest or dividend is paid in kind.
5. Represents the current interest rate for an increasing rate security.
6. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial
Statements.
7. Denotes a step bond: a zero coupon bond that converts to a fixed rate of interest
at a designated
future date.
8. Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act
of 1933, as amended. This security has been determined to be liquid under
guidelines established by the
Board of Trustees. This security amounts to $307,500 or 0.11% of the Fund's net
assets, at September 30,
1996.
9. Non-income producing security.
10. A sufficient amount of securities has been designated to cover outstanding call
options, as follows:
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES EXPIRATION EXERCISE
PREMIUM VALUE
SUBJECT TO CALL DATE PRICE
RECEIVED SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 3,200 1/97 $95 $8,300
$3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International Group, Inc. 1,600 2/97 100 5,752
9,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 7,200 1/97 50 25,175
106,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 4,500 10/96 65 4,927
563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bristol-Myers Squibb Co. 4,400 12/96 95 7,568
18,700
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chase Manhattan Corp. (New) 19,000 3/97 80 73,053
114,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citicorp 2,000 1/97 90 9,440 11,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 55 34,775
87,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 60 50,974
67,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Digital Equipment Corp. 3,400 1/97 45 7,123
4,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ECI Telecommunications Ltd. 9,000 2/97 25 16,604
12,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronic Arts, Inc. 8,400 3/97 30 30,197
87,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gymboree Corp. 6,600 1/97 35 8,877
14,438
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IBP, Inc. 27,000 11/96 25 59,938
10,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Intel Corp. 10,800 1/97 90 33,425
113,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manor Care, Inc. 4,200 4/97 40 5,649
9,713
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Medtronic, Inc. 3,800 2/97 55 12,236
40,850
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Microsoft Corp. 6,700 1/97 125 60,097
97,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NationsBank Corp. 13,000 2/97 90 67,858
47,124
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nokia Corp., Sponsored ADR, A Shares 4,000 4/97 45
10,880 18,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Toys 'R' Us, Inc. 6,400 3/97 35 6,608
3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Xerox Corp. 6,000 1/97 55 12,738
18,750
---------- ----------
$ 552,194 $ 896,088
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
ASSETS Investments, at value (cost $241,674,276)--see accompanying statement
$ 291,465,285
- - -------------------------------------------------------------------------------------------------------
Cash 397,482
- - -------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
974
- - -------------------------------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns
2,638,803
Investments sold 679,786
Shares of beneficial interest sold 286,715
- - -------------------------------------------------------------------------------------------------------
Other 19,537
-------------
Total assets 295,488,582
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LIABILITIES Options written, at value (premiums received $552,194)--
see accompanying statement--Note 6
896,088
- - -------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,918,420
Shares of beneficial interest redeemed
629,197
Trustees' fees 182,123
Distribution and service plan fees 144,390
Shareholder reports 56,678
Transfer and shareholder servicing agent fees
26,623
Other 193,316
-------------
Total liabilities 4,046,835
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSETS $ 291,441,747
-------------
-------------
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPOSITION OF Paid-in capital $
225,707,312
NET ASSETS
- - -------------------------------------------------------------------------------------------------------
Undistributed net investment income
615,057
- - -------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions
15,672,173
- - -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
49,447,205
-------------
Net assets $ 291,441,747
-------------
-------------
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSET VALUE Class A Shares:
PER SHARE
- - -------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (based on net assets
of $264,358,580 and 18,756,434 shares of beneficial interest outstanding)
$14.09
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price)
$14.95
- - -------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $5,996,160 and 428,130 shares of beneficial interest outstanding)
$14.01
- - -------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $21,087,007 and 1,503,813 shares of beneficial interest outstanding)
$14.02
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Nine Months Ended September 30,
1996
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
INVESTMENT INCOME Interest (net of foreign withholding taxes of $9,260)
$ 9,646,866
- - -------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $77,444)
2,710,998
-------------
Total income 12,357,864
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
EXPENSES Management fees--Note 4
1,544,001
- - -------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 345,838
Class B 26,446
Class C 133,941
- - -------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
263,045
- - -------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 98,917
- - -------------------------------------------------------------------------------------------------------
Shareholder reports 98,446
- - -------------------------------------------------------------------------------------------------------
Custodian fees and expenses 72,595
- - -------------------------------------------------------------------------------------------------------
Legal and auditing fees 49,590
- - -------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class B 2,428
Class C 4,485
- - -------------------------------------------------------------------------------------------------------
Other 22,415
-------------
Total expenses 2,662,147
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET INVESTMENT INCOME
9,695,717
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
REALIZED AND UNREALIZED Net realized gain on:
GAIN (LOSS) Investments and options written (including premiums on options exercised)
14,287,148
Closing and expiration of options written
836,046
Foreign currency transactions 421,291
-------------
Net realized gain 15,544,485
- - -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 5,331,900
Translation of assets and liabilities denominated in foreign currencies
(938,617)
-------------
Net change 4,393,283
-------------
Net realized and unrealized gain 19,937,768
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 29,633,485
-------------
-------------
The Fund changed its fiscal year end from December 31 to September 30.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPT. 30, DECEMBER
31,
1996(1) 1995
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
OPERATIONS Net investment income $ 9,695,717
$ 10,269,144
- - -------------------------------------------------------------------------------------------------------
Net realized gain 15,544,485 11,752,299
- - -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,393,283
31,347,982
--------------- ---------------
Net increase in net assets resulting from operations 29,633,485
53,369,425
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A (8,029,426)
(9,264,819)
SHAREHOLDERS Class B (114,496)
(14,574)
Class C (478,886) (386,395)
- - -------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (10,313,461)
Class B -- (52,208)
Class C -- (630,243)
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS beneficial interest transactions--Note 2:
Class A (6,428,157) (18,002,247)
Class B 4,480,009 1,310,712
Class C 4,355,405 5,054,751
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSETS Total increase 23,417,934
21,070,941
- - -------------------------------------------------------------------------------------------------------
Beginning of period 268,023,813
246,952,872
--------------- ---------------
End of period [including undistributed (overdistributed) net
investment income of $615,057 and $(621,120), respectively] $ 291,441,747
$ 268,023,813
--------------- ---------------
--------------- ---------------
1. The Fund changed its fiscal year end from December 31 to September 30.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993 1992 1991(4)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.07 $11.52 $13.05 $11.63
$11.22 $10.19
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Income (loss) from investment operations:
Net investment income (loss) .49 .52 .54 .44 .39
.40
Net realized and unrealized gain (loss) .96 2.08 (.75) 1.43 .44
1.06
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.45 2.60 (.21) 1.87 .83 1.46
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Dividends and distributions to shareholders:
Dividends from net investment income (.43) (.49) (.53) (.44) (.42)
(.43)
Distributions from net realized gain -- (.56) (.79) (.01) --
--
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.43) (1.05) (1.32) (.45) (.42) (.43)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Net asset value, end of period $14.09 $13.07 $11.52 $13.05 $11.63
$11.22
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TOTAL RETURN, AT NET ASSET VALUE(5) 11.22% 22.79% (1.59)%
16.30% 7.54% 14.67%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $264,359 $251,353 $237,771 $277,914
$266,713 $276,800
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Average net assets (in thousands) $256,765 $249,660 $260,767 $272,303
$269,096 $192,870
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Ratios to average net assets:
Net investment income 4.73%(6) 3.97% 4.10% 3.58%
3.41% 3.78%
Expenses 1.21%(6) 1.15% 1.09% 1.14% 1.17%
1.27%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Portfolio turnover rate(7) 31.7% 28.5% 31.5% 32.7% 60.3%
102.0%
Average brokerage commission rate(8) $0.0336 $0.0350 -- -- --
--
<PAGE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------------------------
NINE MONTHS NINE MONTHS
ENDED PERIOD ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, YEAR
ENDED DECEMBER 31,
1996(2) 1995(3) 1996(2) 1995 1994 1993(1)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.03 $13.28 $13.01 $11.49
$13.05 $12.86
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Income (loss) from investment operations:
Net investment income (loss) .41 .17 .40 .40 .44
(.97)
Net realized and unrealized gain (loss) .93 .41 .96 2.07 (.77)
1.29
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.34 .58 1.36 2.47 (.33) .32
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.27) (.35) (.39) (.44)
(.12)
Distributions from net realized gain -- (.56) -- (.56) (.79)
(.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.36) (.83) (.35) (.95) (1.23) (.13)
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Net asset value, end of period $14.01 $13.03 $14.02 $13.01 $11.49
$13.05
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.37% 4.44% 10.55%
21.69% (2.50)% 2.51%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,996 $1,265 $21,087 $15,405
$9,182 $396
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Average net assets (in thousands) $3,546 $ 520 $17,898 $11,827
$5,601 $194
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Ratios to average net assets:
Net investment income 3.69%(6) 2.62%(6) 3.84%(6) 3.08%
3.30% 2.19%(6)
Expenses 2.12%(6) 2.27%(6) 2.07%(6) 1.99% 2.00%
2.50%(6)
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Portfolio turnover rate(7) 31.7% 28.5% 31.7% 28.5% 31.5%
32.7%
Average brokerage commission rate(8) $0.0336 $0.0350 $0.0336 $0.0350
-- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to
December 31, 1993.
2. The Fund changed its fiscal year end from December 31 to September 30.
3. For the period from August 29, 1995 (inception of offering) to
December 31, 1995.
4. Per share amounts calculated based on the weighted average number of shares
outstanding during the year.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1996 were $80,364,625 and $89,523,738, respectively.
8. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Asset Allocation Fund (the Fund) is
ACCOUNTING POLICIES registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management
investment company. On August 15, 1996, the Board of
Trustees elected to change the fiscal year end of the
Fund from December 31 to September 30. Accordingly,
these financial statements include information for
the nine month period from January 1, 1996 to
September 30, 1996. The Fund's investment objective
is to seek high total investment return (current
income and capital appreciation in the value of its
shares). The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent
deferred sales charge. All three classes of shares
have identical rights to earnings, assets and voting
privileges, except that each class has its own
distribution and/or service plan, expenses directly
attributable to a particular class and exclusive
voting rights with respect to matters affecting a
single class. Class B shares will automatically
convert to Class A shares six years after the date of
purchase. The following is a summary of significant
accounting policies consistently followed by the
Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which
such information is regularly reported are valued at
the last sale price of the day or, in the absence of
sales, at values based on the closing bid or the last
sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are
valued using dealer-supplied valuations provided the
Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect
current market value, or are valued under
consistently applied procedures established by the
Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities
having a remaining maturity of 60 days or less are
valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium
or discount. Forward foreign currency exchange
contracts are valued based on the closing prices of
the forward currency contracts rates in the London
foreign exchange markets on a daily basis as provided
by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal
exchange on which the option is traded or, in the
absence of any transactions that day, the value is
based upon the last sale price on the prior trading
date if it is within the spread between the closing
bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
-----------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records
of the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of
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 Statement of Operations.
-----------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the
custodian to take possession, to have legally
segregated in the Federal Reserve Book Entry System
or to have segregated within the custodian's vault,
all securities held as collateral for repurchase
agreements. The market value of the underlying
securities is required to be at least 102% of the
resale price at the time of purchase. If the seller
of the agreement defaults and the value of the
collateral declines, or if the seller enters an
insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
<PAGE>
1. SIGNIFICANT Allocation of Income, Expenses, and Gains and Losses.
ACCOUNTING POLICIES Income, expenses (other than those attributable to a
(CONTINUED) specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
-----------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply
with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income or excise tax provision is required. At
September 30, 1996, the Fund had available for
federal income tax purposes an unused capital loss
carryover of approximately $890,000, which expires in
1997 and 1998.
-----------------------------------------------------
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 nine months ended September 30,
1996, a provision of $58,255 was made for the Fund's
projected benefit obligations, and payments of $4,853
were made to retired trustees, resulting in an
accumulated liability of $166,286 at September 30,
1996.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
-----------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net
investment income (loss) and net realized gain (loss)
may differ for financial statement and tax purposes.
The character of the distributions made during the
year from net investment income or net realized gains
may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that
the income or realized gain (loss) was recorded by
the Fund.
During the nine months ended September 30,
1996, the Fund adjusted the classification of
distributions to shareholders to reflect the
differences between financial statement amounts and
distributions determined in accordance with income
tax regulations. Accordingly, during the nine months
ended September 30, 1996, amounts have been
reclassified to reflect an increase in paid-in
capital of $445,208, an increase in undistributed net
investment income of $15,671, and a decrease in
accumulated net realized gain on investments of
$460,879. In addition, to properly reflect foreign
currency gain in the components of capital, $147,597
of foreign exchange gain determined according to U.S.
federal income tax rules has been reclassified from
net realized gain to net investment income.
-----------------------------------------------------
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.
Dividends in kind are recognized as income on the ex-
dividend date, at the current market value of the
underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate
and a market adjustment is made periodically.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of income and
expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest for each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30, 1996(2) YEAR ENDED
DECEMBER 31, 1995(1)
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C> <C>
Class A:
Sold 860,353 $ 11,689,114 1,154,810 $ 14,750,208
Dividends and distributions reinvested 524,674 7,190,397 1,346,436
17,504,698
Redeemed (1,862,109) (25,307,668) (3,900,352)
(50,257,153)
------------- ------------- ------------- -------------
Net decrease (477,082) $ (6,428,157) (1,399,106) $
(18,002,247)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class B:
Sold 366,656 $ 4,968,484 93,459 $ 1,262,882
Dividends and distributions reinvested 6,864 93,829 4,293
55,836
Redeemed (42,546) (582,304) (596) (8,006)
------------- ------------- ------------- -------------
Net increase 330,974 $ 4,480,009 97,156 $ 1,310,712
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class C:
Sold 448,796 $ 6,095,106 556,244 $ 7,139,931
Dividends and distributions reinvested 33,327 455,037 74,748
969,689
Redeemed (162,380) (2,194,738) (245,902) (3,054,869)
------------- ------------- ------------- -------------
Net increase 319,743 $ 4,355,405 385,090 $ 5,054,751
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
1. For the year ended December 31, 1995 for Class A
and Class C shares and for the period from August 29,
1995 (inception of offering) to December 31, 1995 for
Class B shares.
2. The Fund changed its fiscal year end from December
31 to September 30.
- - --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND At September 30, 1996, net unrealized appreciation on
LOSSES ON INVESTMENTS investments and options written of $49,447,115 was
AND OPTIONS WRITTEN composed of gross appreciation of $53,680,163, and
gross depreciation of $4,233,048.
- - --------------------------------------------------------------------------------
4. MANAGEMENT FEES Management fees paid to the Manager are in accordance
AND OTHER TRANSACTIONS with the investment advisory agreement with the Fund
WITH AFFILIATES which provides for a fee of 0.75% of the first $200
million of average annual net assets, 0.72% of the
next $200 million, 0.69% of the next $200 million,
0.66% of the next $200 million, and 0.60% of
aggregate 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 nine months ended September 30, 1996,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $286,317, of which
$100,671 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to
broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $169,693 and $59,436, of
which $6,767 and $1,886, respectively, was paid to an
affiliated broker/dealer. During the nine months
ended September 30, 1996, OFDI received contingent
deferred sales charges of $1,119 and $3,419,
respectively, upon redemption of Class B and Class C
shares as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division
of the Manager, is the transfer and shareholder
servicing agent for the Fund, and for other
registered investment companies. OFS's total costs of
providing such services are allocated ratably to
these companies.
The Fund has adopted a Service Plan for Class
A shares to reimburse OFDI for a portion of its costs
incurred in connection with the personal service and
maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate
that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the
service fee to reimburse brokers, dealers, banks and
other financial institutions quarterly for providing
personal service and maintenance of accounts of their
customers that hold Class A shares. During the nine
months ended September 30, 1996, OFDI paid $34,848 to
an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
<PAGE>
- - --------------------------------------------------------------------------------
4. MANAGEMENT FEES The Fund has adopted a compensation type Distribution
AND OTHER TRANSACTIONS and Service Plan for Class B shares to compensate
WITH AFFILIATES OFDI for its services and costs in distributing Class
(CONTINUED) B shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of
0.75% per year on Class B shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers
for providing personal services for accounts that
hold Class B shares. Both fees are computed on the
average annual net assets of Class B shares,
determined as of the close of each regular business
day. If the Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments
of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated.
During the nine months ended September 30, 1996, OFDI
retained $25,989 as compensation for Class B sales
commissions and service fee advances, as well as
financing costs. As of September 30, 1996, OFDI had
incurred unreimbursed expenses of $227,661 for
Class B.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class C shares to
reimburse OFDI for its services and costs in
distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays OFDI an annual asset-
based sales charge of 0.75% per year on Class C
shares. OFDI also receives a service fee of 0.25% per
year to reimburse dealers for providing personal
services for accounts that hold Class C shares. Both
fees are computed on the average annual net assets of
Class C shares, determined as of the close of each
regular business day. If the Plan is terminated by
the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to
OFDI for certain expenses it incurred before the Plan
was terminated. During the nine months ended
September 30, 1996, OFDI paid $6,442 to an affiliated
broker/dealer as reimbursement for Class C personal
service and maintenance expenses and retained $53,420
as reimbursement for Class C sales commissions and
service fee advances, as well as financing costs. As
of September 30, 1996, OFDI had incurred unreimbursed
expenses of $201,723 for Class C.
- - --------------------------------------------------------------------------------
5. FORWARD CONTRACTS A forward foreign currency exchange contract (forward
contract) is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated
rate.
The Fund uses forward contracts to seek to
manage foreign currency risks. They may also be used
to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge
upon the purchase or sale of a security denominated
in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes
in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the
closing prices of the forward currency contract rates
in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The
Fund will realize a gain or loss upon the closing or
settlement of the forward transaction.
Securities held in segregated accounts to
cover net exposure on outstanding forward contracts
are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation
on forward contracts is reported in the Statement of
Assets and Liabilities. Realized gains and losses are
reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and
unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At September 30, 1996, outstanding forward currency
exchange contracts to sell foreign currencies were as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Date Amounts (000s) Sept. 30, 1996 Appreciation
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Italian Lira (ITL) 10/1/96 412,344 ITL $270,914 $974
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------------------------
6. OPTION ACTIVITY The Fund may buy and sell put and call options, or
write put and 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.
Options are valued daily based upon the last
sale price on the principal exchange on which the
option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a
gain or loss upon the expiration or closing of the
option transaction. When an option is exercised, the
proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost
of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding
call options are noted in the Statement of
Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and
market value are detailed in a footnote to the
Statement of Investments. Options written are
reported as a liability in the Statement of Assets
and Liabilities. Gains and losses are reported in the
Statement of Operations.
The risk in writing a call option is that the
Fund gives up the opportunity for profit if the
market price of the security increases and the option
is exercised. The risk in writing a put option is
that the Fund may incur a loss if the market price of
the security decreases and the option is exercised.
The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The
Fund also has the additional risk of not being able
to enter into a closing transaction if a liquid
secondary market does not exist.
Written option activity for the nine months ended
September 30, 1996 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS
---------------------------------------------------------------------
NUMBER AMOUNT
OF OPTIONS OF PREMIUMS
---------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1995 3,206 $ 948,975
---------------------------------------------------------------------
Options written 3,997 1,112,991
---------------------------------------------------------------------
Options closed or expired (4,750) (1,234,937)
---------------------------------------------------------------------
Options exercised (725) (274,835)
---------- -----------
Options outstanding at September 30, 1996 1,728 $552,194
---------- -----------
---------- -----------
</TABLE>
7. ILLIQUID AND At September 30, 1996, investments in securities
RESTRICTED SECURITIES included issues that are illiquid or restricted.
Restricted securities are often purchased in private
placement transactions, are not registered under the
Securities Act of 1933, may have contractual
restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair
value. A security may be considered illiquid if it
lacks a readily-available market or if its valuation
has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net
assets (determined at the time of purchase and
reviewed from time to time) in illiquid or restricted
securities. Certain restricted securities, eligible
for resale to qualified institutional investors, are
not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this
limitation at September 30, 1996 was $1,002,636 which
represents 0.34% of the Fund's net assets.
<PAGE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Appendix B
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.
Description of Fitch Investor's Services, Inc. Ratings
Fitch investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a
particular security. The ratings represent Fitch's assessment of
the issuer's ability to meet the obligations of a specific debt
issue or class of debt in a timely manner.
The rating takes into consideration special features of the
issue, its relationship to other obligations of the issuer, the
current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the
economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may
be provided by insurance policies or financial guaranties unless
otherwise indicated.
Bonds that have the same rating are of similar but not
necessarily identical credit quality since the rating categories do
not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price,
the suitability of any security for a particular investor, or the
tax-exempt nature or taxability of payments made in respect of any
security.
Fitch ratings are based on information obtained from issuers,
other obligors, underwriters, their experts and other sources Fitch
believes to be reliable. Fitch does not audit or verify the truth
or accuracy of such information. Ratings may be changed, suspended
or withdrawn as a result of changes in, or the unavailability of,
information or for any other reasons.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short
term debt of these issuers is generally rated AAA.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "AAA" category.
Fitch speculative grade bond ratings provide a guide to
investors in determining the credit risk associated with a
particular security. The ratings ("BB" to "C") represent Fitch's
assessment of the likelihood of timely payment of principal and
interest in accordance with the terms of obligation for bond issues
not in default. For defaulted bonds, the rating ("DDD" to "D") is
an assessment of the ultimate recovery value through reorganization
or liquidation.
The rating takes into consideration special features of the
issue, its relationship to other obligations of the issuer, the
current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the
economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not
necessarily identical credit quality since rating categories cannot
fully reflect the differences in degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, businesses and financial alternatives
can be identified which could assist the obligor in satisfying its
debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need of
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery on these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) and Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "DDD," "DD" or "D" categories.
Description of Duff & Phelps' Ratings
Duff & Phelps issues two types of ratings: 1) long-term debt
ratings which apply to obligations with an initial maturity of over
one year (including preferred stock); 2) short-term debt ratings
which apply to indebtedness with an initial maturity of less than
one year. Duff & Phelps' ratings are specific to credit quality,
i.e., the likelihood of timely payment of principal, interest, and,
in the case of a preferred stock rating, preferred stock dividends.
Our credit ratings do not constitute investment recommendations, as
no consideration is given to current market prices for the rated
securities.
Long-Term Debt and Preferred Stock. These ratings represent
a summary opinion of the issuer's long-term fundamental quality.
Rating determination is based on qualitative and quantitative
factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer.
Important considerations are vulnerability to economic cycles as
well as risks related to such factors as competition, government
action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected
viability of the obligor at the trough of the cycle is a critical
determination.
Each rating also takes into account the legal form of the
security (e.g., first mortgage bonds, subordinated debt, preferred
stock, etc.) The extent of rating dispersion among the various
classes of securities is determined by several factors including
relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer and
the nature of covenant protection. Review of indenture
restrictions is important to the analysis of a company's operating
and financial constraints.
The Credit Rating Committee formally reviews all ratings once
per quarter (more frequently, if necessary). Ratings of BBB- and
higher fall within the definition of investment grade securities,
ad defined by bank and insurance supervisory authorities.
Structured finance issues, including real estate and various
asset-backed financings, use this same rating scale. Duff & Phelps
claims paying ability ratings of insurance companies use the same
scale with minor modification in the definitions. Thus, an
investor can compare the credit quality of investment alternatives
across industries and structural types.
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- High credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of
economic conditions.
A+, A, A- Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.
BBB+, BBB, BBB- Below average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within
this category.
B+, B, B- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent
changes in the rating within this category or into a higher or
lower rating grade.
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principle, interest, or
preferred dividends. Protection factors are narrow and risk can
be substantial with unfavorable economic/industry conditions,
and/or with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principle and/or interest payments.
DP Preferred stock with dividend arrearages.
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
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
240SAI.397
<PAGE>
OPPENHEIMER FUND
Supplement dated January 1, 1997 to the
Prospectus dated October 25, 1996
The Prospectus is changed as follows:
1. In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares" on page 27, (2) sales of Class B shares described
in the fifth paragraph in "Distribution and Service Plans for Class
B and Class C Shares" on page 35, and (3) sales of Class C shares
described in the sixth paragraph in "Distribution and Service Plans
for Class B and Class C Shares" on page 35, the Distributor will
pay additional commission to each broker, dealer and financial
institution that has a sales agreement with the Distributor and
agrees to accept that additional commission (these are referred to
as "participating firms") for Class A, Class B and Class C shares
of the Fund sold in "qualifying transactions" (the "promotion").
The additional commission will be 1.00% of the offering price of
shares of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If
the additional commission is paid on the sale of Class A shares of
$500,000 or more or the sale of Class A shares to a SEP IRA with
100 or more eligible participants and those shares are redeemed
within 13 months from the end of the month in which they were
purchased, the participating firm will be required to return the
additional commission.
"Qualifying transactions" are aggregate sales of $150,000 or
more of Class A, Class B and/or Class C shares of any one or more
of the Oppenheimer funds (except money market funds and municipal
bond funds) for rollovers or trustee-to-trustee transfers from
another retirement plan trustee, of IRA assets or other employee
benefit plan assets from an account or investment other than an
account or investment in the Oppenheimer funds to (1) IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the
OppenheimerFunds, Inc. prototype IRA agreement, if the rollover
contribution is received during the period from January 1, 1997
through April 15, 1997 (the "promotion period"), or the acceptance
of a direct rollover or trustee-to-trustee transfer is acknowledged
by the trustee of the OppenheimerFunds prototype IRA during the
promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR-
SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA
agreement, if the rollover contribution or trustee-to-trustee
payment is received during the promotion period. "Qualifying
transactions" do not include (1) purchases of Class A shares
intended but not yet made under a Letter of Intent, and (2)
purchases of Class A, Class B and/or Class C shares with the
redemption proceeds from an existing Oppenheimer funds account.
2. The first paragraph of the section captioned "Class A
Contingent Deferred Sales Charge" in "Buying Class A Shares" on
page 28, is revised by adding the following subparagraph:
Purchases by a retirement plan qualified under section
401(a) if the retirement plan has total plan assets of $500,000 or
more.
January 1, 1997 PS0400.005
<PAGE>
OPPENHEIMER FUND
Supplement dated March 6, 1997 to the
Prospectus dated October 25, 1996
The Prospectus is amended as follows:
1. The following paragraphs are added at the end of "How the Fund
is Managed" on page 18:
The Board of Trustees of Oppenheimer Fund (referred to as
the "Fund") has determined that it is in the best
interest of the Fund's shareholders that the Fund
reorganize with and into Oppenheimer Multiple Strategies
Fund ("Multiple Strategies Fund"). The Board unanimously
approved the terms of an agreement and plan of
reorganization to be entered into between these funds
(the "reorganization plan") and the transactions
contemplated (the transactions are referred to as the
"reorganization"). The Board further determined that the
reorganization should be submitted to the Fund's
shareholders for approval, and recommended that
shareholders approve the reorganization.
Pursuant to the reorganization plan, (i) substantially
all of the assets of the Fund would be exchanged for
shares of Multiple Strategies Fund, (ii) these shares of
Multiple Strategies Fund would be distributed to the
shareholders of the Fund, (iii) the Fund would be
liquidated, and (iv) the outstanding shares of the Fund
would be cancelled. It is expected that the
reorganization will be tax-free, pursuant to Section
368(a)(1) of the Internal Revenue Code of 1986, as
amended, and the Fund will request an opinion of tax
counsel to that effect.
A meeting of the shareholders of the Fund is scheduled
for June 17, 1997 to vote on the reorganization.
Approval of the reorganization requires the affirmative
vote of a majority of the outstanding shares of the Fund
(the term "majority" is defined in the Investment Company
Act as a special majority. It is also explained in the
Statement of Additional Information). There is no
assurance that the Fund's shareholders will approve the
reorganization. Details about the proposed
reorganization will be contained in a proxy statement and
other soliciting materials to be sent on or about April
30, 1997, to the Fund's shareholders of record as of
April 11, 1997. Persons who become shareholders of the
Fund after the record date for the shareholder meeting
will not be entitled to vote on the reorganization.
March 6, 1997 PS0400.006
<PAGE>
Oppenheimer Fund
Prospectus dated October 25, 1996
Oppenheimer Fund is a mutual fund with the primary investment
objective of seeking capital appreciation. Its secondary objective
is to achieve income consistent with growth in capital.
The Fund attempts to achieve its objectives through investment
in common stocks that offer growth possibilities while retaining a
flexible approach to investment. In its operations, the Fund may
utilize the following special techniques when such use appears
appropriate: hedging, short-term trading, investment in foreign
securities, and investment of up to 10% of the Fund's net assets in
illiquid or restricted securities. Some investment techniques the
Fund may use 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.
Please refer to "Investment Objective and Policies" for more
information about the types of securities the Fund invests in and
refer to "Investment Risks" for a discussion of the risks of
investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the October 25, 1996, Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
10 Investment Risks
12 Investment Techniques and Strategies
16 How the Fund is Managed
17 Performance of the Fund
A B O U T Y O U R A C C O U N T
21 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
35 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
37 How to Sell Shares
By Mail
By Telephone
39 How to Exchange Shares
40 Shareholder Account Rules and Policies
42 Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its fiscal year ended June 30, 1996.
Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account: starting on page 21 for an explanation of how and when
these charges apply.
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge 5.75% None None
on Purchases (as a % of
offering price)
Maximum Deferred Sales Charge None(1) 5% in the first
1% if shares(as a % of the lower of year, declining are redeemed
the original offering to 1% in the within 12 months
price or redemption sixth year and of purchase(2)
proceeds) eliminated
thereafter(2)
Maximum Sales Charge on None None None
on Reinvested Dividends
Exchange Fee None None None
Redemption Fee None(3) None(3) None(3)
(1) If you invest $1 million or more ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A Contingent
Deferred Sales Charge" on page 26) 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 - Buying Class A
Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares" below, for more information on the
contingent deferred sales charge.
(3) There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemptions paid by ACH transfers through
Account Link. See "How to Sell Shares."
Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc. (referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in
"How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees
paid to the bank that holds its portfolio securities, audit fees
and legal and other expenses. Those expenses are detailed in the
Fund's Financial Statements in the Statement of Additional
Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets):
Class A Class B Class C
Shares Shares Shares
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.13% 1.00% 1.00%
Other Expenses 0.39% 0.39% 0.41%
Total Fund Operating
Expenses 1.26% 2.13% 2.15%
The numbers in the chart above for Class A and Class C shares
are based upon the Fund's expenses in its last fiscal year ended
June 30, 1996. Class B shares were not publicly offered prior to
November 1, 1995. Therefore, Annual Fund Operating Expenses shown
for Class B shares are based on the period from November 1, 1995
until June 30, 1996. All amounts are shown as a percentage of the
average net assets of each class of the Fund's shares for the year
ended June 30, 1996, and have been annualized for Class C shares.
The "12b-1 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). Currently, the Board of Trustees has set the maximum fee
at 0.15% for assets representing Class A shares sold before April
1, 1991, and 0.25% for assets representing Class A shares sold on
or after that date. For Class B and Class C shares, the 12b-1 Plan
fees are the service 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%.
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, and the Fund's annual return is 5%, and that
its operating expenses for each class are the ones shown in the
Annual Fund Operating Expenses table above. If you were to redeem
your shares at the end of each period shown below, your investment
would incur the following expenses by the end of 1, 3, 5 and 10
years:
1 year 3 years 5 years 10 years*
Class A Shares $70 $95 $123 $201
Class B Shares $72 $97 $134 $204
Class C Shares $32 $67 $115 $248
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
Class A Shares $70 $95 $123 $201
Class B Shares $22 $67 $114 $204
Class C Shares $22 $67 $115 $248
*In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into
Class A shares after six years. Because of the asset-based sales
charge and the contingent deferred sales charge imposed on Class B
and Class C shares of the Fund, long-term Class B and Class C
shareholders could bear expenses that would be the economic
equivalent of more than the maximum front-end sales charge
permitted under applicable regulatory requirements. For Class B
shareholders, the automatic conversion of Class B shares to Class
A Shares is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" for
more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
What Is The Fund's Investment Objective? The Fund's primary
investment objective is to seek capital appreciation. Its second
objective is to achieve income consistent with growth in capital.
What Does the Fund Invest In? The Fund primarily invests in
common stocks (these are called "equity securities") that offer
growth possibilities while retaining a flexible approach to
investment. The Fund may also write covered calls and use certain
derivative investments and hedging instruments to try to manage
investment risks. These investments are more fully explained in
"Investment Objective and Policies" starting on page 10.
Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc., which (including a
subsidiary) manages investment company portfolios having over $55
billion in assets as of September 30, 1996. The Manager is paid an
advisory fee by the Fund, based on its net assets. The Fund has a
portfolio manager, Richard Rubinstein, who is employed by the
Manager and is primarily responsible for the selection of the
Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on
page ___ for more information about the Manager and its fees.
How Risky is the Fund? All investments carry risks to some
degree. It is important to remember that the Fund is designed for
long-term investors. 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 stock and bond market movements. The change
in value of particular stocks or bonds may result from an event
affecting the issuer, or changes in interest rates that can affect
stock and bond prices. The Fund's investments in foreign
securities are subject to additional risks associated with
investing abroad, such as the affect of currency rate changes on
stock values. These changes affect the value of the Fund's
investments and its share prices for each class of its shares. In
the Oppenheimer funds spectrum, the Fund is generally more
aggressive than the other growth and income funds but less
aggressive than the aggressive growth funds. While the Manager
tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased for the portfolio,
and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objectives and your
shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Risks" starting on page
10 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 21 for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Each class of shares has the same investment
portfolio, but different expenses. Class A shares are offered with
a front-end sales charge, starting at 5.75%, and reduced for larger
purchases. Class B shares and Class C shares are offered without
a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months of
purchase, respectively. There is also an annual asset-based sales
charge on Class B shares and Class C shares. Please review "How To
Buy Shares" starting on page 21 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
36. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How To Exchange Shares" on page 38.
How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total return and
cumulative total returns, 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 a broad market index, which we
have done on pages __ and __. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense
ratios and other data based on the Fund's average net assets. This
information has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended June 30, 1996, is included in
the Statement of Additional Information. Class B shares were only
offered during a portion of the fiscal year ended June 30, 1996,
commencing on November 1, 1995.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Financial Highlights
Class A
--------------------------------------------------------------------
Year Ended June 30,
1996 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $11.34 $10.55 $10.41
$9.72
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Income (loss) from investment operations:
Net investment income .20 .31 .07 .11
Net realized and unrealized gain (loss) 1.69 1.58 .55 1.15
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total income (loss) from investment
operations 1.89 1.89 .62 1.26
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) (.02) (.03)
(.10)
Distributions from net realized gain (.96) (1.08) (.45) (.47)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total dividends and distributions
to shareholders (1.09) (1.10) (.48) (.57)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Net asset value, end of period $12.14 $11.34 $10.55
$10.41
====================================================================
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total Return, at Net Asset Value(3) 17.56% 19.60% 5.84%
13.33%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $273,194 $270,381 $237,281
$216,180
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Average net assets (in thousands) $270,211 $254,011 $229,976
$212,660
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios to average net assets:
Net investment income 1.59% 1.10% 0.69%
1.05%
Expenses 1.26% 1.29% 1.16% 1.10%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Portfolio turnover rate(5) 29.7% 34.1% 41.6%
35.6%
Average brokerage commission rate(6) $0.0324 -- --
- - --
<PAGE>
--------------------------------------------------------------------
--------------------------------------------------------------------
1992 1991 1990 1989
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Per Share Operating Data:
Net asset value, beginning of period $9.31 $9.06 $9.17
$8.36
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Income (loss) from investment operations:
Net investment income .16 .26 .32 .21
Net realized and unrealized gain (loss) .84 .69 .23
.82
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total income (loss) from investment
operations 1.00 .95 .55 1.03
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.32) (.22) (.25)
(.17)
Distributions from net realized gain (.27) (.48) (.41)
(.05)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total dividends and distributions
to shareholders (.59) (.70) (.66) (.22)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Net asset value, end of period $9.72 $9.31 $9.06
$9.17
=====================================================================
=======
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total Return, at Net Asset Value(3) 11.22% 11.65% 6.04%
12.60%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $209,495 $202,509 $196,076
$208,166
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Average net assets (in thousands) $221,369 $189,994 $206,259
$201,556
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios to average net assets:
Net investment income 1.71% 2.91% 3.36%
2.49%
Expenses 1.09% 1.07% 1.04% 1.07%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Portfolio turnover rate(5) 58.2% 105.8% 79.5%
96.6%
Average brokerage commission rate(6) -- -- --
--
<PAGE>
- - ----------------------------------------------------------------------------------
Class B Class C
---------------------------------------- ------------------ ------------
Period Ended
June 30, Year Ended June 30,
1988 1987 1996(2) 1996
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Per Share Operating Data:
Net asset value, beginning of period $12.16 $12.48 $11.85
$11.19
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Income (loss) from investment operations:
Net investment income .13 .06 .14 .07
Net realized and unrealized gain (loss) (1.40) .79 1.17 1.69
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total income (loss) from investment
operations (1.27) .85 1.31 1.76
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.17) (.02) (.13) (.07)
Distributions from net realized gain (2.36) (1.15) (.96) (.96)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total dividends and distributions
to shareholders (2.53) (1.17) (1.09) (1.03)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Net asset value, end of period $8.36 $12.16 $12.07 $11.92
=====================================================================
============
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total Return, at Net Asset Value(3) (12.30)% 8.44% 11.86%
16.51%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $213,301 $273,756 $1,655
$4,086
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Average net assets (in thousands) $224,367 $261,686 $649
$3,491
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ratios to average net assets:
Net investment income 1.51% 0.52% 0.74%(4) 0.75%
Expenses 1.04% 0.99% 2.13%(4) 2.15%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Portfolio turnover rate(5) 118.8% 59.1% 29.7% 29.7%
Average brokerage commission rate(6) -- -- $0.0324 $0.0324
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------
----------------------------------------
1995 1994(1)
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.49 $11.08
- - -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .03 .02
Net realized and unrealized gain (loss) 1.75 (.14)
- - -------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.78 (.12)
- - -------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.02)
Distributions from net realized gain (1.08) (.45)
- - -------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.08) (.47)
- - -------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.19 $10.49
========================================
- - -------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3) 18.57% (1.24)%
- - -------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $2,154 $294
- - -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,100 $108
- - -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.48% 0.05%(4)
Expenses 2.20% 2.44%(4)
- - -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 34.1% 41.6%
Average brokerage commission rate(6) -- --
</TABLE>
<TABLE>
<CAPTION>
<S><C>
1. For the period from December 1, 1993 (inception of offering) to June 30, 1994.
2. For the period from November 1, 1995 (inception of offering) to June 30, 1996.
3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal
period (or inception of
offering), with all dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected
in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time
of acquisition of one year
or less are excluded from the calculation. Purchases and sales of investment securities (excluding
short-term securities) for the
period ended June 30, 1996 were $74,869,135 and $104,723,299, respectively.
6. Total brokerage commissions paid on applicable purchases and sales of portfolio securities for
the period divided by the total
number of related shares purchased and sold.
</TABLE>
Oppenheimer Fund
<PAGE>
Investment Objective and Policies
Objective. The Fund's primary objective is to seek capital
appreciation. Its secondary objective is to achieve income
consistent with growth in capital.
Investment Policies and Strategies. In seeking its primary
investment objective of capital appreciation, the Fund invests
principally in common stocks that the Manager believes offer growth
possibilities. However, the Manager follows a flexible approach to
investment at all times. Investments may also include preferred
stocks, convertible securities, and rights or warrants. To achieve
its secondary objective of income consistent with capital growth,
the Fund invests in dividend-paying common stocks and may also
invest in corporate debt securities and obligations of U.S. and
foreign governments (see "Foreign Securities," below). The Fund
may try to hedge against losses in the value of its portfolio
securities by using hedging techniques described below.
Can the Fund's Investment Objective and Policies Change?
The Fund has a primary and secondary investment objective,
described above, as well as investment policies it follows to try
to achieve its objectives. Additionally, the Fund uses certain
investment techniques and strategies in carrying out those
investment policies. The Fund's investment policies and practices
are not "fundamental" unless this Prospectus or Statement of
Additional Information says that a particular policy is
"fundamental." The Fund's investment objectives are 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.
Investment Risks
All investments carry risks to some degree, whether they are risks
that market prices of the investment will fluctuate (this is known
as "market risk") or that the underlying issuer will experience
financial difficulties and may default on its obligation under a
fixed-income investment to pay interest and repay principal (this
is referred to as "credit risk"). These general investment risks,
and the special risks of certain types of investments that the Fund
may hold are described below. They affect the value of the Fund's
investments, its investment performance, and the prices of its
shares. These risks collectively form the risk profile of the
Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time, and because the
income earned on securities is subject to change, there is no
assurance that the Fund will achieve its investment objective.
When you redeem your shares, they may be worth more or less than
what you paid for them.
Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile, and stock prices can
change substantially. This market risk will affect the Fund's net
asset 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, not all stock markets move in the
same direction at the same time, and other factors can affect a
particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, and changes in government regulations affecting an
industry). Not all of these factors can be predicted. 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.
Foreign Securities Have Special Risks. While foreign
securities offer special investment opportunities, there are also
special risks. The change in value of a foreign currency against
the U.S. dollar will result in a change in the U.S. dollar value of
securities denominated in that foreign currency. Foreign issuers
are not subject to the same accounting and disclosure requirements
that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations,
expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or
other political and economic factors. More information about the
risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the 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 the market for the future or option was illiquid.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. For example, if a covered call
written by the Fund is exercised on an investment that has
increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call
price. In writing a put, 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. These risks are described in
greater detail in the Statement of Additional Information.
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 detailed
information about these practices, including limitations on their
use that may help reduce some of the risks.
Special Situations. The Fund may invest in securities of
companies that are in "special situations" that the Manager
believes present opportunities for capital growth. A "special
situation" may be an event such as a proposed merger,
reorganization, or other unusual development that is expected to
occur and which may result in an increase in the value of a
company's securities regardless of general business conditions or
the movement of prices in the securities market as a whole. There
is a risk that the price of the security may decline if the
anticipated development fails to occur. Although the Fund may
invest in companies for the purpose of influencing their managerial
policy, the Fund has not made any such investment, and has no
present intention of doing so.
Concentration of Investments. The Fund reserves the right
to concentrate up to 50% of its assets in any one industry and may
do so when the Manager deems it appropriate to seek to achieve the
Fund's investment objectives. Such concentration would possibly
occur only when trends in the market as a whole were considered
unfavorable but at the same time a particular industry was believed
to afford better-than-average prospects. Except in that case, it
is not the intention of the Fund to concentrate more than 25% of
the value of its total assets in any one industry.
Temporary Defensive Investments. When stock market prices
are falling or in other unusual economic or business circumstances,
the Fund may invest all or a portion of its assets in defensive
securities. Securities selected for defensive purposes may include
debt securities, such as rated or unrated bonds and debentures,
preferred stocks, cash or cash equivalents, such as U.S. Treasury
bills and other short-term obligations of the U.S. Government, its
agencies or instrumentalities, or commercial paper rated "A-1" or
better by Standard & Poor's Corporation or "P-1" or better by
Moody's Investors Service, Inc.
Foreign Securities. The Fund may purchase equity and debt
securities issued or guaranteed by foreign companies or foreign
governments or their agencies. The Fund may buy securities of
companies in any country, developed or underdeveloped. Investments
in securities of issuers in underdeveloped countries generally
involve more risk and may be considered highly speculative.
Although the Fund may from time to time emphasize investments in
U.S. issuers, there is no limit on the amount of the Fund's assets
that may be invested in foreign securities.
Warrants and Rights. Warrants are options to purchase
stock at set prices that are valid for a limited period of time.
Rights are similar to warrants but normally have a short duration
and are distributed by the issuer to its shareholders. The Fund
may invest up to 5% of its total assets in warrants and rights.
That 5% does not apply to warrants and rights the Fund acquired as
part of units with other securities or that were attached to other
securities. No more than 2% of the Fund's total assets may be
invested in warrants and rights that are not listed on the New York
or American Stock Exchanges. For further details about these
investments, see "Warrants and Rights" in the Additional Statement.
Convertible Securities. Convertible securities are bonds,
preferred stocks and other securities that normally pay a fixed
rate of interest or dividend and give the owner the option to
convert the security into common stock. While the value of
convertible securities depends in part on interest rate changes and
the credit quality of the issuer, the price will also change based
on the price of the underlying stock. While convertible securities
generally have less potential for gain than common stock, their
income provides a cushion against the stock price's declines. They
generally pay less income than non-convertible bonds. The Manager
generally analyzes these investments from the perspective of the
growth potential of the underlying stock and treats them as "equity
substitutes."
Preferred Stock. The Fund may invest in preferred stock.
Generally, preferred stock is an equity security that has a
specified dividend and ranks after bonds and before common stocks
in its claim on income for dividend payments and on assets should
the issuing company be liquidated or enter bankruptcy proceedings.
While most preferred stocks pay a dividend, the Fund may purchase
preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made
primarily for their capital appreciation potential. Certain
preferred stock may be convertible into or exchangeable for a given
number of common shares. Such preferred stock tends to be more
volatile than nonconvertible preferred stock, which behaves more
like a fixed-income security.
Investing in Small, Unseasoned Companies. The Fund may
invest in securities of small, unseasoned companies. These are
companies that have been in operation for less than three years,
even after including the operations of any predecessors.
Securities of these companies may have limited liquidity (which
means that the Fund may have difficulty selling them at an
acceptable price when it wants to) and the prices of these
securities may be volatile. The Fund currently intends to invest no
more than 5% of its total assets in securities of small, unseasoned
issuers.
Illiquid and Restricted Securities. Under the policies
established by the Fund's Board of Trustees, the Manager determines
the liquidity of certain of the Fund's investments. Investments may
be illiquid because of the absence of an active trading market,
making it difficult to value them or dispose of them promptly at an
acceptable price. A restricted security is one that has a
contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.
The Fund currently intends to invest no more than 10% of its net
assets in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional
purchasers, are not subject to that limit.
Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers and other types of financial institutions approved by the
Board of Trustees. The Fund must receive collateral for a loan.
After any loan, the value of the securities loaned must not exceed
25% of the value of the Fund's total assets. There are some risks
in connection with securities lending. The Fund might experience a
delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower
defaults. The Fund presently does not intend to make loans of
portfolio securities that will exceed 5% of the value of the Fund's
total assets in the coming year.
Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. They are used primarily for liquidity purposes. 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. Repurchase agreements
must be fully collateralized. However, if the vendor fails to pay
the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to
be subject to repurchase agreements having a maturity beyond seven
days.
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 indices and
foreign currencies. These are all referred to as "hedging
instruments." While the Fund currently does not engage extensively
in hedging, the Fund may use these instruments for hedging purposes
and, in the case of covered calls, non-hedging purposes as
described below.
The Fund may write covered call options and 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 equity securities market as a temporary
substitute for purchasing individual securities. Some of these
strategies, such as selling futures and writing covered calls,
hedge the Fund's portfolio against price fluctuations. Other
hedging strategies, such as buying futures, tend to increase the
Fund's exposure to the securities market.
Forward contracts may be used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options may be 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.
Futures. The Fund may buy and sell futures contracts that
relate to (1) broadly-based securities indices (these are referred
to as Financial Futures), (2) interest rates (these are referred to
as Interest Rate Futures) or (3) foreign currencies (these are
referred to as Forward Contracts).
Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls). A call or
put option may not be purchased if the value of all the Fund's put
and call options would exceed 5% of the Fund's total assets.
The Fund may buy calls on securities, broadly-based securities
indices, foreign currencies, Interest Rate Futures or Financial
Futures. The Fund may buy calls to terminate its obligation on a
call the Fund previously wrote. The Fund may write (that is, sell)
call options. When the Fund writes a call, it receives cash
(called a premium). Each call the Fund writes must be "covered"
while the call is outstanding. That means the Fund owns the
investment on which the call was written . The Fund may write
calls on Futures contracts it owns, but these calls must be covered
by securities or other liquid assets the Fund owns and segregates
to enable it to satisfy its obligations if the call is exercised.
After writing any call, not more than 25% of the Fund's total
assets may be subject to calls.
The Fund may buy and sell put options. The Fund can buy those
puts that relate to securities the Fund owns, broadly-based
securities indices, foreign currencies, or Interest Rate Futures or
Financial Futures (whether or not the Fund holds the particular
Future in its portfolio). Writing puts requires the segregation of
liquid assets to cover the put. The Fund will not write a put if
it will require more than 25% of the Fund's total assets to be
segregated to cover the put obligation.
The Fund may buy or sell foreign currency puts and calls only
if they are traded on a securities or commodities exchange or over-
the-counter market, or are quoted by recognized dealers in those
options.
Forward Contracts. Forward contracts are foreign currency
exchange contracts. The are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to "lock
in" the U.S. dollar price of a security denominated in a foreign
currency that the Fund has bought or sold, or to protect against
possible losses from changes in the relative values of the U.S.
dollar and 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.
Derivative Investments. In general, a "derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security.
Examples of derivative investments in which the Fund may invest
include index-linked notes (principal or interest payments on the
note depend on performance of a market index) or equity-linked debt
securities (at maturity, principal is payable in an amount based on
the issuer's common stock price at maturity). In the broadest
sense, exchange-traded options and futures contracts (discussed in
"Hedging," above) may be considered "derivative investments."
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:
The Fund cannot buy securities issued or guaranteed by any
one issuer (except the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets,
more than 5% of the Fund's total assets would be invested in
securities of that issuer, or the Fund would then own more than 10%
of that issuer's voting securities.
The Fund cannot deviate from the restrictions listed under
"Concentration of Investments."
All of the percentage restrictions described above and
elsewhere in this Prospectus apply only at the time the Fund
purchases a security. The Fund need not dispose of a security
merely because the size of the Fund's assets has changed or the
security has increased in value relative to the size of the Fund.
There are other fundamental policies discussed in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1958 as a New
York corporation but was reorganized in 1985 as a Massachusetts
business trust. The Fund is an open-end management investment
company.
The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders under
Massachusetts law. The Trustees meet periodically throughout the
year to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and provides more information about them and the officers of the
Fund. Although the Fund will not normally hold annual meetings of
its shareholders, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call
a meeting to remove a Trustee or to take other action described in
the 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 on matters
submitted to the vote of shareholders. Shares of each class may
have separate voting rights on matters in which interests of one
class are different from interests of another class, and shares of
a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the
Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets
forth the fees paid by the Fund to the Manager, and describes the
expenses that the Fund is responsible to pay to conduct its
business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $55 billion as of September 30, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio Manager. The Portfolio Manager of the Fund is
Richard H. Rubinstein. He has been the person principally
responsible for the day-to-day management of the Fund's portfolio
since June, 1990. During the past five years, Mr. Rubinstein has
been a Senior Vice President of the Manager and a Vice President of
the Fund, and has also served as an officer of other Oppenheimer
funds.
Fees and Expenses. Under the Investment Advisory Agreement,
the Fund pays the Manager a monthly fee at the following annual
rates, 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 net assets in excess of $800
million. The Fund's management fee for its last fiscal year was
0.74% of average annual net assets for Class A shares and for Class
C shares, and 0.74% of the average annual net assets (annualized)
for Class B shares. This rate may be higher than the rate paid by
some other mutual funds.
The Fund pays expenses related to its daily operations, such
as custodian fees, Trustees' fees, transfer agency fees, legal fees
and auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However, those
expenses reduce the net asset value of shares, and therefore are
indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other
expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies
and practices in "Brokerage Policies of the Fund" in the Statement
of Additional Information. That section discusses how brokers and
dealers are selected for the Fund's portfolio transactions. When
deciding which brokers to use, the Manager is permitted by the
Investment Advisory Agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment adviser.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other "Oppenheimer funds"
managed by the Manager and is sub-distributor for funds managed by
a subsidiary of the Manager.
The Transfer Agent. The Fund's Transfer Agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for the other
Oppenheimer funds. Shareholders should direct inquiries about
their account to the Transfer Agent at the address and toll-free
number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the term
"total return" to illustrate its performance. The performance of
each class of shares is shown separately, because the performance
of each class of shares will usually be different as a result of
the different kinds of expenses each class bears. 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 be useful to help you see how well your investment has done
over time and to compare it to 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. 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, depending
on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
Total Returns. There are different types of "total returns"
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B and Class C shares, normally the
contingent deferred sales charge that applies to the period for
which total return is shown has been deducted. However, total
returns may also be quoted at "net asset value," without
considering the effect of either the front-end or the appropriate
contingent deferred sales charge, as applicable, and those returns
would be less if the sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its past fiscal year ended June 30,
1996, followed by a graphical comparison of the Fund's performance
to an appropriate broad-based market index.
Management's Discussion of Performance. During the Fund's
fiscal year ended June 30, 1996, its performance was affected
principally by its continued emphasis on growth stocks and by the
overall strong performance of the U.S. stock market during most of
the fiscal year, although there was significant market volatility
near the end of its fiscal year. The Fund's performance benefited
from the Fund's domestic stock holdings, including positions in
technology and healthcare stocks that appreciated as the stock
market rose. Consistent with the portfolio manager's contrarian
investment strategy, the Fund bought retail stocks believed to be
undervalued. As interest rates increased toward the end of the
fiscal year and corporate earnings growth slowed among U.S.
companies the Manager decreased the number of securities in its
portfolio, added to its position in energy stocks , and increased
its position in stocks of foreign companies believed to have
advantages over U.S. competitors or which were selling at prices
the Manager believed to be less than their value.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held at June 30,
1996. In the case of Class A shares, performance is measured over
a ten-year period. In the case of Class B and Class C shares,
performance is measured from the inception of the class on November
1, 1995 and December 1, 1993, respectively. The Fund's performance
reflects the deduction of the 5.75% current maximum initial sales
charge on Class A shares, the applicable contingent deferred sales
charge on Class B and Class C shares, and reinvestment of all
dividends and capital gains distributions.
The Fund's performance is compared to the performance of the
S&P 500 Index, a broad-based index of equity securities widely
regarded as a general measure of the performance of the U.S. equity
securities market. Index performance reflects the reinvestment of
dividends but does not consider the effect of expenses or taxes.
Also, the Fund's performance reflects the effect of Fund business
and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted
that the Fund's investments are not limited to the securities in
the S&P 500 Index, which tend to be securities of larger, well-
capitalized companies. Moreover, the index data does not reflect
any assessment of the risk of the investments included in the
index.
Comparison of Change in Value
of $10,000 Hypothetical Investment in:
Oppenheimer Fund and the
S&P 500 Index
[Graph]
Average Annual Total Return of Class A Shares of the Fund at
6/30/96(1)
1-Year 5-Year 10-Year
10.80% 12.07% 8.41%
Cumulative Total Return of Class B Shares of the Fund at
6/30/96(2)
Life
6.86%
Average Annual Total Return of Class C Shares of the Fund at
6/30/96(3)
1-Year Life(2)
15.51% 12.79%
- - ----------------------------
Total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions.
(1)The inception date of the fund (Class A shares) was 4/30/59.
Class A returns are shown net of the applicable 5.75% maximum
initial sales charge.
(2)Class B shares of the Fund were first publicly offered on
11/1/95. The cumulative total return and the ending account value
in the graph are shown net of the applicable 5% contingent deferred
sales charge for the period.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
Class A Shares. If you buy Class A shares, you pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page 26). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 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
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
six years of buying them, you will normally pay a contingent
deferred sales charge. That sales charge varies depending on how
long you own your shares, as described in "Buying Class B Shares"
below.
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as discussed in "Buying Class C
Shares," below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class
considering the effect of the asset-based sales charge on Class B
and Class C expenses (which will affect your investment return).
For the sake of comparison, we have assumed that there is a 10%
rate of appreciation in your investment each year. Of course, the
actual performance of your investment cannot be predicted and will
vary, based on the Fund's actual investment returns, and the
operating expenses borne by each class of shares, and which class
of shares you invest in. The factors discussed below are not
intended to be investment advice, guidelines 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 Class C shares,
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A shares might be more advantageous than Class C (as
well as Class B) shares for investments of more than $100,000
expected to be held for 5 or 6 years (or more). For investments
over $250,000 expected to be held 4 to 6 years (or more), Class A
shares may become more advantageous than Class C (and Class B
shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more of Class B shares or $1 million or more of Class C shares,
from a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore, you should analyze your options
carefully.
Are There Differences in Account Features That Matter to
You? Because some account features may not be available to Class
B and Class C shareholders, or other features (such as Automatic
Withdrawal Plans) might not be advisable (because of the effect of
contingent deferred sales charge) in non-retirement accounts for
Class B and Class C shareholders, you should carefully review how
you plan to use your investment account before deciding which class
of shares to buy. For example, share certificates are not
available for Class B or Class C shares and if you are considering
using your shares as collateral, that may be a factor.
Additionally, the dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne
solely by that class, such as the asset-based sales charge to which
Class B and Class C shares are subject, as described below and in
the Statement of Additional Information.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class.
It is important that investors understand that the purpose of the
Class B and Class C contingent deferred sales charge and asset-
based sales charges is the same as the purpose of the front-end
sales charge on sales of Class A shares: to compensate the
Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can
make initial and subsequent investments of as little as $25; and
subsequent purchases of at least $25 can be made by telephone
through AccountLink.
Under pension and profit-sharing and 401(k) plans and
Individual Retirement Accounts (IRAs), you can make an initial
investment of as little as $250 (if your IRA is established under
an Asset Builder Plan, the $25 minimum applies), and subsequent
investments may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. When
you buy shares, be sure to specify Class A, Class B or Class C
shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend you discuss your investment first
with a financial advisor, to be sure that it is appropriate for
you.
Buying Shares Through OppenheimerFunds AccountLink. You can
use AccountLink to link your Fund account with an account at a U.S.
bank or other financial institution that is an Automated Clearing
House (ACH) member. You can then transmit funds electronically to
purchase shares, to have the Transfer Agent send redemption
proceeds, or to transmit dividends and distributions to your bank
account.
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 Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the
Application and in the Statement of Additional Information.
At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales
charge that applies) that is next determined after the Distributor
receives the purchase order in Denver. In most cases, to enable
you to receive that day's offering price, the Distributor or its
designated agent must receive your order by the time of day The New
York Stock Exchange closes, which is normally 4:00 P.M., but may be
earlier on some days (all references to time in this Prospectus
mean "New York Time"). The net asset value of each class of shares
is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day"). If you buy
shares through a dealer, the dealer must receive your order by the
close of The New York Stock Exchange on a regular business day and
transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00
P.M. The Distributor may reject any purchase order for the Fund's
shares, in its sole discretion.
Special Sales Charge Arrangements For Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
Front-End
Front-End Sales Charge as
Sales Charge as a Percentage of Commission as
a Percentage of Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
Purchases aggregating $1 million or more.
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
employee benefit plan, group retirement plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans"); that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more.
Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or registered
investment adviser that has made special arrangements with the
Distributor for these purchases, or (2) by a direct rollover of a
distribution from a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
those purchases.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net
asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2)
the original offering price (which is the original net asset value)
of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 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. Until January 1, 1997. Dealers
whose sales of Class A shares of Oppenheimer funds (other than
money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per
quarter), will receive monthly one-half of the Distributor's
retained commissions on those sales, and if those sales exceed $10
million per year, those dealers will receive the Distributor's
entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also include Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the
sales charge rate that applies to your purchases of Class A shares.
The total amount of your intended purchases of both Class A and
Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. This can include
purchases made up to 90 days before the date of the Letter. More
information is contained in the Application and in "Reduced Sales
Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker, or
adviser for the purchase or sale of shares of the Fund);
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares).
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class A shares of that Fund due to the
termination of the Class B and TRAC-2000 program on November 24,
1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence be December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor; or
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and no further
commission will be payable if the shares are redeemed within 18
months of purchase);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program; or
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may
not exceed 0.25% of the average annual net assets of Class A shares
of the Fund. The Fund's Board of Trustees has set the annual rate
for assets representing Class A shares of the Fund sold on or after
April 1, 1991 at 0.25%, and has set the annual rate for assets
representing Class A shares sold before April 1, 1991 at 0.15% (the
Board has authority to increase that rate to no more than 0.25%).
The Distributor uses all of those fees to compensate dealers,
brokers, banks and other financial institutions quarterly for
providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. Payments are made by the Distributor
quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service
providers or their customers. The payments under the Plan increase
the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the
net asset value of the shares at the time of redemption or the
original offering price (which is the original net asset value).
The contingent deferred sales charge is not imposed on the amount
of your account value represented by an increase in net asset value
over the initial purchase price. The Class B contingent deferred
sales charge is paid to the Distributor to reimburse its expenses
of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution and Service Plan, described
below. The conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.
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. This Plan is described below under
"Distribution and Service Plans for Class B and Class C Shares".
Waiver of Class B Sales Charge. The Class B contingent
deferred sales charge will be waived under the circumstances
described below under "Waivers of Class B and Class C Sales
Charge."
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and 3)
shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for distributing Class
B and Class C shares and servicing accounts. Under the Plans, the
Fund pays the Distributor an annual "asset-based sales charge" of
0.75% per year on Class B shares and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under
each plan.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B
or C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund
pays the asset-based sales charges to the Distributor for its
services rendered in distributing Class B shares. Those payments
are at a fixed rate that 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.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sales of Class B shares is 4.00% of the purchase
price. The Distributor retains the Class B asset-based sales
charge.
The Distributor currently pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of
sale of Class C shares. Including the advance of the service fee,
the total amount paid by the Distributor to the dealer at the time
of sale of Class C shares is 1.00% of the purchase price. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been
outstanding for a year or more.
The Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plans for Class B and Class
C shares. If the Fund terminates either Plan, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the Plan
was terminated.
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 of Shares in Certain Cases. The Class
B and Class C contingent deferred sales charge will be waived for
redemptions of shares in the following cases:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code) of the participant or beneficiary (the
death or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving
shareholder, including a trustee of a "grantor" trust or revocable
living trust for which the trustee is also the sole beneficiary
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the
request;
for distributions from OppenheimerFunds prototype 401(k)
plans (1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (5)
for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares 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;
shares issued in plans of reorganization to which the Fund
is a party; or
shares redeemed in involuntary redemptions as described
below.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or
annual basis. 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 automatically exchange an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each Oppenheimer funds account is
$25. These exchanges are subject to the terms of the Exchange
Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge.
This privilege applies to Class A or Class B shares that you
purchased subject to an initial sales charge and to Class A and
Class B shares on which you paid a contingent deferred sales charge
when you redeemed them. It does not apply to Class C shares. You
must be sure to ask the Distributor for this privilege when you
send your payment. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
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 account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered; and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests Send courier or Express Mail requests
to:
by mail:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217 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. You may not redeem shares held in an
OppenheimerFunds retirement plan or under a share certificate by
telephone.
To redeem shares through a service representative, call 1-
800-852-8457
To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink or Wire. There
are no dollar limits on telephone redemption proceeds sent to a
bank account designated when you establish AccountLink. Normally
the ACH transfer to your bank is initiated on the business day
after the redemption. You do not receive dividends on the proceeds
of the shares you redeemed while they are waiting to be
transferred.
Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account if the bank is a member of the Federal
Reserve wire system. There is a $10 fee for each Federal Funds
wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable
the Fund to sell securities to pay the redemption proceeds. No
dividends are accrued or paid on the proceeds of shares that have
been redeemed and are awaiting transmittal by wire. To establish
wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Please call your dealer for more
information about this procedure. 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
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
You must meet the minimum purchase requirements for the fund
you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457, or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. The
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio 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.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.
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 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 and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously.
The redemption price for shares will vary from day to day
because the values of the securities in the Fund's portfolio
fluctuate, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
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
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer Identification
Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How to Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net investment income on an annual
basis and normally pays those dividends to shareholders in
December, but the Board of Trustees can change that date. The Board
may also cause the Fund to declare dividends after the close of the
Fund's fiscal year (which ends June 30). Because the Fund does not
have an objective of seeking current income, the amounts of
dividends it pays, if any, will likely be small. Also, dividends
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.
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 assurances that the
Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. The Fund's distributions from long-term capital gains
are taxable to shareholders as long-term capital gains, no matter
how long you held your shares. Dividends paid by the Fund from
short-term capital gains and net investment income, including
certain net realized foreign exchange gains, are taxable as
ordinary income. These dividends and distributions are subject to
Federal income tax and may be subject to state or local taxes.
Your distributions are taxable as described above, whether you
reinvest them in additional shares or take them in cash. Corporate
shareholders may be entitled to the corporate dividends received
deduction for some portion of the Fund's distributions treated as
ordinary income, subject to applicable limitations under the
Internal Revenue Code. Every year the Fund will send you and the
IRS a statement showing the aggregate amount and character of the
dividends and other distributions you received for 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.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
received when you sold them.
Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund Who
Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those
shareholders of (i) Quest for Value Fund, Inc., Quest for Value
Growth and Income Fund, Quest for Value Opportunity Fund, Quest for
Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became
the investment adviser to those funds, and (ii) Quest for Value
U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Global Income Fund, Quest for Value New York
Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest
for Value California Tax-Exempt Fund when those funds merged into
various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the fund (i)
acquired by such shareholder pursuant to an exchange of shares of
one of the Oppenheimer funds that was one of the Former Quest for
Value Funds or (ii) received by such shareholder pursuant to the
merger of any of the Former Quest for Value Funds into an
Oppenheimer fund on November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution , or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified
Retirement Plan or that Association purchased shares of any of the
Former Quest for Value Funds or received a proposal to purchase
such shares from OCC Distributors prior to November 24, 1995. For
this purpose only, a "Qualified Retirement Plan" includes any
401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of
a single employer.
Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 20 to 21 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates.
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer Funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995, will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50%
of 1.0% if the redemption occurs in the subsequent six months.
Class A shares of any of the Former Quest Fund for Value Funds
purchased without an initial sales charge on or before November 22,
1995 will continue to be subject to the applicable contingent
deferred sales charge in effect as of that date as set forth in the
then-current prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders.
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions. The Class A contingent deferred sales charge
will not apply to redemptions of Class A shares of the Fund
purchased by the following investors who were shareholders of any
Former Quest for Value Fund:
Investors who purchased Class A shares form a dealer that is
not or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest for Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March
6, 1995. In the following cases, the contingent deferred sales
charge will be waived for redemptions of Class A, B or C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995. In the following
cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest For
Value Fund or into which such fund merged, if those shares were
purchased on or after March 6, 1995, but prior to November 24,
1995: (1) distributions to participants or beneficiaries from
Individual Retirement Accounts under Section 408(a) of the Internal
Revenue Code or retirement plans under Section 401(a), 401(k),
403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from
service or (b) following the death or disability (as defined in the
Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than
from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); (4) withdrawals under
an automatic withdrawal plan (but only for Class B or C shares)
where the annual withdrawals do not exceed 10% of the initial value
of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales
charge paid on the redemption of any Class A, B or C shares of the
Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares
in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER FUND
Graphic material included in Prospectus of Oppenheimer Fund:
"Comparison of Total Return of Oppenheimer Fund and the S&P 500
Index - Change in Value of a $10,000 Hypothetical Investment."
A linear graph will be included in the Prospectus of
Oppenheimer Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment
in the Fund. In the case of the Fund's Class A shares, that graph
will cover each of the Fund's last ten fiscal years from 6/30/86
through 6/30/96. In the case of the Fund's Class B shares, the
graph will cover the period from the inception of the Class
(November 1, 1995) through 6/30/96. In the case of the Fund's
Class C shares, the graph will cover the period from inception of
the class (December 1, 1993) through 6/30/96. The graphs will
compare such values with hypothetical $10,000 investments over the
same time periods in the S&P 500 Index.
Set forth below are the relevant data points that will appear
on the linear graph. Additional information with respect to the
foregoing, including a description of the S&P 500 Index, is set
forth in the Prospectus under "Performance of the Fund - Comparing
the Fund's Performance to the Market."
Fiscal Year Oppenheimer S&P 500
Ended Fund A Index
06/30/86 $9,425 $10,000
06/30/87 $10,221 $13,150
06/30/88 $8,965 $11,649
06/30/89 $10,093 $14,039
06/30/90 $10,702 $16,348
06/30/91 $11,949 $17,553
06/30/92 $13,290 $19,903
06/30/93 $15,062 $22,611
06/30/94 $15,941 $22,928
06/30/95 $19,066 $28,897
06/30/96 $22,414 $36,404
Fiscal Period Oppenheimer S&P 500
Ended Fund B Index
11/01/95 $10,000 $10,000
06/30/96 $10,687 $11,713
Fiscal Period Oppenheimer S&P 500
Ended Fund C Index
12/1/93 $10,000 $10,000
06/30/94 $9,877 $9,779
06/30/95 $11,711 $12,324
06/30/96 $13,644 $15,526
<PAGE>
Oppenheimer Fund
Two World Trade Center
New York, NY 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
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, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
PR400.1096 Printed on recycled paper
<PAGE>
Oppenheimer Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated October 25, 1996
This Statement of Additional Information of Oppenheimer Fund
is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated
October 25 1996. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services at P.O. Box 5270, Denver, Colorado 80217
or by calling the Transfer Agent at the toll-free number shown
above.
Contents
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . 3
Other Investment Restrictions . . . . . . . . . . . . . 15
How the Fund is Managed. . . . . . . . . . . . . . . . . . . 16
Organization and History. . . . . . . . . . . . . . . . 16
Trustees and Officers of the Fund . . . . . . . . . . . 17
The Manager and Its Affiliates. . . . . . . . . . . . . 22
Brokerage Policies of the Fund . . . . . . . . . . . . . . . 24
Performance of the Fund. . . . . . . . . . . . . . . . . . . 25
Distribution and Service Plans . . . . . . . . . . . . . . . 28
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . 30
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . 37
How To Exchange Shares . . . . . . . . . . . . . . . . . . . 42
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . 44
Additional Information About the Fund. . . . . . . . . . . . 46
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . 47
Financial Statements . . . . . . . . . . . . . . . . . . . . 48
Appendix A: Industry Classifications . . . . . . . . . . . . A-1
<PAGE>
<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 the
types of securities in which the Fund invests, as well as the
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment advisor, OppenheimerFunds, Inc. (the "Manager"),
evaluates the merits of securities primarily through the exercise
of its own investment analysis. This may include, among other
things, evaluation of the history of the issuer's operations,
prospects for the industry of which the issuer is part, the
issuer's financial condition, the issuer's pending product
developments and developments by competitors, the effect of general
market and economic conditions on the issuer's business, and
legislative proposals or new laws that might affect the issuer.
Current income is not a consideration in the selection of portfolio
securities for the Fund, whether for appreciation, defensive or
liquidity purposes. The fact that a security has a low yield or
does not pay current income will not be an adverse factor in
selecting securities to try to achieve the Fund's investment
objective of capital appreciation unless the Manager believes that
the lack of yield might adversely affect appreciation
possibilities.
The portion of the Fund's assets allocated to securities and
methods selected for capital appreciation will depend upon the
judgment of the Manager as to the future movement of the equity
securities markets. If the Manager believes that economic
conditions favor a rising market, the Fund will emphasize
securities and investment methods selected for high capital growth.
If the Manager believes that a market decline is likely, defensive
securities and investment methods will be emphasized (See
"Temporary Defensive Investments," below).
Foreign Securities. As noted in the Prospectus, the Fund
may invest in securities (which may be denominated in U.S. dollars
or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities and in
securities issued by U.S. corporations denominated in non-U.S.
currencies. The types of foreign debt obligations and other
securities in which the Fund may invest are the same types of debt
and equity securities identified above. Foreign securities are
subject however, to additional risks not associated with domestic
securities, as discussed below. These additional risks may be more
pronounced as to investments in securities issued by emerging
market countries or by companies located in emerging market
countries.
"Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the
United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-
counter markets. Securities of foreign issuers that are
represented by American Depository Receipts or that are listed on
a U.S. securities exchange or traded in the U.S. over-the-counter
markets are not considered "foreign securities" for the purpose of
the Fund's investment allocations, because they are not subject to
many of the special considerations and risks, discussed below, that
apply to foreign securities traded and held abroad.
Investing in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to
reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. In buying foreign securities, the Fund may convert U.S.
dollars into foreign currency, but only to effect securities
transactions on foreign securities exchanges and not to hold such
currency as an investment. If the Fund's portfolio securities are
held abroad, the sub-custodians or depositories holding them must
be approved by the Fund's Board of Trustees to the extent that
approval is required under applicable rules of the Securities and
Exchange Commission.
Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the
U.S. These include: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less
liquidity on foreign markets than in the U.S.; less regulation of
foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits against foreign
issuers; higher brokerage commission rates than in the U.S.;
increased risks of delays in settlement of portfolio transactions
or loss of certificates for portfolio securities because of the
lesser speed and reliability of mail service between the U.S. and
foreign countries than within the U.S.; possibilities in some
countries of expropriation or nationalization of assets,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign
economies. 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 re-imposed. If the Fund's securities are
held abroad, the countries in which such securities may be held and
the sub-custodians holding them must be approved by the Fund's
Board of Trustees under applicable SEC rules.
Other Investment Techniques and Strategies
Temporary Defensive Investments. When the equity markets in
general are declining, the Fund may commit an increasing portion of
its assets to defensive securities. These may include the types of
securities described in the Prospectus. When investing for
defensive purposes, the Fund will normally emphasize investment in
short-term debt securities (that is, securities maturing in one
year or less from the date of purchase), since those types of
securities are generally more liquid and usually may be disposed of
quickly without significant gains or losses so that the Manager may
have liquid assets when it wishes to make investments in securities
for appreciation possibilities.
Warrants and Rights. Warrants 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 prices of
warrants do not necessarily move 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.
Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Trustees of the Fund or by the Manager under Board-
approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's
holding of that security may be deemed to be illiquid.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Repurchase transactions are not considered "loans" for
the purpose of the Fund's limit on the percentage of its assets
that can be loaned. Under applicable regulatory requirements
(which are subject to change), the loan collateral on each business
day must at least equal the value of the loaned securities and must
consist of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. 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', administrative or other fees the
Fund pays in connection with the loan. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code
and must permit the Fund to reacquire loaned securities on five
days' notice or in time to vote on any important matter.
Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sale of fund shares, or pending settlement of purchases of
portfolio securities. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an
approved vendor. An "approved vendor" is a commercial bank or the
U.S. branch of a foreign bank or a broker-dealer which has been
designated a primary dealer in government securities which must
meet credit requirements set by the Fund's Board of Trustees from
time to time. The repurchase price exceeds the purchase price by
an amount that reflects an agreed-upon interest rate effective for
the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans"
under the Investment Company Act of 1940 (the "Investment Company
Act"), collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must
equal or exceed the repurchase price to fully collateralize the
repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value.
Hedging with Options and Futures Contracts. The Fund may
use hedging instruments for the purposes described in the
Prospectus. When hedging to attempt to protect against declines in
the market value of the Fund's portfolio, or to permit the Fund to
retain unrealized gains in the value of portfolio securities which
have appreciated, or to facilitate selling securities for
investment reasons, the Fund may: (1) sell Stock Index Futures, (2)
buy puts, or (3) write covered calls on securities or on Futures
(as described in the Prospectus). When hedging to establish a
position in the equities market as a temporary substitute for the
purchase of individual equity securities, the Fund may: (1) buy
Futures, or (2) buy calls on such Futures or on securities.
Normally, the Fund would then purchase the equity securities and
terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in
the underlying cash market. In the future, the Fund may employ
hedging instruments and strategies that are not presently
contemplated but which may be developed, to the extent such
investment methods are consistent with the Fund's investment
objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments
the Fund may use is provided below.
Futures. The Fund may buy and sell futures contracts
related to financial indices, including stock indices (a "Financial
Future"). A financial index assigns relative values to the
securities included in the index and fluctuates with the changes in
the market value of those securities. Financial indices cannot be
purchased or sold directly. The contracts obligate the seller to
deliver, and the purchaser to take, cash to settle the futures
transaction or to enter into an offsetting contract. No physical
delivery of the securities underlying the index is made on settling
the futures obligation. No monetary amount is paid or received by
a Fund on the purchase or sale of a Financial Future.
A Fund may buy and sell futures contracts on interest rates
("Interest Rate Futures"). No price is paid or received upon the
purchase or sale of an Interest Rate Future. An Interest Rate
Future obligates the seller to deliver and the purchaser to take a
specific type of debt security at a specific future date for a
fixed price. That obligation may be satisfied by actual delivery
of the debt security or by entering into an offsetting contract.
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 payment will be deposited with the
Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account
only under specified conditions. As the Future is marked to market
to reflect changes in its market value, subsequent margin payments,
called variation margin, will be paid to or by the futures broker
on a daily basis. Prior to expiration of the Future, if the Fund
elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is
required to be paid by or released to the Fund, and any loss or
gain is realized for tax purposes. Although Financial Futures and
Interest Rate Futures by their terms call for settlement by
delivery of cash or securities, respectively, in most cases the
obligation is fulfilled by entering into an offsetting position.
All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Writing Covered Calls. When the Fund writes a call on a
security, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 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 should the price of the
underlying security decline during the call period, which may be
offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund
may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the option transaction costs and the premium
received on the call written was more or less than the price of the
call subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the related
investments and the premium received. Those profits are considered
short-term capital gains for Federal income tax purposes, and when
distributed by the fund are taxable as ordinary income. If the
Fund could not effect a closing purchase transaction due to the
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 value of liquid assets. The Fund
will segregate additional liquid assets if the value of the
escrowed assets drops below 100% of the current value of the
Future. In no circumstances would an exercise notice as to a
Future put the Fund in a short futures position.
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 forgoes the opportunity of
investing the segregated assets or writing calls against those
assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring the Fund to
take delivery of the underlying security against payment of the
exercise price. The Fund has no control over when it may be
required to purchase the underlying security, since it may be
assigned an exercise notice at any time prior to the termination of
its obligation as the writer of the put. This obligation
terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing
a put of the same series as that previously sold. Once the Fund
has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
Purchasing Puts and Calls. When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium
and, except as to calls on securities indices or 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. 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 exercise price, 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 indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying
a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market
price of the underlying investment is equal to or above the
exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration date, and the Fund
will lose its premium payment and the right to sell the underlying
investment. However, the put may be sold prior to expiration
(whether or not at a profit).
The Fund's option activities may affect its portfolio turnover
rate and brokerage commissions. The exercise of calls written by
the Fund may cause the Fund to sell related portfolio securities,
thus increasing its turnover rate. The exercise by the Fund of
puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
which would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put, or
underlying investment in connection with the exercise of a put or
call. Such commissions may be higher on a relative basis than
those which would apply to direct purchases or sales of such
underlying investments.
Premiums paid for options are small in relation to the market
value of the underlying investments and consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying
investments.
Options on Indices and Futures. Puts and calls on broadly-
based indices or Futures are similar to puts and calls on
securities or futures contracts except that all settlements are in
cash and gain or loss depends on changes in the index in question
(and thus on price movements in the market generally) rather than
on price movements of individual securities or futures contracts.
When the Fund buys a call on an index or Future, it pays a premium.
If the Fund exercises the call during the call period, a seller of
a corresponding call on the same investment will pay the Fund an
amount of cash to settle the call if the closing level of the index
or Future upon which the call is based is greater than the exercise
price of the call. That cash payment is equal to the difference
between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines
the total dollar value for each point of difference.
When the Fund buys a put on an index or Future, it pays a
premium and has the right during the put period to require a seller
of a corresponding put, upon the Fund's exercise of its put, to
deliver cash to the Fund to settle the put if the closing level of
the index or Future upon which the put is based is less than the
exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls. The
put protects the Fund to the extent that the index moves in a
similar pattern to the securities the Fund holds. The Fund can
either resell the put or, in the case of a put on a Future, buy the
underlying investment and sell it at the exercise price. The
resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying
investment is above the exercise price, and as a result the put is
not exercised, the put will become worthless on the expiration
date. In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio
securities.
Options on Foreign Currencies. The Fund may write and
purchase calls and puts on foreign currencies that are traded on a
securities or commodities exchange or over-the-counter markets or
are quoted by major recognized dealers in such options. The Fund
does so to protect against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in
the dollar value of a foreign currency in which securities to be
acquired are denominated, the increased cost of such securities may
be partially offset by purchasing calls or writing puts on that
foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio
securities denominated in that currency may be partially offset by
writing calls or purchasing puts on that foreign currency.
However, in the event of currency rate fluctuations adverse to the
Fund's position, it would lose the premium it paid and transaction
costs.
A call written on a foreign currency by the Fund is covered if
the Fund owns the underlying foreign currency covered by the call
or has an absolute and immediate right to acquire that foreign
currency without additional cash consideration (or for additional
cash consideration held in a segregated account by its Custodian)
upon conversion or exchange of other foreign currency held in its
portfolio. A call may be written by the Fund on a foreign currency
to provide a hedge against a decline due to an expected adverse
change in the exchange rate in the U.S. dollar value of a security
which the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option. This is a
"cross-hedging" strategy. In such circumstances, the Fund covers
the option by maintaining in a segregated account with the Fund's
custodian, liquid assets of any type, including equity and debt
securities of any grade, in an amount not less than the exercise
price of the option.
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 enter into a Forward Contract to "lock in"
the U.S. dollar price of a security denominated in a foreign
currency which it has purchased or sold but which has not yet
settled, or to protect against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and a
foreign currency.
The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase of 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. To do so, the Fund enters 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 value
of portfolio positions ( position hedges ). In a position hedge,
for example, when the Fund believes that a foreign currency in
which the Fund has security holdings may suffer a substantial
decline against the U.S. dollar, the Fund may enter into a forward
sale contract to sell an amount of that foreign currency for a
fixed U.S. dollar amount. Additionally, 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 U.S. dollar amount.
The Fund may also enter into a forward contract to sell a
foreign currency other than that in which the underlying security
is denominated. This technique is referred to as cross hedging,
and is done when the foreign currency sold through the forward
contract is correlated with the foreign currency or currencies in
which the underlying security positions are denominated. The
foreign currency sold through the forward contract may be sold for
a fixed U.S. dollar amount or for a fixed amount of another
currency correlated with the U.S. dollar.
The Fund may also cross hedge its portfolio positions by
entering into a forward contract to buy or sell a foreign currency
other than the currency in which its underlying securities are
denominated for a fixed amount in U.S. dollars or a fixed amount in
another currency which is correlated with the U.S. dollar. If the
Fund does not own portfolio securities denominated in the currency
on the long side of the cross hedge, the Fund will not be required
to later purchase portfolio securities denominated in that
currency. Instead, the Fund may unwind the cross hedge by
reversing the original transaction, that is, by transacting in a
forward contract that is opposite to the original cross hedge or it
may extend the hedge by "rolling" the hedge forward.
The success of cross hedging is dependent on many factors,
including the ability of the Manager to correctly identify and
monitor the correlation among foreign currencies and between
foreign currencies and the U.S. dollar. To the extent that these
correlations are not identical, the Fund may experience losses or
gains on both the underlying security and the cross currency hedge.
However, the Manager shall determine that any cross hedge is a bona
fide hedge in that it is expected to reduce the volatility of the
Fund s total return.
The Fund s Custodian will identify liquid assets for a
separate account having a value equal to the aggregate amount of
the Fund s commitment under Forward Contracts to cover its short
positions. The Fund will not enter into such Forward Contracts or
maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund s portfolio
securities or other assets denominated in that currency or another
currency that is the subject of the hedge. The Fund, however, in
order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value
of the Fund s portfolio securities or other assets denominated in
these currencies provided the excess amount is covered by liquid
securities denominated in any currency, at lest equal at all times
to the amount of such excess. As an alternative, the Fund may
purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a
price no higher than the forward contract price or the Fund may
purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price
as high or higher than the forward contact price. Unanticipated
changes in currency prices may result in poorer overall performance
for the Fund than if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and 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. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Such contracts are not traded on
an exchange. Therefore, 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 all of its holdings of
foreign currency deposits 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.
Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it
will enter into an arrangement with a primary U.S. Government
securities dealer, which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission is evaluating whether OTC options should be
considered liquid securities, and the procedure described above
could be affected by the outcome of that evaluation.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of Futures and options on Futures established by
the Commodity Futures Trading Commission ("CFTC"). In particular
the Fund is exempted from registration with the CFTC as a
"commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not
limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its
aggregate initial futures margin and related option premiums to no
more than 5% of the Fund's total assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule.
Under the Rule, the Fund also must use short Futures and Futures
options positions solely for "bona fide hedging purposes" within
the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number
of options which may be written or held by a single investor or
group of investors acting in concert, regardless of whether the
options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or
more different exchanges or futures brokers. Thus, the number of
options which the Fund may write or hold may be affected by
options written or held by other entities, including other
investment companies having the same or an affiliated investment
adviser. Position limits also apply to Futures. An exchange may
order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions. Due to
requirements under the Investment Company Act of 1940 (the
"Investment Company Act"), when the Fund purchases a Future, the
Fund will maintain in a segregated account or accounts with its
Custodian, liquid assets in an amount equal to the market value of
the securities underlying such Future, less the margin deposit
applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through"
its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (1) 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; (2) purchasing calls or
puts which expire in less than three months; (3) effecting closing
transactions with respect to calls or puts purchased less than
three months previously; (4) exercising puts or calls held by the
Fund for less than three months; or (5) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "Section
1256 contracts." Gains or losses relating to Section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
Section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, Section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the timing and character of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, generally gains or losses
attributable to fluctuations in exchange rates that occur between
the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of disposition also are treated
as ordinary gain or loss. Currency gains and losses are offset
against market gains and losses on each trade before determining a
net "Section 988" gain or loss under the Internal Revenue Code for
that trade, which may increase or decrease the amount of the Fund's
investment company income available for distribution to its
shareholders.
Risks of Hedging with Options and Futures. In addition to
the risks associated with respect to hedging that are discussed in
the Prospectus and above, there is a risk in using short hedging by
selling Futures to attempt to protect declines in the values of the
fund's securities. The risk is that the prices of the Futures will
correlate imperfectly with the behavior of the cash (i.e., market
value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close out
futures contracts through off-setting transactions which could
distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view
of speculators, the deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the 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 securities being hedged if the historical volatility of
the prices of such securities being hedged is more than the
historical volatility of the applicable index. It is also possible
that where the Fund has used Hedging Instruments in a short hedge,
the market may advance and the value of securities held in the
Fund's portfolio may decline. If this occurred, the Fund would
lose money on the Hedging Instruments and also experience a decline
in value in its 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 equities markets as a temporary substitute for the purchase
of individual equity 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 equity securities at that time because
of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the equity
securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. The following are fundamental policies,
and together with the Fund's fundamental policies described in the
Prospectus, cannot be changed without the vote of a "majority" of
the Fund's outstanding voting securities. Such a "majority" vote
is defined in the Investment Company Act, as the vote of the
holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares. Under these additional restrictions, the
Fund cannot:
make short sales;
invest in commodities or commodities contracts other than
the Hedging Instruments permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered
to be a commodity or commodity contract;
invest in real estate or in interests in real estate, but
may purchase readily marketable securities of companies holding
real estate or interests therein;
purchase or sell securities on margin; however, the Fund may
make margin deposits in connection with any of the Hedging
Instruments permitted by any of its other fundamental policies;
mortgage, hypothecate or pledge any of its assets; however,
this does not prohibit the escrow arrangements contemplated by the
writing of covered call options or other collateral or margin
arrangements in connection with any of the Hedging Instruments
permitted by any of its other fundamental policies;
borrow money in excess of 5% of its gross assets taken at
current value, and then only as a temporary measure for
extraordinary or emergency purposes;
invest in or acquire shares of any other investment company
or trust except in connection with a plan of merger, consolidation
or reorganization; however, this policy shall not prevent the Fund
from investing in the securities issued by a real estate investment
trust, provided that such trust is not permitted to invest in real
estate or interests in real estate other than mortgages or other
security interests;
underwrite securities of other companies except insofar as
it might be deemed to be an underwriter in the resale of any
securities held in its own portfolio; or
Invest more than 15% of the Fund's total assets in
securities of an issuer which together with any predecessor has
been in operation for less than three years of continuous operation
or securities of issuers which are restricted as to disposition,
including securities that may be resold pursuant to Rule 144A under
the Securities Act of 1933.
purchase or retain the securities of any issuer if those
officers, trustees and directors of the Fund or the Manager who
beneficially own individually more than .5% of the securities of
such issuer together own more than 5% of the securities of such
issuer.
Non-Fundamental Investment Restrictions. For purposes of
the Fund's policy not to concentrate its assets as described under
the second investment restriction in "Other Investment
Restrictions" 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.
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 (1) invest in oil, gas
or other mineral leases, or (2) 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.
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 for
each, Trustee and officer, is Two World Trade Center, New York, New
York 10048-0203, unless another address is listed below. Ms.
Macaskill is not a director of Oppenheimer Money Market Fund, Inc.
Otherwise, all of the Trustees are also trustees or directors of
Oppenheimer Global Fund, Oppenheimer Growth Fund, Oppenheimer
Enterprise Fund, Oppenheimer International Growth Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Target Fund, Oppenheimer
Municipal Bond Fund, Oppenheimer New York Municipal Fund,
Oppenheimer California Municipal Fund, Oppenheimer Multi-State
Municipal Trust, Oppenheimer Asset Allocation Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Global Growth & Income
Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
Discovery Fund, Oppenheimer U.S. Government Trust, Oppenheimer
World Bond Fund and Oppenheimer Multi-Sector Income Trust
(collectively, the "New York-based Oppenheimer funds"). As of
October 2, 1996, all of the Fund's Trustees and officers as a group
beneficially owned less than 1% of the Fund's outstanding shares of
the Fund. That statement does not include ownership of shares held
of record by an employee benefit plan for employees of the Manager
(one of the Trustees of the fund listed below, Ms. Macaskill, and
one of the officers, Mr. Donohue, are trustees of that plan, other
than the shares beneficially owned under the plan by the officers
of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age 71
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age 63
Vice Chairman of the Manager and formerly he held the following
positions: Vice President and Counsel of Oppenheimer Acquisition
Corp. ("OAC") the Manager's parent holding company, Executive Vice
President and General Counsel and a director of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment adviser 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 Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 73
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
Publishers, Inc. (Publishers of Psychology Today and Mother Earth
News) and Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age 48
President, Chief Executive Officer and a Director of the Manager;
Chairman and a Director of SSI and SFSI; President and a director
of OAC, HarbourView and of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc; formerly an Executive Vice
President of the Manager.
Elizabeth B. Moynihan, Trustee; Age 67
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 National Building Museum; a member of the
Trustees Council, Preservation League of New York State; a member
of the Indo-U.S. Sub-Commissions on Education and Culture.
Kenneth A. Randall, Trustee; Age 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power & oil & gas
producer), Enron-Dominion Cogen Corp. (Cogeneration Company), and
Kemper Corporation (insurance and financial services company);
Fidelity Life Association (mutual life insurance company); formerly
President and Chief Executive Officer of the Conference Board, Inc.
(international economic and business research) and a director of
Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow of Jerome Levy Economics Institute, Bard
College, 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 64
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc.
(executive recruiting); Chairman of Directors Publication, Inc.
(consulting and publishing); a director of XYAN Inc. (printing),
Professional Staff Limited and American Scientific Resources, Inc.;
a trustee of Mystic Seaport Museum, International House, Greenwich
Historical Society and Greenwich Hospital.
Sidney M. Robbins, Trustee; Age 84
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. (a 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, Vice Chairman and Trustee*; Age 70
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor").
Pauline Trigere, Trustee; Age 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, 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),
FMC Corp. (chemicals and machinery), IMC Global, Inc. (chemicals
and animal feed) and Texas Instruments, Inc. (electronics);
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.
[FN]
- - --------------------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Richard H. Rubinstein, Vice President and Portfolio Manager; Age 48
Senior Vice President of the Manager; an officer of other
Oppenheimer funds, formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer Capital Corp., an
investment adviser.
Andrew J. Donohue, Secretary; Age 46
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a director of Centennial; Executive
Vice President, General Counsel and a director of HarbourView, SSI,
SFSI, an Oppenheimer Partnership Holdings, Inc.; President and
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor;
Partner in Kraft & McManimon (a law firm); an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser);
director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age 60
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; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC;
Vice President and Treasurer of Oppenheimer Real Asset Management,
Inc; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott T. Farrar, Assistant Treasurer; Age 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer
funds; formerly a Fund Controller for the Manager, prior to which
he was an International Mutual Fund Supervisor for Brown Brothers
Harriman & Co., a bank, and previously a Senior Fund Accountant for
State Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer
funds.
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 (Ms. Macaskill and Messrs. Galli
and Spiro; Ms. Macaskill and Mr. Spiro are also officers) receive
no salary or fee from the Fund. The remaining Trustees of the Fund
received the compensation shown below from the Fund, during its
fiscal year ended June 30, 1996, and from the New York-based
Oppenheimer funds (including the Fund) for which they served as
Trustee or Director. Compensation is paid for services in the
positions below their names:
Retirement Total
Benefits Compensation
Aggregate Accrued as From All
Compensation Part of New York-based
Name and Position from Fund Fund Expenses Oppenheimer
funds1
Leon Levy $8,409 6,536 $141,000
Chairman and Trustee
Benjamin Lipstein $5,141 3,996 $ 86,200
Study Committee
Chairman and Trustee
Elizabeth B. Moynihan $5,141 3,996 $ 86,200
Study Committee Member
and Trustee
Kenneth A. Randall $4,676 3,634 $ 78,400
Audit Committee
Chairman and Trustee
Russell S. Reynolds, Jr. $3,107 $2,415 $ 52,100
Proxy Committee Member2
and Trustee
Edward V. Regan $4,103 $3,189 $68,800
Proxy Committee Chairman,2
Audit Committee Member
and Trustee
Sidney M. Robbins $7,282 $5,660 $122,100
Study Committee
advisory member, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere, Trustee $3,107 $2,415 $ 52,100
Clayton K. Yeutter $3,107 $2,415 $ 52,100
Proxy Committee Member2
and Trustee
- - -----------------------
1For the 1995 calendar year (prior to the inception of the Proxy
Committee) during which the New York-based Oppenheimer funds,
listed in the first paragraph of this section, including
Oppenheimer Mortgage Income Fund and Oppenheimer Time Fund (which
ceased operation following the acquisition of their assets by
certain other Oppenheimer funds) but excluding Oppenheimer
International Growth Fund, which had not yet commenced operations.
2Committee position held during a portion of the period shown. The
Study and Audit Committees meet for all of the New York-based
Oppenheimer funds and the fees are allocated among the funds by the
Board.
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. During the year ended June 30, 1996,
a provision of $41,657 was made for the Fund's projected benefit
obligations and payments of $2,831 were made to retired trustees,
resulting in an accumulated liability of $102,810 at June 30, 1996.
Major Shareholders. As of October 2, 1996, the two entities that
owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding shares were (i) Donaldson Lufkin &
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City,
N.J. 07303-0998, which owned 54,998.996 Class B shares (33.28%) and
(ii) Merrill Lynch Pierce Fenner & Smith Inc., Attn. Book Entry
Dept., 4800 Deer Lake Drive EA3, Jacksonville, FL 32246-6484, which
owned 37,984 Class C shares (10.79%).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom may also serve as officers of the Fund, and three of whom (Ms.
Macaskill and Messrs. Spiro and Galli) 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 between the Manager
and the Fund requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for
the Fund, including the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified
reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the
Investment Advisory Agreement or by the Distributor under the
General Distributor's Agreement are paid by the Fund. The
Investment Advisory Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, certain insurance premiums, 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. For the
Fund's fiscal years ended June 30, 1994, 1995 and 1996, the
management fees paid by the Fund to the Manager were $1,715,675,
$1,896,121, and $2,036,339 respectively.
The Investment Advisory Agreement contains no expense
limitation. However, independently of the Investment 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 fees, distribution
plan payments, and extraordinary non-recurring expenses, such as
litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund.
Pursuant to the undertaking, the Manager's fee will be reduced at
the end of a month so that there will not be any accrued but unpaid
liability under this undertaking. Currently, the most stringent
state expense limitation is imposed by California, and limits the
Fund's expenses (with specified exclusions) to 2.5% of the first
$30 million of average net assets, 2.0% of the next $70 million of
average net assets, and 1.5% of average net assets in excess of
$100 million. The Manager reserves the right to terminate or amend
the undertaking at any time. Any assumption of the Fund's expenses
under this limitation would lower the Fund's overall expense ratio
and increase its total return during any period for which expenses
are limited.
The Investment Advisory Agreement provides that so long as it
has acted with due care and in good faith, the Manager shall not be
liable for any loss sustained by reason of any investment, the
adoption of any investment policy, or the purchase, sale or
retention of securities, irrespective of whether the determinations
of the Manager relative thereto shall have been based, wholly or
partly, upon the investigation or research of any other individual,
firm or corporation believed by it to be reliable. However, the
Investment Advisory Agreement does not protect the Manager against
liability by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties or its reckless
disregard of its obligations and duties under the advisory
agreement. The Investment 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 activities. 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 corporate 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 June 30, 1994, 1995 and 1996, the aggregate
amount of sales charge on sales of the Fund's Class A shares was
$537,507, $1,275,166 and $581,891 respectively, of which the
Distributor and an affiliated broker-dealer retained $140,880,
$280,415 and $146,293 in those respective years. During the Fund's
fiscal year ended June 30, 1996, the contingent deferred sales
charge collected on the Fund's Class B shares totalled $46, all of
which the Distributor retained. During fiscal year ended June 30,
1996, sales charges advanced to broker/dealers by the Distributor
on sales of the Fund's Class B shares totalled 51,972 of which $72
was paid to an affiliated broker/dealer. During the Fund's fiscal
year ended June 30, 1996, the contingent deferred sales charge
collected on Class C shares totalled $2,962, all of which the
Distributor retained. During the fiscal year ended June 30, 1996,
sales charges advanced to broker/dealers by the Distributor on
sales of the Fund's Class C shares totalled $21,470 of which $1,625
was paid to an affiliated broker/dealer. 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. OppenheimerFunds Services, the Fund's
transfer agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the Investment Advisory Agreement
is to arrange the portfolio transactions for the Fund. The
Advisory Agreement contains provisions relating to the employment
of broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the
advisory agreement to employ broker-dealers including "affiliated"
brokers as that term is defined in the Investment Company Act, as
may, in its best judgment based on all relevant factors, implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding, but is expected to minimize the
commissions paid to the extent consistent with the interests and
policies of the Fund as established by its Board of Trustees.
Under the Advisory Agreement, the Manager is authorized to
select brokers which provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have
charged if a good faith determination is made by the Manager that
the commission is 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 Investment Advisory Agreement, 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 otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transactions in the
securities to which the option relates. Where possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply
to direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt
obligations are principal transactions at net prices. Instead of
using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker
unless it determines that a better price or execution can be
obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer
to the underwriter. Purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research for the commissions of
these 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 has also permitted the Manager to
use stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to Manager that:
(i) the trade is not from or for the broker's own inventory, (ii)
the trade was executed by the broker of 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 Investment 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.
During the Fund's fiscal years ended June 30, 1994, 1995 and
1996, total brokerage commissions paid by the Fund (not including
spreads or concessions on principal transactions on a net trade
basis) were $406,111, $349,512 and $366,506 respectively. During
the fiscal year ended June 30, 1996, $144,110 was paid to brokers
as commissions in return for research services; the aggregate
dollar amount of those transactions was $50,048,961. The
transactions giving rise to those commissions were allocated in
accordance with the internal allocation procedures described above.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" "average annual total return at net asset value" and "total
return at net asset value" of an investment in each class of shares
of the Fund may be advertised. An explanation of how these total
returns and total returns are calculated for each class and the
components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
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 factors which include 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:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, the payment of the applicable contingent deferred sales
charge of (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter) is applied to the investment result
for the time period shown (unless the total return is shown at net
asset value as described below). For Class C shares, 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 at net asset value per share, and that
the investment is redeemed at the end of the period.
The "average annual total returns" on an investment in Class
A shares of the Fund (using the method described above) for the
one, five and ten-year periods ended June 30, 1996, were 10.80%,
12.07% and 8.41%, respectively. The Fund's "cumulative total
return" for Class A shares for the ten-year period ended June 30,
1996, was 124.15%. During a portion of the periods for which total
returns are shown, the Fund's maximum sales charge rate was higher;
as a result, performance returns on actual investments during those
periods may be lower than the results shown. The cumulative total
return on Class B shares of the Fund for the period from November
1, 1995 through June 30, 1996 was 6.86%. The average annual total
return on Class C shares for the year ended June 30, 1996 was
15.51% and the average annual total return for the period December
1, 1993 (the commencement of the offering of the shares) through
June 30, 1996 was 12.79%. The cumulative total return on Class C
shares for the period December 1, 1993 through June 30, 1996 was
36.44%.
Total Returns at Net Asset Value. From time to time the
Fund may also quote an average annual total return at net asset
value or a cumulative total return at net asset value for Class A,
Class B or Class C shares. Each is based on the difference in net
asset value per share at the beginning and the end of the period
for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and
takes into consideration the reinvestment of dividends and capital
gains distributions.
The cumulative total return at net asset value of the Fund's
Class A shares for the ten-year period ended June 30, 1996, was
137.82%. The average annual total returns at net asset value for
the one, five and ten-year periods ended June 30, 1996 for Class A
shares were 17.56%, 13.41% and 9.05%, respectively. The cumulative
total return at net asset value for Class B shares for the period
November 1, 1995 through June 30, 1996 was 11.86%. The cumulative
total return at net asset value of the Fund's Class C shares for
the period December 1, 1993 (commencement of the offering of
shares) through June 30, 1996 was 36.44%. The average annual total
returns at net asset value for the one year ended June 30, 1996 and
the period December 1, 1993 through June 30, 1996 for the Fund's
Class C shares were 16.51% and 12.79%, respectively.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B or Class C shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an
equity fund seeking capital appreciation, its shares are subject to
greater market risks and volatility than shares of funds having
other investment objectives.
Other Performance Comparisons. From time to time the Fund may also
include in its advertisements and sales literature performance
information about the Fund or rankings of the Fund's performance
cited in newspapers or periodicals, such as The New York Times.
These articles may include quotations of performance from other
sources, such as Lipper Analytical Services, Inc. ("Lipper") or
Morningstar, Inc. and Lipper is 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 of
shares is ranked against (i) all other funds and (ii) all other
gold-oriented funds. The Lipper performance rankings are based on
total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or
taxes into consideration.
Morningstar is an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual
total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%),
four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and
one star is "lowest" (bottom 10%). Morningstar ranks the Fund's
Class A, Class B and Class C shares in relation to other equity
funds. Rankings are subject to change.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds services to those of
other mutual fund families selected by the rating or ranking
services, and may be based upon the opinions of the rating or
ranking service itself, using its own research or judgment, or
based upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of
the Fund under Rule 12b-1 of the Investment Company Act pursuant to
which the Fund makes payments to the Distributor in connection with
the distribution and/or servicing of the shares of that class as
described in the Prospectus. Each Plan has been approved by a vote
of (i) the Board of Trustees of the Fund, including a majority of
the "Independent Trustees," cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class. For the Distribution and Service Plans for Class B
and Class C shares, that vote was cast by the Manager as the sole
initial holder of Class B and Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform 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. None of the Plans may be amended
to increase materially the amount of payments to be made unless
such amendment is approved by shareholders of the Class affected by
the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that
would materially increase payments under the plan. Such approval
must be by a "majority" of the Class A and Class B shares (as
defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at
least quarterly on the amount of all payments made pursuant to each
Plan, the purpose for which payments were made and the identity of
each Recipient that received any such payment. The reports for the
Class B and Class C Plans 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 the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Fund's Independent Trustees. Initially, the
Board of Trustees has set the fee at the maximum rate and set no
minimum amount. However, while the maximum fee rate under the
Class a Plan is 0.25% of average annual net assets of the Fund, the
Board of Trustees has set the maximum rate for assets representing
Class A shares of the Fund acquired before April 1, 1991 at 0.15%,
and for assets representing Class A shares acquired on or after
April 1, 1991, at 0.25%.
For the fiscal year ended June 30, 1996, payments under this
Class A Plan totaled $350,307, all of which was paid by the
Distributor to Recipients, including $5,013 paid to an affiliate of
the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may
not be recovered in subsequent fiscal years. Payments received by
the Distributor under the Class A Plan will not be used to pay any
interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B 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 B Plan during the period from November 1,
1995 through June 30, 1996 totalled $4,128 all of which was
retained by the Distributor. Payments made under Class C Plan
during the fiscal year ended June 30, 1996 totalled $34,894 of
which $21,763 was retained by the Distributor and $218 was paid to
a dealer affiliated with the Distributor.
Although the Class B and Class C Plans permit the Distributor
to retain both the asset-based sales charges and the service fees
on shares, or to pay Recipients the service fee on a quarterly
basis without payment in advance, the Distributor intends to pay
the service fee to Recipients in the manner described above. A
minimum holding period may be established from time to time under
the Class B and Class C Plans by the Board. Initially, the Board
has set no minimum holding period. All payments under the Class B
and Class C Plans are subject to the limitations imposed by the
Rule of Fair Practice of the National Association of Securities
Dealers, Inc. The Distributor anticipates that it will take a
number of years for it to recoup (from the Fund's payments to the
Distributor under the Class B or Class C Plan and from the
contingent deferred sales charges collected on redeemed Class B or
Class C shares) the sales commissions paid to authorized brokers or
dealers.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits an
investor to choose the method of purchasing shares that is more
beneficial to the investor depending on the amount of the purchase,
the length of time the investor expects to hold shares and other
relevant circumstances. Investors should understand that the
purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B and Class C shares are the
same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor normally will not accept 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 Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total 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 Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and/or Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the total number of Fund shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states
that it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays
or customary U.S. business holidays on which the Exchange is
closed. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Trustees has established procedures for
the valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a securities exchange or on the
Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market,
Inc. for which last sale information is regularly reported are
valued at the last reported sale price on their primary exchange or
NASDAQ that day (or, in the absence of sales that day, at values
based on the last sale price of the preceding trading day, or
closing bid and asked prices that day); (ii) securities traded on
a foreign securities exchange are valued generally at the last
sales price available to the pricing service approved by the Fund's
Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded at its last trading
session on or immediately preceding the valuation date, or at the
mean between "bid" and "asked" prices obtained from the principal
exchange or two active market makers in the security on the basis
of reasonable inquiry; (iii) long-term debt securities having a
remaining maturity in excess of 60 days are valued based on the
mean between the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Fund's Board of Trustees or
obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments
having a maturity of more than 397 days when issued, and non-money
market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are
valued at the mean between "bid" and "asked" prices determined by
a pricing service approved by the Fund's Board of Trustees or
obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type
debt securities that had a maturity of less than 397 days 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 (vi) securities (including restricted securities)
not having readily-available market quotations are valued at fair
value determined under the Board's procedures. If the Manager is
unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above), the security may be priced at the mean
between the "bid" and "asked" prices provided by a single active
market maker.
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include matrix comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price any of
the types of securities described above to price U.S. Government
Securities, mortgage-backed securities, foreign government
securities and corporate bonds. The Manager will monitor the
accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of
selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the New York Stock Exchange. Events affecting the values of
foreign securities traded in securities markets that occur between
the time their prices are determined and the close of the New York
Stock Exchange will not be reflected in the Fund's calculation of
net asset value unless the Board of Trustees or the Manager, under
procedures established by the Board of Trustees, determines that
the particular event is likely to effect a material change in the
value of such security. Foreign currency, including forward
contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in
foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by
a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on
the principal exchange on which they are traded, or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing bid and asked prices
on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ, it shall be
valued at the mean between bid and asked prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no asked price is available).
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy shares. Dividends will
begin to accrue on such shares on the day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange that day, which is normally three days
after the ACH transfer is initiated. The Exchange normally closes
at 4:00 P.M., but may close earlier on certain days. If Federal
Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will begin to
accrue on the next regular business day. The proceeds of ACH
transfers are normally received by the Fund 3 days after the
transfers are initiated. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and expenses realized by the Distributor, dealers and
brokers making such sales. No sales charge is imposed in certain
circumstances described in the Prospectus because the Distributor
or dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, brothers and sisters, sons-
and daughters-in-law, siblings, a sibling's spouse, a spouse's
siblings, aunts, uncles, nieces and nephews.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal 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 International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Bond Fund for Growth
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term
Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer International Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income &
Growth Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Growth & Income Fund
Rochester Fund Municipals*
Rochester Portfolio Series-Limited Term
New York Municipal Fund*
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
*Shares of the Fund are not presently exchangeable for shares of
these funds.
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 Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other 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 investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under
the Letter to obtain the reduced sales charge rate on purchases of
Class A shares of the Fund (and of other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of
Class A shares. Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of
shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other OppenheimerFunds
by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual purchases. If
total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value to 5% of the intended purchase amount specified in the Letter
shall be held in escrow by the Transfer Agent. For example, if the
intended purchase amount is $50,000, the escrow shall be shares
valued in the amount of $2,500 (computed at the public offering
price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the intended purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A or Class B shares of other
Oppenheimer funds acquired in exchange for either (i) Class A
shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or
(ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"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
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent deferred sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has
the right to cause the involuntary redemption of the shares held in
any account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for the Shareholder to increase the investment, and set other terms
and conditions so that the shares would not be involuntarily
redeemed.
Selling Shares by Wire. The wire of redemption proceeds may
be delayed if a Fund's Custodian bank is not open for business on
a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the
redemption. In those circumstances, the wire will not be
transmitted until the next bank business day on which the Fund is
open for business. No dividends will be paid on the proceeds of
redeemed shares awaiting transfer by wire.
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 it portfolio securities described above under "Determination
of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares, or (ii) Class B shares subject to the Class B
contingent deferred sales charge when you redeemed them. The
reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which
shares of the Fund are exchangeable as described below, at the net
asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for
that privilege at the time of reinvestment. Any capital gain that
was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or
all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code,
if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the
Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That
would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a
contingent deferred sales charge at the time of transfer to the
name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain
subject to the contingent deferred sales charge, calculated as if
the transferee shareholder had acquired the transferred shares in
the same manner and at the same time as the transferring
shareholder. If less than all shares held in an account are
transferred, and some but not all shares in the account would be
subject to a contingent deferred sales charge if redeemed at the
time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B or 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 or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons
maintaining a plan account in their own name) in OppenheimerFunds-
sponsored prototype pension, profit-sharing or 401(k) plans may not
directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension and profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price will be the
net asset value next computed after the receipt of an order placed
by such dealer or broker, except that if the Distributor receives
an 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 closes
(normally that is 4:00 P.M., but may be earlier on some days) and
the order was transmitted to and received by the Distributor prior
to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after
the shares have been redeemed upon the Distributor's receipt the
required redemption documents in proper form, with the signature(s)
of the registered owners guaranteed on the redemption document as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans that would require the redemption of
shares held less than 6 years or 12 months, respectively, because
of the imposition of contingent deferred sales charges on such
withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus
under "Waivers of Class B and 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
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. 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.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money
Market Trust, Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and
Oppenheimer Main Street California Tax Exempt Fund which only
offers Class A and Class B shares, (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans).
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge).
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of
shares of either class purchased subject to a contingent deferred
sales charge. However, shares of Oppenheimer Money Market Fund,
Inc. purchased with the redemption proceeds of shares of other
mutual funds (other than funds managed by the Manager or its
subsidiaries) redeemed within the 12 months prior to that purchase
may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales
charge, whichever is applicable. To qualify for that privilege,
the investor or the investor's dealer must notify the Distributor
of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege. The
Class C contingent deferred sales charge is imposed on Class C
shares acquired by exchange if they are redeemed within 12 months
of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or Class C contingent
deferred sales charge will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares
held of record at the time of the previous determination of net
asset value, or as otherwise described in "How to Buy Shares."
Daily dividends on newly purchased shares will not be declared or
paid until such time as Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks
received from investors are converted to Federal Funds on the next
business day. Dividends will be declared on shares repurchased by
a dealer or broker for three business days following the trade date
(i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will
be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of a Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C shares" above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower than dividends on Class A shares as a result
of the asset-based sales charges on Class B and Class C shares, and
will also differ in amount as a consequence of any difference in
net asset value between the classes.
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 (generally dividends
from domestic corporations) which the Fund derives from its
portfolio investments held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held by the shareholder for 45 days or
less. To the extent the Fund derives a significant portion of its
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 only a portion of dividends paid by
the Fund will qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1st of the prior
year through October 31 of that year or else must pay an excise tax
on the amounts not distributed. While it is presently anticipated
that the Fund's distributions will meet those requirements, the
Manager might determine that in a particular year that it might be
in the best interests of shareholders not to distribute income or
capital gains at the mandated levels and to pay the excise tax on
the undistributed amounts, which would reduce the amount available
for distribution to shareholders.
If prior distributions must be re-characterized at the end of
the fiscal year as a result of the effect of a 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 and there can be no assurance as to the payment
of any dividends or the realization of any capital gains.
If the Fund has more than 50% of its total assets invested in
foreign securities at the end of its fiscal year, it may elect the
application of Section 853 of the Internal Revenue Code to permit
shareholders to take a credit (or, at their option, a deduction)
for foreign taxes paid by the Fund. Under Section 853,
shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign
investments as a credit on their federal income taxes. As an
alternative, shareholders could, if to their advantage, treat the
foreign tax withheld as a deduction from gross income in computing
taxable income rather than as a tax credit. In substance, the
Fund's election would enable shareholders to benefit from the same
foreign tax credit or deduction that would be received if they had
been the record owners of the Fund's foreign securities and had
paid foreign taxes on the income received.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests relating to such qualification. For example, if the Fund
derives 30% or more of its gross income from the sale of securities
held less than three months, it may fail to qualify (see "Tax
Aspects of Covered Calls and Hedging Instruments," above). If it
did not so qualify, the Fund would be treated for tax purposes as
an ordinary corporation and would not receive a tax deduction for
payments made to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and either
must have an existing account in the fund selected for reinvestment
or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment will be
made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities 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.
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 Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Fund as of June 30, 1996, 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 five-year period then ended. 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 June
30, 1996, 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 Fund as of June 30, 1996, 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
five-year period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
July 22, 1996
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments June 30, 1996
Face Market Value
Amount See Note 1
<S> <C> <C>
=====================================================================
==============================================================
Foreign Government Obligations--1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Argentina (Republic of) Past Due Interest Bonds, Series L, 6.312%, 3/31/05
(Cost $2,264,894)(1) $ 3,960,000 $
3,101,155
=====================================================================
==============================================================
Convertible Corporate Bonds and Notes--0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
MEDIQ, Inc., 7.50% Exchangeable Sub. Debs., 7/15/03 (Cost $1,748,461)
1,850,000 1,572,500
Shares
=====================================================================
==============================================================
Common Stocks--86.5%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Basic Materials--6.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Chemicals--3.2%
Agrium, Inc. 30,000 393,281
- - ---------------------------------------------------------------------------------------------------------------
ARCO Chemical Co. 28,900
1,502,800
- - ---------------------------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 170,000
6,003,058
- - ---------------------------------------------------------------------------------------------------------------
Georgia Gulf Corp. 22,100 646,425
- - ---------------------------------------------------------------------------------------------------------------
IMC Global, Inc. 12,400 466,550
------------
9,012,114
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Gold--0.5%
Santa Fe Pacific Gold Corp. 92,800
1,310,800
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Metals--1.3%
Brush Wellman, Inc. 151,400
2,876,600
- - ---------------------------------------------------------------------------------------------------------------
J&L Specialty Steel, Inc. 54,500 810,687
------------
3,687,287
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Paper--1.3%
Aracruz Celulose SA, Sponsored ADR 165,000
1,567,500
- - ---------------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 90,323
1,197,146
- - ---------------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 4,900 64,925
- - ---------------------------------------------------------------------------------------------------------------
Stone Container Corp. 64,800 891,000
------------
3,720,571
=====================================================================
==============================================================
Consumer Cyclicals--12.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Autos & Housing--1.3%
Chromcraft Revington, Inc.(2) 18,500
432,437
- - ---------------------------------------------------------------------------------------------------------------
Fiat SpA 350,000 1,172,412
- - ---------------------------------------------------------------------------------------------------------------
General Motors Corp.(3) 26,000
1,361,750
- - ---------------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones, SA 214,506
730,355
------------
3,696,954
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Leisure & Entertainment--5.6%
AMR Corp.(2) 19,300 1,756,300
- - ---------------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 30,800 889,350
- - ---------------------------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc.(2)(3) 31,800
1,303,800
- - ---------------------------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 90,800
2,201,900
- - ---------------------------------------------------------------------------------------------------------------
Eastman Kodak Co.(3) 25,500
1,982,625
- - ---------------------------------------------------------------------------------------------------------------
International Game Technology 57,000
961,875
- - ---------------------------------------------------------------------------------------------------------------
King World Productions, Inc.(2)(3) 56,500
2,055,187
- - ---------------------------------------------------------------------------------------------------------------
Mattel, Inc.(3) 76,093 2,178,162
- - ---------------------------------------------------------------------------------------------------------------
Shimano, Inc. 82,000 1,465,334
- - ---------------------------------------------------------------------------------------------------------------
U S West Media Group(2) 45,700
834,025
------------
15,628,558
6 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Media--2.6%
Bowne & Co., Inc. 34,000 $ 701,250
- - ---------------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 130,000
2,405,000
- - ---------------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 25,200
1,052,100
- - ---------------------------------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 2,400,000
1,643,303
- - ---------------------------------------------------------------------------------------------------------------
Time Warner, Inc. 40,600 1,593,550
------------
7,395,203
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Retail: General--1.8%
Cone Mills Corp.(2) 243,000 2,733,750
- - ---------------------------------------------------------------------------------------------------------------
Price/Costco, Inc.(2) 73,100 1,580,787
- - ---------------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 32,900 834,837
------------
5,149,374
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Retail: Specialty--1.1%
Gymboree Corp.(2)(3) 40,700
1,241,350
- - ---------------------------------------------------------------------------------------------------------------
Toys 'R' Us, Inc.(2) 69,200 1,972,200
------------
3,213,550
=====================================================================
==============================================================
Consumer Non-Cyclicals--17.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Beverages--1.2%
Buenos Aires Embotelladora SA, Sponsored ADR 35,000
463,750
- - ---------------------------------------------------------------------------------------------------------------
Guinness PLC 182,000 1,323,466
- - ---------------------------------------------------------------------------------------------------------------
Whitman Corp.(3) 63,100 1,522,287
------------
3,309,503
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Food--2.2%
Chiquita Brands International, Inc. 32,249
419,237
- - ---------------------------------------------------------------------------------------------------------------
Groupe Danone 6,241 944,377
- - ---------------------------------------------------------------------------------------------------------------
IBP, Inc.(3) 31,500 870,187
- - ---------------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 40,000
2,283,400
- - ---------------------------------------------------------------------------------------------------------------
Sara Lee Corp.(3) 52,700 1,706,163
------------
6,223,364
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Healthcare/Drugs--7.3%
Abbott Laboratories 24,000 1,044,000
- - ---------------------------------------------------------------------------------------------------------------
American Home Products Corp. 24,000
1,443,000
- - ---------------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 37,250
1,644,834
- - ---------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 48,000
4,320,000
- - ---------------------------------------------------------------------------------------------------------------
Ciba-Geigy AG 2,825 3,441,981
- - ---------------------------------------------------------------------------------------------------------------
Foundation Health Corp.(2) 23,000
825,125
- - ---------------------------------------------------------------------------------------------------------------
Genzyme Corp.(2)(3) 31,500
1,582,875
- - ---------------------------------------------------------------------------------------------------------------
Johnson & Johnson 38,600 1,910,700
- - ---------------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 50,000 862,500
- - ---------------------------------------------------------------------------------------------------------------
NBTY, Inc.(2) 204,400 2,056,775
- - ---------------------------------------------------------------------------------------------------------------
SmithKline Beecham PLC, ADR 22,500
1,223,438
------------
20,355,228
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Healthcare/Supplies &
Services--3.2%
Biomet, Inc.(2) 45,000 646,875
- - ---------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc.(3) 4,472 322,543
- - ---------------------------------------------------------------------------------------------------------------
Manor Care, Inc.(3) 30,770 1,211,569
- - ---------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 20,000 1,120,000
7 Oppenheimer Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Healthcare/Supplies &
Services (continued)
Nellcor Puritan Bennett, Inc.(2) 10,800 $
523,800
- - ---------------------------------------------------------------------------------------------------------------
Sofamor Danek Group, Inc.(2)(3) 22,000
610,500
- - ---------------------------------------------------------------------------------------------------------------
U.S. Healthcare, Inc.(3) 63,500 3,492,500
- - ---------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(2)(3) 34,417
1,075,531
------------
9,003,318
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Household Goods--1.2%
Kimberly-Clark Corp. 13,100
1,011,975
- - ---------------------------------------------------------------------------------------------------------------
Procter & Gamble Co.(3) 14,000
1,268,750
- - ---------------------------------------------------------------------------------------------------------------
Wella AG 1,750 1,003,686
------------
3,284,411
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Tobacco--2.0%
Philip Morris Cos., Inc. 54,300 5,647,200
=====================================================================
==============================================================
Energy--4.9%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Energy Services &
Producers--1.2%
Kerr-McGee Corp.(3) 13,000
791,375
- - ---------------------------------------------------------------------------------------------------------------
Landmark Graphics Corp.(2) 66,600
1,282,050
- - ---------------------------------------------------------------------------------------------------------------
Western Atlas, Inc.(2) 20,000 1,165,000
------------
3,238,425
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Oil-Integrated--3.7%
Atlantic Richfield Co. 13,900 1,647,150
- - ---------------------------------------------------------------------------------------------------------------
Enterprise Oil PLC 118,000 843,403
- - ---------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 9,500
1,460,625
- - ---------------------------------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 82,000
1,110,781
- - ---------------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR(3) 52,680
1,955,745
- - ---------------------------------------------------------------------------------------------------------------
Unocal Corp. 88,000 2,970,000
- - ---------------------------------------------------------------------------------------------------------------
Yukong Ltd., GDR(4) 39,500
258,081
- - ---------------------------------------------------------------------------------------------------------------
Yukong Ltd., GDR 1,438 12,237
- - ---------------------------------------------------------------------------------------------------------------
Yukong Ltd., GDR 3,294 28,032
------------
10,286,054
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Financial--10.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Banks--6.5%
Akbank T.A.S. 2,661,250 320,662
- - ---------------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 109,900
1,058,737
- - ---------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New)(3) 94,600
6,681,125
- - ---------------------------------------------------------------------------------------------------------------
Citicorp(3) 16,000 1,322,000
- - ---------------------------------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 60,000
2,838,108
- - ---------------------------------------------------------------------------------------------------------------
NationsBank Corp. 72,200 5,965,525
------------
18,186,157
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Diversified Financial--1.4%
American Express Co. 44,100
1,967,963
- - ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 9,700
829,350
- - ---------------------------------------------------------------------------------------------------------------
H & R Block, Inc.(3) 30,600 998,325
------------
3,795,638
8 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Insurance--2.5%
ACE Ltd. 21,600 $ 1,015,200
- - ---------------------------------------------------------------------------------------------------------------
Aetna Life & Casualty Co. 5,600
400,400
- - ---------------------------------------------------------------------------------------------------------------
American International Group, Inc. 13,700
1,351,163
- - ---------------------------------------------------------------------------------------------------------------
American Re Corp.(3) 48,800
2,189,900
- - ---------------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 40,000
1,057,950
- - ---------------------------------------------------------------------------------------------------------------
UNUM Corp. 13,500 840,375
------------
6,854,988
=====================================================================
==============================================================
Industrial--10.9%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Electrical Equipment--1.2%
General Electric Co.(3) 39,600 3,425,400
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Industrial Materials--2.0%
Insituform Technologies, Cl. A(2) 72,000
558,000
- - ---------------------------------------------------------------------------------------------------------------
Interpool, Inc. 42,500 775,625
- - ---------------------------------------------------------------------------------------------------------------
Owens Corning 77,000 3,311,000
- - ---------------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.(2) 25,700 899,500
------------
5,544,125
=====================================================================
==============================================================
Industrial Services--0.4%
Ecolab, Inc.(3) 35,400 1,168,200
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Manufacturing--3.7%
Citic Pacific Ltd. 214,000 865,344
- - ---------------------------------------------------------------------------------------------------------------
Harnischfeger Industries, Inc.(3) 21,800
724,850
- - ---------------------------------------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 132,000
830,488
- - ---------------------------------------------------------------------------------------------------------------
Mannesmann AG 6,000 2,065,514
- - ---------------------------------------------------------------------------------------------------------------
Pacific Dunlop Ltd. 476,000 1,071,463
- - ---------------------------------------------------------------------------------------------------------------
Tenneco, Inc.(3) 75,800 3,875,275
- - ---------------------------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 60,200
790,125
------------
10,223,059
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Transportation--3.6%
Airborne Freight Corp.(3) 44,000
1,144,000
- - ---------------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp.(3) 57,400
4,642,225
- - ---------------------------------------------------------------------------------------------------------------
Canadian National Railway Co. 38,000
699,828
- - ---------------------------------------------------------------------------------------------------------------
Consolidated Freightways, Inc. 14,200
299,975
- - ---------------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA 116,000 2,102,500
- - ---------------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA, ADR 58,000
1,080,250
------------
9,968,778
=====================================================================
==============================================================
Technology--21.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Aerospace/Defense--0.6%
Rockwell International Corp.(3) 27,300
1,562,925
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Computer Hardware--3.9%
Digital Equipment Corp.(2) 21,000
945,000
- - ---------------------------------------------------------------------------------------------------------------
EMC Corp.(2) 36,800 685,400
- - ---------------------------------------------------------------------------------------------------------------
International Business Machines Corp.(3) 17,400
1,722,600
- - ---------------------------------------------------------------------------------------------------------------
Moore Corp. Ltd. 37,400 705,925
- - ---------------------------------------------------------------------------------------------------------------
Storage Technology Corp. (New)(2)(3) 11,000
420,750
- - ---------------------------------------------------------------------------------------------------------------
Sun Microsystems, Inc.(2)(3) 7,000
412,125
- - ---------------------------------------------------------------------------------------------------------------
Xerox Corp.(3) 111,000 5,938,500
------------
10,830,300
9 Oppenheimer Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Computer Software--6.8%
American Software, Inc. 50,000 $
231,250
- - ---------------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.(3) 44,100
3,142,125
- - ---------------------------------------------------------------------------------------------------------------
Davidson & Associates, Inc.(2) 34,000
1,020,000
- - ---------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(2) 48,600 1,300,050
- - ---------------------------------------------------------------------------------------------------------------
Informix Corp.(2)(3) 52,800 1,188,000
- - ---------------------------------------------------------------------------------------------------------------
Microsoft Corp.(2) 9,800 1,177,225
- - ---------------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 45,000 3,347,876
- - ---------------------------------------------------------------------------------------------------------------
Novell, Inc.(2) 238,400 3,307,800
- - ---------------------------------------------------------------------------------------------------------------
Structural Dynamics Research Corp.(2) 67,100
1,476,200
- - ---------------------------------------------------------------------------------------------------------------
Sybase, Inc.(2) 46,600 1,100,925
- - ---------------------------------------------------------------------------------------------------------------
Symantec Corp.(2) 137,340 1,716,750
------------
19,008,201
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Electronics--7.2%
Duracell International, Inc. 18,500 797,813
- - ---------------------------------------------------------------------------------------------------------------
General Motors Corp., Cl. H 20,800
1,250,600
- - ---------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 34,000 3,387,250
- - ---------------------------------------------------------------------------------------------------------------
Intel Corp. 119,800 8,797,813
- - ---------------------------------------------------------------------------------------------------------------
Kyocera Corp. 17,000 1,201,205
- - ---------------------------------------------------------------------------------------------------------------
LSI Logic Corp.(2)(3) 32,000 832,000
- - ---------------------------------------------------------------------------------------------------------------
Nokia Corp., Preference 22,000 814,000
- - ---------------------------------------------------------------------------------------------------------------
Proxima Corp.(2) 70,000 848,750
- - ---------------------------------------------------------------------------------------------------------------
Samsung Electronics (First New)(2) 79
6,282
- - ---------------------------------------------------------------------------------------------------------------
Samsung Electronics Co. 265 22,247
- - ---------------------------------------------------------------------------------------------------------------
Teradyne, Inc.(2) 55,000 948,750
- - ---------------------------------------------------------------------------------------------------------------
VLSI Technology, Inc.(2) 76,500
1,061,438
------------
19,968,148
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Telecommunications-
Technology--2.6%
Airtouch Communications, Inc.(2)(3) 45,500
1,285,375
- - ---------------------------------------------------------------------------------------------------------------
Bay Networks, Inc.(2)(3) 26,870
691,903
- - ---------------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd.(3) 57,500
1,336,875
- - ---------------------------------------------------------------------------------------------------------------
Kinnevik Investments AB Free, Series B 31,500
954,190
- - ---------------------------------------------------------------------------------------------------------------
MCI Communications Corp. 100,000
2,562,500
- - ---------------------------------------------------------------------------------------------------------------
NetCom Systems AB, B Shares(2) 31,500
356,041
------------
7,186,884
=====================================================================
==============================================================
Utilities--3.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Electric Utilities--1.3%
Korea Electric Power Corp. 20,000
814,622
- - ---------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 30,000
821,250
- - ---------------------------------------------------------------------------------------------------------------
Verbund Oest Electriz 25,200 1,923,113
------------
3,558,985
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Gas Utilities--0.7%
Hong Kong & China Gas 591,648
943,976
- - ---------------------------------------------------------------------------------------------------------------
Southwestern Energy Co. 72,500
1,024,063
------------
1,968,039
10 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Telephone Utilities--1.4%
BCE, Inc. 34,000 $ 1,343,000
- - ---------------------------------------------------------------------------------------------------------------
Portugal Telecom SA(2) 15,900
415,321
- - ---------------------------------------------------------------------------------------------------------------
U S West Communications Group 65,500
2,087,813
------------
3,846,134
------------
Total Common Stocks (Cost $164,928,947)
241,257,875
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Preferred Stocks--1.5%
- - ---------------------------------------------------------------------------------------------------------------
Alumax, Inc., $4.00 Cv., Series A 6,333
825,665
- - ---------------------------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A 20,666
1,131,463
- - ---------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., $3.50 Cv. Depositary Shares, Series C 36,300
2,286,900
------------
Total Preferred Stocks (Cost $3,245,783)
4,244,028
Units
=====================================================================
==============================================================
Rights, Warrants and Certificates--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Hong Kong & China Gas Wts., Exp. 9/97 (Cost $19,691) 74,304
19,439
Face
Amount
=====================================================================
==============================================================
Repurchase Agreement--10.8%
- - ---------------------------------------------------------------------------------------------------------------
Repurchase agreement with Canadian Imperial Bank of Commerce,
5.45%, dated 6/28/96, to be repurchased at $30,213,716 on 7/1/96,
collateralized by U.S. Treasury Bonds, 9.125%--11.25%, 2/15/15--5/11/18,
with a value of $10,675,333, and U.S. Treasury Nts., 5.25%--8.50%,
1/11/97--11/15/04, with a value of $20,174,956 (Cost $30,200,000) $
30,200,000 30,200,000
- - ---------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $202,407,776) 100.5%
280,394,997
- - ---------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.5)
(1,460,799)
------------ ------------
Net Assets 100.0% $278,934,198
============
============
</TABLE>
1. Represents the current interest rate for a variable rate
security.
2. Non-income producing security.
11 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
3. A sufficient amount of liquid assets has been designated
to cover outstanding written call options, as follows:
Shares Expiration Exercise Premium Market
Value
Subject To Call Date Price Received See Note
1
<S> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Airborne Freight Corp. 15,000 8/96 $ 30 $ 26,125 $
3,746
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Airtouch Communications, Inc. 9,000 7/96 34 12,771
563
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
American Re Corp. 10,800 7/96 45 19,925
14,175
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Bay Networks, Inc. 21,000 9/96 35 91,242
14,438
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Burlington Northern Santa Fe Corp. 11,200 7/96 85 43,063
7,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Cardinal Health, Inc. 11,000 7/96 18 17,544
129,250
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Chase Manhattan Corp. (New) 18,500 9/96 70 73,443
97,125
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Circus Circus Enterprises, Inc. 6,200 9/96 33 19,188
58,900
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Citicorp 3,200 7/96 75 10,704 24,400
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Computer Associates International, Inc. 8,800 7/96 50 35,551
8,800
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Eastman Kodak Co. 5,000 7/96 75 20,474
18,750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
ECI Telecommunications Ltd. 15,200 8/96 30 26,143
3,800
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Ecolab, Inc. 5,000 7/96 35 5,850 1,563
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
General Electric Co. 8,000 9/96 80 24,759
64,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
General Motors Corp. 4,000 9/96 65 15,379
7,500
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Genzyme Corp. 5,400 7/96 80 27,679
338
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Gymboree Corp. 9,000 7/96 20 13,230
97,875
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
H & R Block, Inc. 12,000 7/96 40 24,635
750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Harnischfeger Industries, Inc. 14,600 8/96 35 67,335
12,775
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Harnischfeger Industries, Inc. 7,200 8/96 40 7,884
1,800
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
IBP, Inc. 31,500 11/96 25 69,928
110,250
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Informix Corp. 29,000 8/96 35 129,626
3,625
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
International Business Machines Corp. 2,800 7/96 120 13,216
350
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Kerr-McGee Corp. 2,600 7/96 70 2,684
650
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
King World Productions, Inc. 16,000 8/96 45 27,519
4,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
LSI Logic Corp. 8,000 7/96 35 25,759
1,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
LSI Logic Corp. 8,000 7/96 45 20,259
500
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Manor Care, Inc. 6,000 7/96 45 5,820
750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Mattel, Inc. 15,000 7/96 28 20,414 23,438
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Procter & Gamble Co. 2,800 7/96 95 5,341
1,050
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Rockwell International Corp. 5,400 7/96 65 14,013
675
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Sara Lee Corp. 12,200 7/96 35 16,408
763
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Sofamor Danek Group, Inc. 12,000 9/96 30 55,138
33,750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Storage Technology Corp. (New) 11,000 9/96 23 50,545
177,375
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Sun Microsystems, Inc. 7,000 7/96 48 56,331
84,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Tenneco, Inc. 15,000 8/96 60 22,049
2,813
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Total SA, Sponsored ADR 11,000 8/96 40 10,670
6,188
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
U.S. Healthcare, Inc. 15,000 7/96 55 20,174
9,375
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Wellpoint Health Networks, Inc. 10,200 7/96 30 10,383
2,550
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Whitman Corp. 15,000 9/96 25 14,550
11,250
- - ------------------------------------------------------------------------------------------------------------------
- - -----------------
Xerox Corp. 22,200 7/96 50 60,827
88,800
---------- ------------
$1,234,581 $ 1,130,700
==========
============
</TABLE>
4. Represents a security sold under Rule 144A, which is
exempt from registration under the Securities Act of 1933,
as amended. This security has been determined to be liquid
under guidelines established by the Board of Trustees. These
securities amount to $258,081 or 0.09% of the Fund's net
assets, at June 30, 1996.
See accompanying Notes to Financial Statements.
12 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities June 30, 1996
<S> <C>
=====================================================================
==============================================================
Assets Investments, at value (including repurchase agreement of $30,200,000)
(cost $202,407,776)--see accompanying statement
$280,394,997
- - ---------------------------------------------------------------------------------------------------------------
Cash 101,788
- - ---------------------------------------------------------------------------------------------------------------
Receivables:
Interest and dividends 595,026
Shares of beneficial interest sold 108,283
- - ---------------------------------------------------------------------------------------------------------------
Other 66,034
------------
Total assets 281,266,128
=====================================================================
==============================================================
Liabilities Options written, at value (premiums received $1,234,581)--
see accompanying statement--Note 5
1,130,700
- - ---------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed
426,981
Investments purchased 350,990
Trustees' fees 118,521
Distribution and service plan fees 91,662
Transfer and shareholder servicing agent fees
66,305
Shareholder reports 60,356
Other 86,415
------------
Total liabilities 2,331,930
=====================================================================
==============================================================
Net Assets $278,934,198
============
=====================================================================
==============================================================
Composition of Paid-in capital
$178,389,656
Net Assets
- - ---------------------------------------------------------------------------------------------------------------
Undistributed net investment income
4,179,246
- - ---------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions
18,274,717
- - ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
78,090,579
------------
Net assets $278,934,198
============
=====================================================================
==============================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of
$273,193,978 and 22,495,412 shares of beneficial interest outstanding)
$ 12.14
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $ 12.88
- - ---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $1,654,505 and 137,088 shares of beneficial interest outstanding)
$ 12.07
- - ---------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $4,085,715 and 342,672 shares of beneficial interest outstanding)
$ 11.92
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations For the Year Ended June 30, 1996
<S> <C>
=====================================================================
==============================================================
Investment Income Dividends (net of foreign withholding taxes of $112,278)
$ 5,887,471
- - ---------------------------------------------------------------------------------------------------------------
Interest 1,929,027
------------
Total income 7,816,498
=====================================================================
==============================================================
Expenses Management fees--Note 4
2,036,339
- - ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
616,198
- - ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 350,307
Class B 4,128
Class C 34,894
- - ---------------------------------------------------------------------------------------------------------------
Shareholder reports 108,816
- - ---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 91,485
- - ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 85,190
- - ---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 71,929
- - ---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 334
Class B 561
Class C 496
- - ---------------------------------------------------------------------------------------------------------------
Other 98,175
------------
Total expenses 3,498,852
=====================================================================
==============================================================
Net Investment Income 4,317,646
=====================================================================
==============================================================
Realized and Net realized gain on:
Unrealized Investments (including premiums on options exercised)
21,639,931
Gain (Loss) Foreign currency transactions
309,497
Closing and expiration of options written--Note 5
845,454
------------
Net realized gain 22,794,882
- - ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 18,834,911
Translation of assets and liabilities denominated in foreign currencies
(1,955,886)
------------
Net change 16,879,025
------------
Net realized and unrealized gain
39,673,907
=====================================================================
==============================================================
Net Increase in Net Assets Resulting From Operations
$ 43,991,553
============
See accompanying Notes to Financial Statements
</TABLE>
14 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended June 30,
1996 1995
<S> <C> <C>
=====================================================================
==============================================================
Operations Net investment income $ 4,317,646 $
2,806,853
- - ---------------------------------------------------------------------------------------------------------------
Net realized gain 22,794,882 19,743,628
- - ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 16,879,025
23,440,270
------------- -------------
Net increase in net assets resulting from operations 43,991,553
45,990,751
=====================================================================
==============================================================
Dividends and Dividends from net investment income:
Distributions to Class A (2,763,277)
(498,859)
Shareholders Class B (1,333) --
Class C (19,415) --
- - ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (20,559,886) (24,601,920)
Class B (10,043) --
Class C (287,511) (100,620)
=====================================================================
==============================================================
Beneficial Net increase (decrease) in net assets resulting from
Interest beneficial interest transactions--Note 2:
Transactions Class A (17,324,834)
12,428,700
Class B 1,639,742 --
Class C 1,733,727 1,742,306
=====================================================================
==============================================================
Net Assets Total increase 6,398,723
34,960,358
- - ---------------------------------------------------------------------------------------------------------------
Beginning of period 272,535,475
237,575,117
------------- -------------
End of period (including undistributed net investment income
of $4,179,246 and $3,477,408, respectively) $ 278,934,198
$ 272,535,475
=============
=============
</TABLE>
See accompanying Notes to Financial Statements
15 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
----------------------------------------------------------------
Year Ended June 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
=====================================================================
================================================
Per Share Operating Data:
Net asset value, beginning of period $ 11.34 $ 10.55 $ 10.41 $ 9.72 $ 9.31
- - ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .20 .31 .07 .11 .16
Net realized and unrealized
gain (loss) 1.69 1.58 .55 1.15 .84
-------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.89 1.89 .62 1.26 1.00
- - ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) (.02) (.03) (.10) (.32)
Distributions from net realized gain (.96) (1.08) (.45) (.47) (.27)
-------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (1.09) (1.10) (.48) (.57) (.59)
- - ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.14 $ 11.34 $ 10.55 $ 10.41 $ 9.72
======== ======== ======== ========
========
=====================================================================
================================================
Total Return, at Net Asset Value(3) 17.56% 19.60% 5.84% 13.33%
11.22%
=====================================================================
================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $273,194 $270,381 $237,281 $216,180 $209,495
- - ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $270,211 $254,011 $229,976 $212,660
$221,369
- - ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.59% 1.10% 0.69% 1.05% 1.71%
Expenses 1.26% 1.29% 1.16% 1.10% 1.09%
- - ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 29.7% 34.1% 41.6% 35.6% 58.2%
Average brokerage commission rate(6) $ 0.0324 -- -- -- --
<CAPTION>
Class B Class C
------- ------------------------------------
Period
Ended
June 30, Year Ended June 30,
1996(2) 1996 1995 1994(1)
<S> <C> <C> <C> <C>
=====================================================================
============================
Per Share Operating Data:
Net asset value, beginning of period $ 11.85 $ 11.19 $ 10.49 $ 11.08
- - -------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .14 .07 .03 .02
Net realized and unrealized
gain (loss) 1.17 1.69 1.75 (.14)
-------- -------- -------- --------
Total income (loss) from investment
operations 1.31 1.76 1.78 (.12)
- - -------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) (.07) -- (.02)
Distributions from net realized gain (.96) (.96) (1.08) (.45)
-------- -------- -------- --------
Total dividends and distributions
to shareholders (1.09) (1.03) (1.08) (.47)
- - -------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.07 $ 11.92 $ 11.19 $ 10.49
======== ======== ======== ========
=====================================================================
============================
Total Return, at Net Asset Value(3) 11.86% 16.51% 18.57% (1.24)%
=====================================================================
============================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 1,655 $ 4,086 $ 2,154 $ 294
- - -------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 649 $ 3,491 $ 1,100 $ 108
- - -------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.74%(4) 0.75% 0.48% 0.05%(4)
Expenses 2.13%(4) 2.15% 2.20% 2.44%(4)
- - -------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 29.7% 29.7% 34.1% 41.6%
Average brokerage commission rate(6) $ 0.0324 $ 0.0324 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
2. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1996 were $74,869,135 and $104,723,299, respectively.
6. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
16 Oppenheimer Fund
<PAGE>
Notes to Financial Statements
- - --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Fund (the Fund) is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company. The
Fund's investment objective is to seek capital appreciation through investment
in common stocks that offer growth potential. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class
C shares. Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge. All classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class. The following is a summary of
significant accounting policies consistently followed by the Fund.
- - --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Forward foreign currency exchange contracts
are valued based on the closing prices of the forward currency contract rates in
the London foreign exchange markets on a daily basis as provided by a reliable
bank or dealer. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior
trading date if it is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread, the closing bid 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 rates of exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates is separately
identified from the fluctuations arising from changes in market values of
securities held and reported with all other foreign currency gains and losses in
the Fund's Statement of Operations.
- - --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- - --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- - --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- - --------------------------------------------------------------------------------
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
June 30, 1996, a provision of $41,657 was made for the Fund's projected benefit
obligations and payments of $2,831 were made to retired trustees, resulting in
an accumulated liability of $102,810 at June 30, 1996.
17 Oppenheimer Fund
<PAGE>
Notes to Financial Statements (Continued)
- - --------------------------------------------------------------------------------
1. Significant
Accounting
Policies
(continued)
Distributions to Shareholders. Dividends and distributions to shareholders are
reported on the ex-dividend date.
- - --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. Also, due
to timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
During the year ended June 30, 1996, the Fund changed the classification of
distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. Accordingly, during the year ended June 30, 1996,
amounts have been classified to reflect a decrease in paid in capital of
$770,135, a decrease in undistributed net investment income of $831,783, and an
increase in accumulated net realized gain on investments of $1,601,918.
- - --------------------------------------------------------------------------------
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 unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- - --------------------------------------------------------------------------------
2. Shares of
Beneficial
Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1996(1) Year Ended June
30, 1995
------------------------------ -------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Class A:
Sold 2,083,446 $ 24,678,546 6,673,759 $
71,435,301
Dividends and distributions reinvested 1,924,123 21,357,698 2,364,103
23,168,217
Redeemed (5,349,170) (63,361,078) (7,685,964)
(82,174,818)
---------- ------------ --------- ------------
Net increase (decrease) (1,341,601) $(17,324,834) 1,351,898
$ 12,428,700
========== ============ =========
============
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Class B:
Sold 215,151 $ 2,550,547 -- $ --
Dividends and distributions reinvested 1,026 11,365 --
--
Redeemed (79,090) (922,170) -- --
---------- ------------ --------- ------------
Net increase 137,088 $ 1,639,742 -- $
- - --
========== ============ =========
============
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Class C:
Sold 238,989 $ 2,774,056 183,982 $
1,948,887
Dividends and distributions reinvested 26,363 288,410 8,876
86,189
Redeemed (115,207) (1,328,739) (28,381)
(292,770)
---------- ------------ --------- ------------
Net increase 150,145 $ 1,733,727 164,477 $
1,742,306
========== ============ =========
============
</TABLE>
1. For the year ended June 30, 1996 for Class A and Class C shares, and for
the period from November 1, 1995 (inception of offering) to June 30, 1996 for
Class B shares.
18 Oppenheimer Fund
<PAGE>
- - --------------------------------------------------------------------------------
3. Unrealized Gains and
Losses on Investments and
Options Written
At June 30, 1996, net unrealized appreciation on investments and options written
of $78,091,102 was composed of gross appreciation of $84,234,203, and gross
depreciation of $6,143,101.
- - --------------------------------------------------------------------------------
4. Management Fees and
Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% on the first
$200 million of average annual net assets with a reduction of 0.03% on each $200
million thereafter to $800 million, and 0.60% 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 June 30, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $581,891, of which $146,293 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $51,972 and $21,470, of which $1,625 was paid to an
affiliated broker/dealer for Class C shares. During the year ended June 30,
1996, OFDI received contingent deferred sales charges of $2,962 upon redemption
of Class C shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the year ended June 30, 1996, OFDI paid $5,013 to an affiliated
broker/dealer as reimbursement for Class A personal service and maintenance
expenses.
The Fund has adopted a compensation type Distribution and Service Plan for
Class B shares to compensate OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares that are
outstanding for 6 years or less. OFDI also receives a service fee of 0.25% per
year to compensate dealers for providing personal services for accounts that
hold Class B shares. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business day. If the
Plan is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain expenses
it incurred before the Plan was terminated. During the year ended June 30, 1996,
OFDI retained $4,128 as compensation for Class B sales commissions and service
fee advances, as well as financing costs. As of June 30, 1996, OFDI had incurred
unreimbursed expenses of $58,024 for Class B.
The Fund has adopted a reimbursement type Distribution and Service Plan for
Class C shares to reimburse OFDI for its services and costs in distributing
Class C shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C shares. OFDI also
receives a service fee of 0.25% per year to reimburse dealers for providing
personal services for accounts that hold Class C shares. Both fees are computed
on the average annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments of the asset-based sales
charge to OFDI for certain expenses it incurred before the Plan was terminated.
During the year ended June 30, 1996, OFDI retained $21,763 as reimbursement for
Class C sales commissions and service fee advances, as well as financing costs.
As of June 30, 1996, OFDI had incurred unreimbursed expenses of $67,156 for
Class C.
19 Oppenheimer Fund
<PAGE>
Notes to Financial Statements (Continued)
- - --------------------------------------------------------------------------------
5. Option Activity
The Fund may buy and sell put and call options, or write put and 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.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended June 30, 1996 was as follows:
Call Options
------------------------
Number of Amount of
Options Premiums
- - --------------------------------------------------------------------------------
Options outstanding at June 30, 1995 5,992 $ 1,266,634
- - --------------------------------------------------------------------------------
Options written 9,804 2,642,006
- - --------------------------------------------------------------------------------
Options closed or expired (8,036) (1,868,399)
- - --------------------------------------------------------------------------------
Options exercised (3,182) (805,660)
----- -----------
Options outstanding at June 30, 1996 4,578 $ 1,234,581
===== ===========
<PAGE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
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 STRATEGIC INCOME & GROWTH FUND
Supplement dated January 15, 1997 to the
Prospectus dated January 15, 1997
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares" on page 35, (2) sales of Class B shares described
in the fourth paragraph in "Distribution and Service Plans for
Class B and Class C Shares" on page 42, and (3) sales of Class C
shares described in the fifth paragraph in "Distribution and
Service Plans for Class B and Class C Shares" on page 42, the
Distributor will pay additional commission to each broker, dealer
and financial institution that has a sales agreement with the
Distributor and agrees to accept that additional commission (these
are referred to as "participating firms") for Class A, Class B and
Class C shares of the Fund sold in "qualifying transactions" (the
"promotion"). The additional commission will be 1.00% of the
offering price of shares of the Fund sold by a registered
representative or sales representative of a participating firm
during the promotion. If the additional commission is paid on the
sale of Class A shares of $500,000 or more or the sale of Class A
shares to a SEP IRA with 100 or more eligible participants and
those shares are redeemed within 13 months from the end of the
month in which they were purchased, the participating firm will be
required to return the additional commission.
"Qualifying transactions" are aggregate sales of $150,000 or
more of Class A, Class B and/or Class C shares of any one or more
of the Oppenheimer funds (except money market funds and municipal
bond funds) for rollovers or trustee-to-trustee transfers from
another retirement plan trustee, of IRA assets or other employee
benefit plan assets from an account or investment other than an
account or investment in the Oppenheimer funds to (1) IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the
OppenheimerFunds, Inc. prototype IRA agreement, if the rollover
contribution is received during the period from January 1, 1997
through April 15, 1997 (the "promotion period"), or the acceptance
of a direct rollover or trustee-to-trustee transfer is acknowledged
by the trustee of the OppenheimerFunds prototype IRA during the
promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR-
SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA
agreement, if the rollover contribution or trustee-to-trustee
payment is received during the promotion period. "Qualifying
transactions" do not include (1) purchases of Class A shares
intended but not yet made under a Letter of Intent, and (2)
purchases of Class A, Class B and/or Class C shares with the
redemption proceeds from an existing Oppenheimer funds account.
January 15, 1997 PS0275.009
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Supplement dated March 6, 1997 to the
Prospectus dated January 15, 1997
The Prospectus is changed as follows:
The following paragraphs are added at the end of "How the Fund is
Managed" on page 26:
The Board of Trustees of the Fund has determined that it is in the best
interest of the Fund's shareholders that the Fund reorganize with and into
Oppenheimer Multiple Strategies Fund. The Board of Trustees unanimously
approved the terms of an Agreement and Plan of Reorganization to be
entered into between these funds (the "Reorganization Plan") and the
transactions contemplated (the transactions are referred to as the
"Reorganization"). The Board of Trustees further determined that the
Reorganization should be submitted to the Fund's shareholders for
approval, and recommended that shareholders approve the Reorganization.
Pursuant to the Reorganization Plan, (i) substantially all of the assets
of the Fund would be exchanged for shares of Oppenheimer Multiple
Strategies Fund, (ii) these shares of Oppenheimer Multiple Strategies Fund
would be distributed to the shareholders of the Fund, (iii) the Fund would
be liquidated, and (iv) the outstanding shares of the Fund would be
canceled. It is expected that the Reorganization will be tax-free,
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended, and the Fund will request an opinion of tax counsel to that
effect.
A meeting of the shareholders has been scheduled for June 17, 1997 to vote
on the Reorganization. Approval of the Reorganization requires the
affirmative vote of a majority of the outstanding shares of the Fund .The
term "majority" is defined in the Investment Company Act of 1940, as
amended, as a special majority. It is also explained in the Statement of
Additional Information. There is no assurance that the Fund's shareholders
will approve the Reorganization. Details about the Reorganization will be
contained in a proxy statement and other soliciting materials to be sent
to the Fund's shareholders of record as of April 11, 1997. Persons who
become shareholders of the Fund after the record date for the shareholder
meeting will not be entitled to vote on the reorganization.
March 6, 1997 PS0275.010
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Prospectus dated January 15, 1997
Oppenheimer Strategic Income & Growth Fund is a mutual fund
with a primary investment objective of current income and a
secondary investment objective of capital appreciation. The Fund
intends to seek its primary objective principally by investing in
(1) U.S. Government Securities, (2) foreign debt securities, and
(3) domestic debt securities, including lower-rated, high risk,
high yield securities commonly called "junk bonds." The Fund can
invest some or all of its assets in each of these three types of
securities, although it will normally invest some assets in each
sector. The Fund intends to seek its secondary investment
objective of capital appreciation principally by investing in
domestic equity securities.
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 high
yield, lower-rated securities. Investors should carefully consider
these risks before investing. Please refer to "Special Risks of
Lower-Rated Securities" on pages __ and __.
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 January 15, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(Oppenheimer funds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the F.D.I.C. or
any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objectives and Policies
Investment Risks
Other Investment Techniques and Strategies
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 A: Description of Securities Ratings
Appendix B: Special Sales Charge Arrangements
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of
its assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1996.
Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account,"
beginning on page __, for an explanation of how and when these
charges apply.
Class A Shares Class B Shares Class C Shares
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
Maximum Deferred Sales Charge
(as a % of the lower
of the original
purchase price or
redemption proceeds) None(1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the sixth within 12 months
year and eliminated of purchase(2)
thereafter(2)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
Redemption Fee None None None
(1) If you invest $1 million or more ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A
Contingent Deferred Sales Charge" on page __) 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.
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
advisor, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses
(as a Percentage of Average Net Assets)
Class A Class B Class C
Shares Shares Shares
Management Fees 0.75% 0.75% 0.75%
12b-1 Plan Fees 0.24% 1.00% 1.00%
Other Expenses 0.44% 0.44% 0.53%
Total Fund Operating Expenses 1.43% 2.19% 2.28%
The numbers in the above chart are based on the Fund's
expenses in its fiscal year ended September 30, 1996. These
amounts are shown as a percentage of the average net assets of each
of those classes of the Fund's shares for that year. The 12b-1
Distribution Plan Fees for Class A shares are service plan fees.
For Class B and Class C shares the 12b-1 Distribution Plan Fees are
service plan fees and asset based sales charges. The service plan
fee for each class is a maximum of 0.25% of average annual net
assets of the class and the asset-based sales charge for Class B
and Class C shares is 0.75%. These plans are described in greater
detail in "How to Buy Shares" below.
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares. Class C shares were not
publicly offered before October 2, 1995. Therefore, the Annual
Fund Operating Expenses for Class C shares are based on amounts
that would have been payable in that period assuming that Class C
shares were outstanding during the entire fiscal year. These plans
are described in greater detail in "How to Buy Shares."
Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each
class of shares of the Fund, and that the Fund's annual return is
5%, and that its operating expenses for each class are the ones
shown in the Annual Fund Operating Expenses chart above. If you
were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of 1,
3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $61 $91 $122 $211
Class B Shares $72 $99 $137 $215
Class C Shares $33 $71 $122 $262
If you did not redeem your investment, it would incur the
following expenses:
Class A Shares $61 $91 $122 $211
Class B Shares $22 $69 $117 $215
Class C Shares $23 $71 $122 $262
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts Class B shares into Class
A shares after 6 years. Because of the effect of the asset-based
sales charge and the contingent deferred sales charge on Class B
and Class C shares, long-term Class B and Class C shareholders
could pay the economic equivalent of an amount greater than the
maximum front-end sales charge allowed under applicable regulatory
requirements. For Class B shareholders, the automatic conversion
of Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but
are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
What Are The Fund's Investment Objectives? The Fund's
primary investment objective is to seek current income. The Fund's
secondary investment objective is to seek capital appreciation.
What Does the Fund Invest In? To seek current income, the
Fund primarily invests in three types of securities, or "sectors"
of the market: (i) U.S. Government Securities, (ii) foreign debt
securities, including emerging market debt securities, and (iii)
domestic debt securities, including lower-rated, high yield
securities commonly called "junk bonds." While all securities
investments entail risks, foreign securities and junk bonds have
special risks, described in more detail in "Investment Objectives
and Policies." To seek its secondary objective, the Fund normally
will invest in domestic common stocks that the Manager believes
have growth potential. 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 Objectives and
Policies" starting on page __.
Who Manages the Fund? The Fund's investment advisor (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) manages investment company portfolios currently having
over $62 billion in assets as of December 31, 1996. The Manager is
paid an advisory fee by the Fund, based on its net assets. The
Fund has three portfolio managers, employed by the Manager, who are
primarily responsible for the selection of the Fund's securities:
Robert C. Doll, Jr., Arthur P. Steinmetz and David P. Negri. The
Fund's Board of Trustees, elected by shareholders, oversees the
investment advisor and the portfolio managers. 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 Oppenheimer
funds spectrum, the Fund is generally considered moderately
aggressive, more risky than investment grade bond funds, because it
may hold high yield securities and may invest for capital
appreciation in common 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 objectives and your shares may be worth
more or less than their original cost when you redeem them. Please
refer to "Investment Objectives and Policies" starting on page ___
for a more complete discussion of the Fund's investment risks.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How To Buy Shares" on page ___ for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund offers
the individual investor three classes of shares. All classes have
the same investment portfolio but different expenses. Class A
shares are offered with a front-end sales charge, starting at
4.75%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be
subject to a contingent deferred sales charge if redeemed within 6
years or 12 months, respectively, 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 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 Oppenheimer
funds, described in "How to Exchange Shares" on page ___.
How Has the Fund Performed? The Fund measures its
performance by quoting its yield, average annual total return and
cumulative total return, which measure historical performance.
Those yields and returns can be compared to the yield and returns
(over similar periods) of other funds. Of course, other funds may
have different objectives, investments, and levels of risk. The
Fund's performance can also be compared to broad market indices,
which we have done on pages ___ and ___. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended September 30, 1996, is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992(3)
=====================================================================
==============
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.36 $4.92 $5.26 $5.03 $5.00
- - -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .32 .21 .22 .07(4)
Net realized and unrealized
gain (loss) .54 .44 (.23) .22 .02
----- ----- ----- ----- -----
Total income (loss) from
investment operations .86 .76 (.02) .44 .09
- - -----------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.34) (.32) (.21) (.20) (.06)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.34) (.32) (.32) (.21) (.06)
- - -----------------------------------------------------------------------------------
Net asset value, end of period $5.88 $5.36 $4.92 $5.26 $5.03
===== ===== ===== ===== =====
=====================================================================
==============
TOTAL RETURN, AT NET ASSET VALUE(5) 16.53% 16.09% (0.23)% 8.84% 1.74%
=====================================================================
==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $46,747 $40,977 $42,733 $55,291 $48,3973
- - -----------------------------------------------------------------------------------
Average net assets (in thousands) $43,764 $40,799 $48,360 $59,209 $30,2643
- - -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.75% 6.37% 4.56% 4.33% 4.59%(6)
Expenses 1.43% 1.35% 1.43% 1.36% 1.46%(4)(6)
- - -----------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3% 114.0% 80.0% 122.4% 25.8%
Average brokerage
commission rate(8) $0.0595 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993(2) 1996(1)
=====================================================================
===============================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.35 $4.91 $5.26 $5.10 $5.36
- - ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .28 .19 .14 .28
Net realized and unrealized
gain (loss) .53 .44 (.25) .16 .49
----- ----- ----- ----- -----
Total income (loss) from
investment operations .82 .72 (.06) .30 .77
- - ----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.30) (.28) (.18) (.13) (.27)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.30) (.28) (.29) (.14) (.27)
- - ----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.87 $5.35 $4.91 $5.26 $5.86
===== ===== ===== ===== =====
=====================================================================
===============================
TOTAL RETURN, AT NET ASSET VALUE(5) 15.69% 15.26% (1.17)% 5.86%
15.18%
=====================================================================
===============================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $28,93 $19,885 $16,053 $12,386 $1,106
- - ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,26 $17,316 $14,986 $ 7,541 $ 400
- - ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94% 5.61% 3.86% 3.32%(6) 4.58%(6)
Expenses 2.19% 2.10% 2.17% 2.21%(6) 2.28%(6)
- - ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3 114.0% 80.0% 122.4% 147.3%
Average brokerage
commission rate(8) $0.0595 -- -- -- $0.0595
</TABLE>
1. For the period from October 2, 1995 (inception of offering)
to September 30, 1996.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from June 1, 1992 (commencement of operations)
to September 30, 1992.
4. Net investment income would have been $.07 per share absent
the voluntary expense reimbursement, resulting in an expense ratio of
1.74%.
5. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering),
with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for
a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended
September 30, 1996 were $106,528,444 and $95,769,996, respectively.
8. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period divided by the total number
of related shares purchased and sold. See accompanying Notes to
Financial Statements.
<PAGE>
Investment Objectives and Policies
Objectives. The Fund has primary and secondary investment
objectives. First, the Fund invests its assets to try to provide
current income. As a secondary objective, the Fund seeks capital
appreciation.
Investment Policies and Strategies. The Fund intends to seek its
primary investment objective of current income principally by
investing in securities in three sectors of the investment market:
(1) U.S. Government Securities, (2) foreign debt securities,
including lower-rated, high yield foreign securities that have
special risks, and (3) domestic debt securities, including lower-
rated, high yield, high risk bonds. The Fund intends to seek its
secondary investment objective of capital appreciation principally
by investing in domestic equity securities.
The term "equity security" generally refers to a security,
such as a common stock, which represents an ownership interest in
the company issuing the security. The term "debt security" refers
to a wide variety of different types of securities that, in general
terms, represent a loan of money to the issuer, which promises to
pay back the amount loaned (the "principal") plus interest, which
may be at a fixed-rate or a variable rate. Debt securities are
sometimes generally referred to as "fixed-income" securities.
Under normal circumstances, the Fund will invest at least some
of its assets in each of the four sectors described above. There
is no specific percentage of its assets that must be invested in
any one or more of these sectors at any time. However, from time
to time the Fund may invest up to 100% of its total assets in any
one sector, other than in domestic equity securities if, in the
judgment of the Manager, the Fund has the opportunity of seeking a
high level of current income without undue risk to principal.
Because that means the Fund could invest all of its assets in
lower-rated securities, an investment in the Fund may be considered
to be speculative. There can be no assurance that the Fund will
achieve its objectives.
The amount of income the Fund earns and distributes to
shareholders will fluctuate over time as the Fund shifts its assets
among these sectors. Also, from time to time the Fund may shift
its emphasis on debt securities having a particular maturity,
whether long, short or intermediate.
When investing the Fund's assets, the Manager considers many
factors, including the financial condition of particular companies
it is considering investing in as well as general economic
conditions in the U.S. relative to foreign economies, and the
trends in domestic and foreign debt securities and stock markets.
In evaluating the potential for income from particular securities,
the Manager examines many factors, such as the consistency of the
company's earnings, the industry group the company is in (and the
prospects for that industry in the overall economy), how well the
company is managed, and the size of the company's capitalization.
The Manager may use different approaches at different times to
determine how to allocate the Fund's assets between the three debt
securities sectors to seek income and the domestic equity sector to
seek capital growth. The Manager determines that allocation
periodically, in the following manner. First, the Manager
establishes a target level of current income to seek from the
Fund's portfolio investments. That target may use, as a point of
reference, a measure of current interest rates, such as the
interest rate then being paid on 3-month U.S. Treasury bills.
Second, the Manager estimates what proportion of the Fund's assets
are to be allocated to the debt securities sectors to seek that
level of current income. Third, the remainder of the Fund's assets
that are not allocated to debt securities are allocated to the
domestic equity sector to attempt to achieve capital appreciation.
The Manager intends to determine this allocation monthly
(although the frequency of the determination may vary) and to
utilize the 3-month Treasury bill rate as the benchmark measure of
current interest rates to target desired portfolio income, although
a different measure may be adopted. Since the Fund's objective of
capital appreciation is secondary to its objective of current
income, there may be periods in which relatively little or none of
the Fund's assets are invested in equity securities.
Under this asset allocation approach, the proportion of the
Fund's assets allocated to the different debt securities sectors
and to the domestic equity sector will vary from time to time. The
allocation will depend on the level of current portfolio income
targeted by the Manager, the Manager's estimates of earnings
available from the fixed income sectors, and other factors. In
general, if the Manager's estimate of projected earnings available
from the fixed income sectors exceeds the targeted level of current
portfolio income, a greater percentage of the Fund's assets will be
available to allocate to the domestic equity sector.
The Manager may vary, revise or discontinue this asset
allocation approach or adopt a different approach. The use of this
approach is not an objective or fundamental investment policy of
the Fund, but merely illustrates the investment selection and
allocation techniques the Manager currently intends to employ in
seeking the Fund's objectives and in implementing the Fund's
investment policies. There can be no assurance that any asset
allocation approach will be successful in providing the Fund or its
shareholders a particular amount of current income or achieving
particular investment results. The Fund's expenses will reduce the
amount of any income the Fund earns that is available for
distribution to shareholders, whether or not the targeted income
level sought by the Manager is achieved. Investors are cautioned
that the Fund is designed for the long-term investor and should not
be considered as a short-term investment vehicle.
The Fund may try to hedge against losses in the value of its
portfolio of securities by using hedging strategies and derivative
investments described below. The Fund's portfolio managers may
employ special investment techniques in selecting securities for
the Fund. These are also described below. Additional information
may be found about them under the same headings in the Statement of
Additional Information.
Can the Fund's Investment Objectives and Policies Change?
The Fund has investment objectives, described above, as well as
investment policies it follows to try to achieve its objectives.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless
this Prospectus or the Statement of Additional Information says
that a particular policy is "fundamental." The Fund's investment
objectives are fundamental policies.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional
Information). The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although
significant changes will be described in amendments to this
Prospectus.
Investments in Bonds and Convertible Securities. The Fund
may invest in a variety of different types of income-producing
securities to help seek its primary objective of current income.
When investing in convertible securities, the Manager looks to
the conversion feature and treats the securities as "equity
securities." The Fund can buy unrated securities, and when doing
so, the Manager will determine in its judgement whether unrated
securities are of comparable quality to securities rated by rating
organizations.
Board-Approved Instruments. The Fund may invest in other
investments in any of the three debt securities sectors (including
new investments that may be developed in the future) that the
Fund's Board of Trustees (or the Manager, under guidelines
established by the Board) determines are consistent with the Fund's
investment objectives and investment policies.
Certain Types of Securities Are in More Than One Sector.
The types of securities described below may be included in two or
more of the three debt securities sectors the Fund invests in.
Bank Obligations. The Fund may invest in certain kinds of
bank obligations, which may fall within the domestic or foreign
debt securities sectors. Generally, these are debt obligations
that have a maturity of one year or less, and include: certificates
of deposit, bankers' acceptances, time deposits, and letters of
credit if they are payable in the United States or London, England.
Those letters of credit must be issued or guaranteed by a domestic
or foreign bank having total assets in excess of $1 billion and
which the Manager has determined to be creditworthy, considering,
among other factors, any ratings assigned to the securities by one
or more "nationally-recognized statistical rating organizations" as
that term is defined in Rule 2a-7 under the Investment Company Act.
Commercial Paper. The Fund may invest in foreign or
domestic commercial paper, which in general terms is short-term
corporate debt. If rated, it must be rated at least "A-3" by
Standard & Poor's or at least "Prime-3" by Moody's. If not rated,
it must be issued by a corporation having an already-issued debt
security rated at least "BBB" by Standard & Poor's or "Baa" by
Moody's or rated similarly by another nationally recognized
statistical rating organization. The Fund's commercial paper
investments may include variable amount master demand notes and
floating rate or variable rate notes, described in the Statement of
Additional Information.
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, those guarantees do
not extend to the value of or yield of the mortgage-backed
securities themselves or to the net asset value of the Fund's
shares. Other mortgage-backed securities represent pools of
mortgages "packaged" and offered by private issuers, and these are
part of the Fund's domestic debt securities investments.
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 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 or private issuers will be able
to meet their obligations.
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. Stripped securities that receive principal payments are
also subject to increased volatility in price due to interest rate
changes and have the additional risk that the securities will be
less liquid during demand or supply imbalances.
The Fund may also enter into "forward roll" transactions with
mortgage-backed securities. In this investment strategy, the Fund
sells mortgage-backed securities it holds to banks or other buyers
and simultaneously agrees to repurchase a similar security from
that party at a later date at an agreed-upon price. Forward rolls
are considered to be a borrowing by the Fund (which is a technique
explained in "Special Investment Methods - Borrowing," below). The
Fund would be required to identify liquid assets to its custodian
bank in an amount equal to its obligation under the roll; that
amount is subject to the limitation on borrowing described in
"Borrowing" below. The main investment risk of this strategy is
the risk of default by the counterparty.
Participation Interests. This type of security may include
securities in the domestic and foreign debt securities sectors.
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. Borrowers may have difficulty making payments.
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. Participation interests are subject to the
Fund's limitations on investments in illiquid securities, described
in "Illiquid and Restricted Securities", below.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued either by foreign banks, foreign companies and
domestic private issuers or by the U.S. Treasury, and which
therefore may be in all three debt sectors. 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 Treasury securities are U.S. Treasury notes and
bonds that have been stripped of their interest coupons and
receipts. Because a zero coupon security pays no interest to its
holder during its life or for a substantial period of time, it
usually trades at a discount from its face or par value, and does
not pay current cash income. It will be subject to greater
fluctuations in market value in response to changing interest rates
than other debt obligations that have comparable maturities and
which make current distributions of interest. While the Fund does
not receive cash payments of interest on zero coupon securities, it
does accrue taxable income on these securities.
Domestic Debt Securities. The Fund may invest in debt
securities issued by U.S. companies in any type of industry.
Domestic debt securities may be denominated in U.S. dollars or in
non-U.S. currencies. The Fund is not required to limit those
investments to issuers having a particular size capitalization,
although it is expected that most will have total assets in excess
of $100 million. These investments may include debt obligations
such as bonds, debentures (unsecured bonds) and notes (including
variable and floating rate instruments described in "Investment
Objectives and Policies" in the Statement of Additional
Information), as well as the other investments discussed below.
These investments may also include sinking fund and callable bonds.
Municipal Securities. The Fund may invest in municipal
securities. These are debt obligations issued by or on behalf of
states, the District of Columbia, or any commonwealths, territories
or possessions of the United States. They also include securities
issued by their political subdivisions, agencies, instrumentalities
or authorities. The Fund will invest in these securities if the
Manager believes the interest income opportunities are favorable
compared to other debt securities, but not to seek income exempt
from income taxes.
Asset-Backed Securities. The Fund may invest in "asset-
backed" securities. These represent interests in pools of consumer
loans and other trade receivables similar to mortgage-backed
securities. They are issued by trusts and "special purpose
corporations." They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a
number of different parties. The income from the underlying pool
is passed through to holders, such as the Fund. These securities
may be supported by a credit enhancement, such as a letter of
credit, a guarantee or a preference right. However, the extent of
the credit enhancement may be different for different securities
and generally applies to only a fraction of the security's value.
These securities may present an additional risk, for example, in
the case of credit card receivables, the issuer of the security may
have no security interest in the related collateral.
U.S. Government Securities. The Fund's investment in debt
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities are referred to as "U.S. Government
Securities." Because U.S. Government Securities are considered
among the most creditworthy investments, their yields are generally
lower than the yields available from corporate debt securities.
Additionally, the values of U.S. Government Securities are subject
to changes in prevailing domestic interest rates, as described
below in "Interest Rate Risks."
U.S. Government Securities are debt obligations issued by or
guaranteed by the United States government or any of its agencies
or instrumentalities. Some of these obligations, including U.S.
Treasury notes and bonds, and mortgage-backed securities (referred
to as "Ginnie Maes") guaranteed by the Government National Mortgage
Association, are supported by the full faith and credit of the
United States, which means that the government pledges to use its
taxing power to repay the debt. Other U.S. Government Securities
issued or guaranteed by Federal agencies or government-sponsored
enterprises are not supported by the full faith and credit of the
United States. They may include obligations supported by the
ability of the issuer to borrow from the U.S. Treasury. However,
the Treasury is not under a legal obligation to make a loan.
Examples of these are obligations of Federal Home Loan Mortgage
Corporation (these securities are often called "Freddie Macs").
Other obligations are supported by the credit of the
instrumentality, such as Federal National Mortgage Association
bonds (these securities are often called "Fannie Maes"). Some of
the other U.S. Government Securities in which the Fund may invest
are zero coupon U.S. Treasury securities and mortgage-backed
securities.
Foreign Debt Securities. When investing in the foreign
sector for the portfolio, the Fund may include debt obligations of
the types identified in "Domestic Debt Securities," above. These
foreign securities may be denominated in U.S. dollars or in non-
U.S. currencies. They may be issued or guaranteed by foreign
corporations, supranational entities (such as the World Bank) and
foreign governments. Foreign government securities also include
debt securities issued by political subdivisions of foreign
governments that have taxing authority or by their agencies or
instrumentalities.
The Fund may also invest in emerging market debt securities.
Emerging market countries generally (i) have no market for longer-
term debt securities denominated in its local currency; (ii) borrow
money in currencies other than its local currency; (iii) lack a
developed yield curve for their local currencies; and (iv) with the
exception of Mexico, are not members of the Organization for
Economic Cooperation and Development.
No more than 25% of the Fund's total assets will be invested
in government securities of any one foreign country or in debt
securities issued by companies organized under the laws of any one
foreign country. The foreign securities sector also may include
debt obligations issued by U.S. corporations denominated in non-
U.S. currencies. This sector also includes debt obligations known
as "Brady Bonds." Brady Bonds are issued to exchange existing
commercial bank loans to foreign governments for new obligations
that are usually collateralized by zero coupon U.S. Treasury
securities that have the same maturity as the debt obligation.
Domestic Equity Securities. When investing for the Fund's
secondary objective of capital appreciation, it may buy equity
securities of domestic corporations in any industry. The Fund's
equity investments are not limited to companies of a particular
size, although it is currently expected that most will have assets
in excess of $100 million.
These investments may include common stocks, preferred stocks,
convertible securities and warrants. In selecting stocks, the Fund
will emphasize issues listed on a U.S. securities exchange or
quoted on the automatic quotation system of the National
Association of Securities Dealers, Inc. ("NASDAQ").
Investments in Small, Unseasoned Companies. The Fund may
invest in securities of small, unseasoned companies, but as a
matter of fundamental policy, purchases of investments in companies
that have operated less than three years (counting the operations
of any predecessors) may not exceed 5% of the Fund's total assets.
Securities of these companies may have limited liquidity (which
means that the Fund may have difficulty selling them at an
acceptable price when it wants to), and the prices of these
securities may be volatile.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." 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. In addition, the Manager trades equity
securities when the Manager determines that these securities should
be purchased or sold. The Fund therefore may have a greater rate
of portfolio turnover than investment companies that invest on a
long-term basis. As a result, the Fund's portfolio turnover rate
is likely to be more than 100% per year. 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. See "Tax Aspects of
Covered Calls and Hedging Instruments" in the Statement of
Additional Information. 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.
Investment Risks
All investments carry risks to some degree, whether they are
risks that market prices of investments may fluctuate (this is
known as "market risk") or that the issuer may experience financial
difficulties and default on its obligations under a fixed income
investment to pay interest and principal (this is known as "credit
risk"). These general investment risks and the special investment
risks of certain types of investments that the Fund may purchase
are described below. They affect the value of the Fund's
investments, its investment performance, and the value of its
shares. These risks collectively form the risk profile of the
Fund.
Interest Rate Risks. In addition to credit risk, described
above, 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.
Stock Investment Risks. Because the Fund can invest a
portion of its assets in stocks, the value of the Fund's portfolio
will be affected by changes in the stock markets. At times, the
stock markets can be volatile and stock prices can change
substantially. This market risk will affect the Fund's net asset
value per share, which will fluctuate as the values of the Fund's
portfolio securities change. Not all stock prices change uniformly
or at the same time, and other factors can affect a particular
stock's prices (for example, poor earnings reports by an issuer,
loss of major customers, major litigation against an issuer, or
changes in government regulations affecting an industry). Not all
of these factors can be predicted.
Special Risks of Lower-Rated Securities. The domestic and
foreign debt securities the Fund can invest in may include high
risk, higher yielding "lower-grade" debt securities, commonly known
as "junk bonds". There is no restriction on the amount of the
Fund's assets that could be invested in these types of securities.
"Lower-grade" securities are those rated below "investment grade,"
which means they have a rating of "BB" or lower by Standard &
Poor's Corporation ("Standard & Poor's") or "Ba" or lower by
Moody's Investors Service, Inc. ("Moody's") 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 "C" or "D" or that may be in default at time of purchase.
As of September 30, 1996, the Fund's portfolio included
corporate bonds in the following S&P rating categories, or if
unrated, determined by the Manager to be comparable to the category
indicated (the percentages shown are the dollar-weighted average
value of the bonds in each rating category measured as a percentage
of the Fund's total assets: AAA, .09%; A, .29%; BBB, 1.61%; BB,
2.87%; B, 9.87%; CCC, 1.40%; D, 0.00%. 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. For a description of
these securities ratings, please refer to the Appendix A to this
Prospectus.
The Manager does not rely solely on ratings of securities by
rating agencies when selecting investments for the Fund, but
evaluates other economic and business factors as well. The Fund
may invest in unrated securities that the Manager believes offer
yields and risks comparable to rated securities. High yield,
lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade
securities. They may be subject to greater market fluctuations and
risk of loss of income and principal than lower yielding,
investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable
price. There is a relatively greater possibility that the issuer's
earnings may be insufficient to make the payments of interest due
on the bonds. The issuer's low creditworthiness may increase the
potential for its insolvency. All corporate debt securities,
whether foreign or domestic, are subject to some degree of credit
risk. Additionally, during an economic downturn, high yield bonds
might decline in value more than lower yielding, investment grade
bonds. For foreign lower-grade debt securities, these risks are in
addition to the risks of investing in foreign securities, described
in "Special Risks of Foreign Securities," below.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. The Fund is not obligated to dispose of securities
when issuers are in default or if the rating of the security is
reduced. However, the Fund's use of three different debt
securities sectors under normal conditions may reduce some of the
effect that the risk of investing in these securities can have, as
will the Fund's policy of diversifying its investments. Also,
convertible securities may be less subject to some of these risks
than other debt securities, to the extent they can be converted
into stock, which may be more liquid and less affected by these
other risk factors.
Special Risks of Foreign Securities. 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. See "Returns of Capital" below.
The Fund may invest in foreign securities issued in any
country, developed or underdeveloped. Securities of issuers in
non-industrialized and emerging market 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.
Other Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The
Statement of Additional Information contains more information about
these practices, including limitations on their use that are
designed to reduce some of the risks.
Borrowing for Leverage. The Fund may borrow money from
banks to buy securities. The Fund will borrow only if it can do so
without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." Leveraging may
subject the Fund to greater risks and costs than funds that do not
borrow. These risks may include the possible reduction of income
and increased fluctuation in the Fund's net asset value per share,
since the Fund pays interest on borrowings. Borrowing is subject
to regulatory limits described in more detail in the Statement of
Additional Information.
Derivative Investments. In general, a "derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The Fund may
not purchase or sell physical commodities or commodity contracts,
however, this shall not prevent the Fund from buying or selling
options and futures contracts or from investing in securities or
other instruments backed by physical commodities. The Fund may
purchase and sell foreign currency in hedging transactions.
Derivative investments used by the Fund are used in some cases
for hedging purposes and in other cases for "non-hedging"
investment purposes to seek income or 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 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. Principal
and/or interest payments on a commodity-linked note may depend on
the performance of an index of commodity futures, or on the
performance of an individual commodity such as crude oil, gasoline,
natural gas, livestock, agricultural grains, or metals. 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.
Derivatives may entail special risks. The company
issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or
security might not perform the way the Manager expected it to
perform. Markets, underlying securities and indices may move in a
direction not anticipated by the Manager. Performance of
derivative investments may also be influenced by interest rate and
stock market changes in the U.S. and abroad. All of this can mean
that the Fund will realize less principal or income from the
investment than expected. Certain derivative investments held by
the Fund may be illiquid. Please refer to "Illiquid and Restricted
Securities," below.
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 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 contacts are used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options are used to try to protect against declines in the dollar
value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for
liquidity purposes, defensive reasons, or to raise cash to
distribute to shareholders.
Futures. The Fund may buy and sell futures contracts that
relate to (1) foreign currencies (these are Forward Contracts), (2)
financial indices such as U.S. or foreign government securities,
corporate debt securities or equity indices (these are referred to
as Financial Futures), and (3) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are described
in "Hedging" in the Statement of Additional Information.
Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls on (1) debt securities, (2) foreign
currencies, (3) Futures, (4) broadly-based securities indices, (5)
interest rate spreads, (6) equity securities, or to terminate its
obligation on a call the Fund previously wrote. The Fund may write
(that is, sell) call options on debt or equity securities, foreign
currency or Futures, but only if they are "covered." That means
the Fund must own the security subject to the call while the call
is outstanding (or own and segregate liquid assets to satisfy its
obligation if the call is exercised). 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 100% of
the Fund's total assets may be subject to covered 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
those puts that relate to (1) debt securities, (2) Futures, (3)
foreign currencies, (4) broadly-based securities indices, (5)
interest rate spreads, or (6) equity securities. The Fund can buy
a put on a debt security whether or not the Fund owns the
particular debt security in its portfolio. The Fund may sell a put
on debt securities or Futures, but only if the puts are covered by
segregated liquid assets. The Fund will not write puts if more
than 50% of the Fund's net assets would have to be segregated to
cover put obligations.
A call or put may be purchased only if, after the purchase,
the value of all call and put options held by the Fund will not
exceed 5% of the Fund's total assets. The Fund may buy and sell
put and call options that are traded on U.S. or foreign securities
or commodity exchanges or are traded in the over-the-counter
markets. In the case of foreign currency options, they may be
quoted by major recognized dealers in those options. Options
traded in the over-the-counter market may be "illiquid," and
therefore may be subject to the Fund's restrictions on illiquid
investments, described in "Illiquid and Restricted Securities,"
below.
Forward Contracts. Forward Contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to try to
"lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Fund has purchased or sold, or to protect
against possible losses from changes in the relative value of the
U.S. dollar and a foreign currency. The Fund may also use "cross
hedging," where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.
Interest Rate Swaps. In an interest rate swap, the Fund
and another party exchange their right to receive, or their
obligation to pay, interest on a security. For example, they may
swap a right to receive floating rate interest payments for fixed
rate payments. The Fund enters into swaps only on securities it
owns. The Fund may not enter into swaps with respect to more than
25% of its total assets. The Fund will segregate liquid assets to
cover any amounts it could owe under swaps that exceed the amounts
it is entitled to receive, and it will adjust that amount daily, as
needed.
Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different from what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. For example, in writing puts, there
is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price. The use of Forward Contracts
may reduce the gain that would otherwise result from a change in
the relationship between the U.S. dollar and a foreign currency.
The Fund attempts to limit its exposure in foreign currency
exchange contracts to the amount of its assets denominated in the
foreign currency, to avoid having to buy or sell foreign currency
at disadvantageous prices. Interest rate swaps are subject to the
risk that the other party will fail to meet its obligations (or
that the underlying issuer will fail to pay on time), as well as
interest rate risks. The Fund could be obligated to pay more under
its swap agreements than it receives under them, as a result of
interest rate changes. If a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund
will be required to sell the investment at the call price and will
not be able to realize any profit if the investment has increased
in value above the call price. These risks are described in
greater detail in the Statement of Additional Information.
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. See
the Statement of Additional Information for more details.
Loans of Portfolio Securities. To attempt to increase its
income, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. The Fund must receive
collateral for a loan. These loans are limited to not more than
25% of the value of the Fund's total assets and are subject to
other conditions described in the Statement of Additional
Information. The Fund presently does not intend to lend its
portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of the Fund's
total assets in the coming year.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 10% of its net assets in
illiquid or restricted securities (the Board may increase that
limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that
are eligible for resale to qualified institutional purchasers. The
Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.
When-Issued and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market
exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
Short Sales "Against-the-Box". As a matter of fundamental
policy, the Fund may not sell securities short except in
collateralized transactions referred to as short sales "against-
the-box." No more than 15% of the Fund's net assets will be held
as collateral for such 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:
purchase securities issued or guaranteed by any one issuer
(except the U.S. Government or any of its agencies or
instrumentalities), if (with respect to 75% of its total assets)
more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would then own more than 10%
of that issuer's voting securities;
concentrate 25% or more of its total assets in investments
of issuers in the same industry (excluding the U.S. Government, its
agencies and instrumentalities); for purposes of this limitation,
utilities will be divided according to their services (for example,
gas, gas transmission, electric and telephone utilities are each
considered a separate industry);
make loans, except that it may purchase debt obligations in
accordance with its investment objectives and policies, or enter
into repurchase agreements, or lend portfolio securities in
accordance with applicable regulations;
buy securities of an issuer which, together with any
predecessor, has been in operation for less than three years, if as
a result, the aggregate of these investments would exceed 5% of the
value of the Fund's total assets; or
make short sales of securities or maintain a short position,
unless as short sales against-the-box.
Unless the Prospectus or the Statement of Additional
Information states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an
investment and the Fund need not sell securities to meet the
percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1992 as a
Massachusetts business trust. The Fund is a diversified, open-end,
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 under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review
the actions of the Manager. "Trustees and Officers of the Fund" in
the Statement of Additional Information names the Trustees and
officers of the Fund and provides more information about them.
Although the Fund will not normally hold annual meetings of its
shareholders, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in
the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of this Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Only shares of a particular
class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the
Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets
forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its
business.
The Manager has operated as an investment advisor since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $62 billion as of December 31, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio Managers. The Fund has three portfolio managers:
Robert C. Doll, Jr. is an Executive Vice President of the Manager
and a Senior Vice President of the Fund; Arthur P. Steinmetz is a
Senior Vice President of the Manager and David P. Negri is a Vice
President of the Manager and each is also a Vice President of the
Fund. Since the Fund's inception in 1992, they have been
principally responsible for the day-to-day management of the Fund's
portfolio, with Mr. Doll selecting equity investments and Messrs.
Steinmetz and Negri selecting debt securities. During the past
five years, Messrs. Doll, Steinmetz and Negri have also served as
officers of the Manager and as officers and portfolio managers for
other Oppenheimer funds. For more information about the Fund's
other officers and Trustees, see "Trustees and Officers of the
Fund" in the Statement of Additional Information.
Fees and Expenses. Under the investment advisory agreement,
the Fund pays the Manager the following annual fees, which decline
on additional assets as the Fund grows: 0.75% of the first $200
million of average annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200
million, 0.60% of the next $200 million, and 0.50% of average
annual net assets in excess of $1 billion. The Fund's management
fee for its last fiscal year was 0.75% of average annual net assets
for its Class A, Class B and Class C shares, which may be higher
than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such
as custodian fees, Trustees' fees, transfer agency fees, legal fees
and auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However, those
expenses reduce the net asset value of the Fund's 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 advisor.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
distributes the shares of other Oppenheimer funds and is sub-
distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other
Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free
number shown below under "How to Sell Shares" in this Prospectus
and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return," "average annual total return" and "yield" to
illustrate its performance. The performance of each class of shares
is shown separately, because the performance of each class of
shares will usually be different as a result of the different kinds
of expenses each class bears. 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 information
may be useful to help you see how well your investment has done
over time and to compare it to other mutual funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns
and yield represent past performance and should not be considered
to be predictions of future returns or performance. More detailed
information about how total returns are calculated is contained in
the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B shares, normally the contingent
deferred sales charge that applies to the period for which total
return is shown has been deducted. When total returns are shown
for Class C shares, for a one-year period (or less), they reflect
the effect of the contingent deferred sales charge. However, total
returns may also be quoted "at net asset value," without
considering the sales charge, and those returns would be less if
sales charges were deducted.
Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share from the
portfolio during a 30-day period by the maximum offering price on
the last day of the period. The yield of each class will differ
because of the different expenses of each class of shares. The
yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on
dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment
income during a stated period by the maximum offering price on the
last day of the period. Yields and dividend yields for Class A
shares reflect the deduction of the maximum initial sales charge,
but may also be shown based on the Fund's net asset value per
share. Yields for Class B and Class C shares do not reflect the
deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during its last fiscal year, ended
September 30, 1996, followed by a graphical comparison of the
Fund's performance to a broad-based bond market index and a broad-
based stock market index. Two market indices have been shown for
comparison, because the Fund invests in both debt and equity
securities. There is no single appropriate broad market index of
both debt and equity investments that the Manager believes to be
appropriate to compare the Fund's performance.
Management's Discussion of Fund Performance. During the
Fund s fiscal year ended September 30, 1996, the U.S. fixed income
market declined slightly as interest rates rose. To compensate for
the under performance of U.S. Government bonds and mortgage backed
securities, the Manager shifted the Fund s assets into emerging
market bonds. Foreign government bonds, particularly those issued
by the governments of Italy and Australia performed well over the
past year. In addition, the Manager increased the Fund s holdings
of short term money market instruments in the local currency of
foreign countries. These instruments have a high current yield
compared to similar maturity U.S. Government instruments and
provide the Fund with the ability to move out of these investments
should interest rate situations in those foreign countries
deteriorate.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
shares of the Fund held until September 30, 1996. In the case of
Class A shares, performance is measured from the Fund's inception
on June 1, 1992. In the case of Class B shares, performance is
measured from the inception of the Class on November 30, 1992. In
the case of Class C shares, performance is measured from the
inception of the class on October 2, 1995. In all cases, all
dividends and capital gains distributions were reinvested in
additional shares. The graph for Class A shares reflects the
deduction of the 4.75% current maximum initial sales charge for
Class A shares. The graph for Class B shares reflects the
applicable contingent deferred sales charge that applies to
redemptions of Class B shares held from 11/30/92 until 9/30/96.
The graph for Class C shares reflects the applicable 1% contingent
deferred sales charge for the period shown.
The performance of each class of the Fund's shares is compared
to the performance of the Lehman Brothers Aggregate Bond Index and
the S&P 500 Index. The Lehman Brothers Aggregate Bond Index is a
broad-based, 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. The S&P 500 Index is a broad-based index of
equity securities widely regarded as a general measurement of the
performance of the U.S. equity securities market. Index performance
reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While
index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments
are not limited to the securities in any one index. Moreover, the
index performance data does not reflect any assessment of the risk
of the investments included in the index.
Comparison of Change in Value
of a $10,000 Hypothetical Investments in:
Oppenheimer Strategic Income & Growth Fund,
Lehman Brothers Aggregate Bond Index and the S&P 500 Index
[Graph] [with Class A shares of the Fund]
[Graph] [with Class B shares of the Fund]
[Graph] [with Class C shares of the Fund]
Past performance is not predictive of future performance.
Average Annual Total Returns Cumulative Total Return
of the Fund at 9/30/96 of the Fund at 9/30/96
Life of Life of
A Shares 1-Year Class(1) C Shares Class(3)
11.00% 8.51% 14.18%
B Shares 1-Year Life of Class(2)
10.69% 8.46%
____________________
Total returns and the ending account values in the graph show
change in share value and include reinvestment of all dividends and
capital gains distributions.
1Class A returns are shown net of the applicable 4.75% maximum
initial sales charge. The inception date of the Fund (Class A
shares) was 6/1/92.
2Class B shares of the Fund were first publicly offered on
11/30/92. Returns are shown net of the applicable 5% and 2%
contingent deferred sales charge, respectively, for the 1-year
period and the Life of Class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
3Class C shares of the Fund were first publicly offered on 10/2/95.
The Life of Class return is shown net of the applicable 2%
contingent deferred sales charge.
Past performance is not predicative of future performance.
Graphs may not be 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 "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page __). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 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
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years of buying them, you will normally pay a contingent
deferred sales charge that varies depending on how long you own
your shares, as described in "Buying Class B Shares" below.
Class C Shares. If you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%, as 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 to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class of
shares and considered the effect of the annual asset-based sales
charge on Class B and Class C expenses (which, like all expenses,
will affect your investment return). For the sake of comparison,
we have assumed that there is a 10% rate of appreciation in the
investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's
actual investment returns and the operating expenses borne by each
class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares, and not a combination
of shares of different classes.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to 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 investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more or $1 million or more of Class B or Class C shares,
respectively, from a single investor.
Investing for the Longer Term. If you are investing for
the longer-term, for example, for retirement, and do not expect to
need access to your money for seven years or more, Class B shares
may be an appropriate consideration, if you plan to invest less
than $100,000. If you plan to invest more than $100,000 over the
long term, Class A shares will likely be more advantageous than
Class B shares or C shares, as discussed above, because of the
effect of the expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore you should analyze your options
carefully.
Are There Differences in Account Features That Matter to
You? Because some account features may not be available to Class
B or Class C shareholders, or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of
the contingent deferred sales charge) in non-retirement accounts
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 to buy. 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.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales
charges and asset-based sales charges is the same as the purpose of
the front-end sales charge on sales of Class A shares: that is, to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
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. Subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
How Are Shares Purchased? You can buy shares several ways
- - -- through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure it is
appropriate for you.
Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member. You can then transmit funds
electronically to purchase shares, or have the Transfer Agent send
redemption proceeds or transmit dividends and distributions to your
bank account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.
At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent 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 each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange on a regular
business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor may reject any purchase
order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix B
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price is the
net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
paid to your dealer as commission. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
_________________________________________________________________
Front-End Front-End
Sales Charge Sales Charge
as as Commission as
Percentage of Percentage of Percentage
Amount of Purchase Offering Price Amount Invested of Offering Price
______________________________________________________________________________
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
______________________________________________________________________________
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
Purchases aggregating $1 million or more;
Purchases by a retirement plan qualified under section
401(a) if the retirement plan has total plan assets of $500,000 or
more;
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
employee benefit plan, group retirement plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans") that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more; or
Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or
registered investment advisor that has made special arrangements
with the Distributor for these purchases, or (2) by a direct
rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the
Distributor for those purchases.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares 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 may be equal to 1.0% of the lesser of the aggregate net
asset value of either (1) the redeemed shares (not including shares
purchased by reinvestment of dividends or capital gains
distributions) or (2) the original offering price (which is the
original net asset value) of the redeemed shares. However, the
Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your
dealer on all Class A shares of all Oppenheimer funds you
purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will
apply.
Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also include Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A shares and Class B shares of the
Fund and other Oppenheimer funds during a 13-month period, you can
reduce the sales charge rate that applies to your purchases of
Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge
rate for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter.
More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales
charges are not imposed in the circumstances described below. There
is an explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses
and minor children) 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
or registered representative's spouse or minor children);
dealers, brokers, banks or registered investment advisors
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 (those clients
may be charged a transaction fee by their broker, dealer or advisor
for the purchase or sale of Fund shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence, by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares),
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party,
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor,
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor,
shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver, or
purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month ( and no further
commission will be payable if the shares are redeemed within 18
months of purchase);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program; or
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net asset value of Class A
shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of 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 asset value of Class A shares held in accounts of the
service providers or their 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
contingent deferred sales charge will be based on the lesser of the
net asset value of the shares at the time of redemption or the
original offering price (which is the original net asset value).
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that
were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The
conversion feature is subject to the continued availability of a
tax ruling described in "Alternative Sales Arrangements - Class A,
Class B and Class C Shares" in the Statement of Additional
Information.
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the
net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period. All purchases
are considered to have been made on the first regular business day
of the month in which the purchase was made.
Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for its services and
costs in distributing Class B and C shares and servicing accounts.
Under the Plans, the Fund pays the Distributor an annual "asset-
based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under
each Plan. If either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to the Distributor for distributing shares before the
Plan was terminated.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or C
shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
C shares. Those services are similar to those provided under the
Class A Service Plan, described above. The Distributor pays the
0.25% service fees to dealers in advance for the first year after
Class B or Class C shares have been sold by the dealer and retains
the service fee paid by the Fund in that year. After the shares
have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class B shares is 4.00% of the purchase
price. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee
payments it makes, and its financing costs of distributing and
selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is 1.00% of the purchase
price. Those payments, retained by the Distributor during the
first year Class C shares are outstanding, are at a fixed rate that
is not related to the Distributor's expenses. The Distributor
plans to pay the asset-based sales charge as an ongoing commission
to the dealer on Class C shares that have been outstanding for a
year or more.
The Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred
sales charges collected on redeemed shares and from the Fund under
the Distribution and Service Plan for Class B shares. Therefore,
those expenses may be carried over and paid in future years. At
September 30, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses under the Plan of
$1,292,158 (equal to 4.47% of the Fund's net assets represented by
Class B shares on September 30, 1996), which has been carried over
into the present Plan year. At September 30, 1996, the end of the
Class C Plan year, the Distributor had incurred unreimbursed
expenses under the Plan of $35,790, (equal to 3.25% of the Fund's
net assets represented by Class C shares on September 30, 1996),
which has been carried over into the next Plan year. If the Plan
is terminated by the Fund, the Board of Trustees may allow the Fund
to continue payments of the service fee and asset-based sales
charge to the Distributor for expenses it incurred before the Plan
was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions nor will it apply
to Class B and Class C shares redeemed in certain circumstances as
described below. The reasons for this policy are discussed in
"Reduced Sales Charges" in the Statement of Additional Information.
Waivers for Redemptions of Shares in Certain Cases. The Class
B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases, if the Transfer Agent
is notified that these conditions apply to the redemption:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code) of the participant or beneficiary (the
death or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
including a trustee of a "grantor" trust or revocable living trust
for which the trustee is also the sole beneficiary (the death or
disability must have occurred after the account was established,
and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually measured from the date the Transfer Agent receives the
request;
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; or (5)
for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares 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 of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchasing shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up
to $100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another 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 Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of
Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of the same class of up to five other Oppenheimer funds
on a monthly, quarterly, semi-annual or annual basis under an
Automatic Exchange Plan. The minimum purchase for each Oppenheimer
funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge. This
privilege applies to Class A shares that you purchased subject to
an initial sales charge and to Class A or Class B shares on which
you paid a contingent deferred sales charge when you redeemed them.
This privilege does not apply to Class C shares. You must be sure
to ask the Distributor for this privilege when you send your
payment. Please consult the Statement of Additional Information for
more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
401(k) Prototype Retirement Plans for businesses.
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares in writing
or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an Oppenheimer
funds 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 account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
requests by mail to: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your request must be
received by the Transfer Agent or its agent by the close of The New
York Stock Exchange that day, which is normally 4:00 P.M., but may
be earlier on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan or under a share certificate by
telephone.
To redeem shares through a service representative, call 1-
800-852-8457.
To redeem shares automatically on PhoneLink, call 1-800-
533-3310.
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone once in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
transfer to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence;
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege;
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day;
You must meet the minimum purchase requirements for the
fund you purchase by exchange; and
Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. Oppenheimer Money Market Fund,
Inc. offers only one class of shares which are considered "Class A"
shares for this purpose. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service representative at 1-800-
852-8457 or by using PhoneLink for automated exchanges, by calling
1-800-533-3310. Telephone exchanges may be made only between
accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
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.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period
in which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by
requiring callers to provide tax identification numbers and other
account data or by using PINs, and by confirming such transactions
in writing. If the Transfer Agent does not use reasonable
procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund
will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable
to reach the Transfer Agent during periods of unusual market
activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by
the Fund if the account value has fallen below $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
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied
at the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer Identification
Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net investment income on each
regular business day and pays those dividends to shareholders
monthly. Normally, dividends are paid on or about the first
Tuesday of the following month, but the Board of Trustees can
change that date. Also, dividends 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.
During the Fund's fiscal year ended September 30, 1996, the
Fund attempted to pay dividends on its Class A shares at a targeted
level above 3-month Treasury bill rates, to the extent that was
consistent with the amount of net investment income and other
distributable income available from the Fund's portfolio
investments. However, the targeted level can change and the amount
of each dividend can change from time to time (or there might not
be a dividend at all on any class) depending on market conditions,
the Fund's expenses, and the composition of the Fund's portfolio.
Attempting to pay dividends at a targeted level required the
Manager to monitor the Fund's income stream from its investments
compared to Treasury bill rates and at times to select higher
yielding securities (appropriate to the Fund's investment
objectives and restrictions) to try to earn income at the targeted
level. This practice did not affect the net asset values of any
class of shares. There is no targeted dividend level for Class B
or Class C shares. There is no fixed dividend rate and there can
be no assurance as to payment of any dividends.
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 calendar year. Short-term
capital gains are treated as dividends for tax purposes. There can
be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
"Buying a Dividend": When the Fund makes a capital
distribution, its share price is reduced by the amount of the
distribution. If you buy shares on 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
capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
received when you sold them.
Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
Appendix A: 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 B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those
shareholders of (i) Quest for Value Fund, Inc., Quest for Value
Growth and Income Fund, Quest for Value Opportunity Fund, Quest for
Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became
the investment advisor to those funds, and (ii) Quest for Value
U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Global Income Fund, Quest for Value New York
Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest
for Value California Tax-Exempt Fund when those funds merged into
various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund (i)
acquired by such shareholder pursuant to an exchange of shares of
one of the Oppenheimer funds that was one of the Former Quest for
Value Funds or (ii) received by such shareholder pursuant to the
merger of any of the Former Quest for Value Funds into an
Oppenheimer fund on November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
millon or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. This
contingent deferred sales charge rate also applies to shares of the
Fund purchased by exchange of shares of other Oppenheimer funds
that were acquired as a result of the merger of Former Quest for
Value Funds into those Oppenheimer Funds, and which shares were
subject to a Class A contingent deferred sales charge prior to
November 24, 1995. Class A shares of any of the Former Quest Fund
for Value Funds purchased without an initial sales charge on or
before November 22, 1995 will continue to be subject to the
applicable contingent deferred sales charge in effect as of that
date as set forth in the then-current prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund
or by exchange from an Oppenheimer fund that was a Former Quest for
Value Fund or into which such fund merged, if those shares were
purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund
or by exchange from an Oppenheimer fund that was a Former Quest For
Value Fund or into which such fund merged, if those shares were
purchased on or after March 6, 1995, but prior to November 24,
1995: (1) distributions to participants or beneficiaries from
Individual Retirement Accounts under Section 408(a) of the Internal
Revenue Code or retirement plans under Section 401(a), 401(k),
403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from
service or (b) following the death or disability (as defined in the
Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than
from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); (4) withdrawals under
an automatic withdrawal plan (but only for Class B or C shares)
where the annual withdrawals do not exceed 10% of the initial value
of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales
charge paid on the redemption of any Class A, B or C shares of the
Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares
in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Graphic material included in Prospectus of Oppenheimer
Strategic Income & Growth Fund: "Comparison of Total Return of
Oppenheimer Strategic Income & Growth Fund with The Lehman Brothers
Aggregate Bond Index and The Standard & Poor's 500 Index - Change
in Value of $10,000 Hypothetical Investments"
Linear graphs will be included in the Prospectus of Oppenheimer
Strategic Income & Growth Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical
$10,000 investment in each class of shares of the Fund during each
of the Fund's fiscal periods since the commencement of the Fund's
operations (June 1, 1992) and comparing such values with the same
investments over the same time periods with The Lehman Aggregate
Bond Index and The Standard & Poors 500 Index. Set forth below are
the relevant data points that will appear on the linear graphs.
Additional information with respect to the foregoing, including a
description of The Lehman Aggregate Bond Index and The Standard &
Poor's 500 Index, is set forth in the Prospectus under "Performance
of the Fund--How Has the Fund Performed?"
Oppenheimer Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund A Bond Index S&P 500 Index
06/01/92 $9,525 $10,000 $10,000
09/30/92 $9,659 $10,573 $10,162
09/30/93 $10,522 $11,628 $11,480
09/30/94 $10,485 $11,253 $11,902
09/30/95 $12,167 $12,835 $15,438
09/30/96 $14,242 $13,464 $18,575
Oppenheimer Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund B Bond Index S&P 500 Index
11/30/92 $10,000 $10,000 $10,000
09/30/93 $10,586 $11,143 $10,888
09/30/94 $10,465 $10,784 $11,289
09/30/95 $12,061 $12,300 $14,643
09/30/96 $13,653 $12,903 $17,618
Oppenheimer Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund C Bond Index S&P 500 Index
10/02/95 $10,000 $10,000 $10,000
09/30/96 $11,418 $10,490 $12,032
Oppenheimer Strategic Income & Growth Fund
6803 South Tucson Way
Englewood, Colorado 80012
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information and, if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
PR275.001.0197N* Printed on Recycled Paper
<PAGE>
Oppenheimer Strategic Income & Growth Fund
6803 South Tucson Way, Englewood, Colorado 80012
1-800-525-7048
Statement of Additional Information dated January 15, 1997
This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated January 15, 1997.
It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling
the Transfer Agent at the toll-free number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . .2
Investment Policies and Strategies. . . . . . . . . . . . . . . . . .2
Other Investment Techniques and Strategies. . . . . . . . . . . . . 11
Other Investment Restrictions . . . . . . . . . . . . . . . . . . . 23
How the Fund is Managed. . . . . . . . . . . . . . . . . . . . . . . . . 24
Organization and History. . . . . . . . . . . . . . . . . . . . . . 24
Trustees and Officers of the Fund . . . . . . . . . . . . . . . . . 25
The Manager and Its Affiliates. . . . . . . . . . . . . . . . . . . 30
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . . . . . . 31
Performance of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . 33
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . 37
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . . . . . . 51
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . . . . . . 53
Additional Information About the Fund. . . . . . . . . . . . . . . . . . 54
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 55
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Appendix A: Corporate Industry Classifications. . . . . . . . . . . . .A-1
<PAGE>
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives
and policies of the Fund are discussed in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund may invest, as well as the
strategies the Fund may use to try to achieve its objectives.
Certain capitalized terms used in this Statement of Additional
Information are defined in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment adviser, OppenheimerFunds, Inc. (referred to as the
"Manager"), evaluates the investment merits of fixed-income and
domestic equity securities primarily through the exercise of its
own investment analysis. This may include, among other things,
consideration of the financial strength of an issuer, including its
historical and current financial condition, the trading activity in
its securities, present and anticipated cash flow, estimated
current value of its assets in relation to their historical cost,
the issuer's experience and managerial expertise, responsiveness to
changes in interest rates and business conditions, debt maturity
schedules, current and future borrowing requirements, and any
change in the financial condition of an issuer and the issuer's
continuing ability to meet its future obligations. The Manager
also may consider anticipated changes in business conditions,
levels of interest rates of bonds as contrasted with levels of cash
dividends, industry and regional prospects, the availability of new
investment opportunities and the general economic, legislative and
monetary outlook for specific industries, the nation and the world.
Investment Risks. All fixed-income securities are subject
to one or more types of risks: credit risk, interest rate risk, or
foreign exchange 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 bonds are
subject to credit risk to a greater extent than higher quality
bonds. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting solely from the inverse
relationship between price and yield of outstanding fixed-income
securities. An increase in interest rates will generally reduce
the market value of fixed-income investments, and a decline in
interest rates will tend to increase their value. In addition,
debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter
maturities. Fluctuations in the market value of fixed-income
securities subsequent to their acquisition will not affect the
interest payable on those securities, and thus the cash income from
such securities, but will be reflected in the valuations of those
securities used to compute the Fund's net asset values. Foreign
exchange risk refers to the change in value of the currency in
which a foreign security the Fund holds is denominated against the
U.S. dollar.
Special Risks - High Yield Securities. As stated in the
Prospectus, the corporate debt securities in which the Fund will
principally invest may be in the lower rating categories. The Fund
may invest in securities rated as low as "C" by Moody's or "D" by
Standard & Poor's or other nationally recognized statistical rating
organizations. The Manager will not rely solely on the ratings
assigned by rating services and may invest, without limitation, in
unrated securities which offer, in the opinion of the Manager,
comparable yields and risks as those rated securities in which the
Fund may invest.
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.
Fixed-Income Securities of U.S. Companies. The Fund's
investments in fixed-income securities issued by domestic companies
and other issuers may include debt obligations (bonds, debentures,
notes, mortgage-backed and asset-backed securities, participation
interests, commercial paper and zero coupon securities) and
preferred stock (to the extent a fixed coupon or a stated dividend
rate is paid).
Participation Interests. The Fund may invest in
participation interests, subject to the limitation, described in
"Restricted and Illiquid 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.
Preferred Stocks. Preferred stock, unlike common stock,
offers 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, 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.
Asset-Backed Securities. These securities, issued by trusts
and special purpose entities, are backed by pools of assets,
primarily automobile and credit-card receivables and home equity
loans, which pass through the payments on the underlying
obligations to the security holders (less servicing fees paid to
the originator or fees for any credit enhancement). 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. Payments of principal and interest passed through
to holders of asset-backed securities are typically supported by
some form of credit enhancement, such as a letter of credit, surety
bond, limited guarantee by another entity or by having a priority
to certain of the borrower's other securities. The degree of
credit enhancement varies, and generally applies to only a fraction
of the asset-backed security's par value until exhausted. If the
credit enhancement of an asset-backed security held by the Fund has
been exhausted, and if any required payments of principal and
interest are not made with respect to the underlying loans, the
Fund may experience losses or delays in receiving payment. The
risks of investing in asset-backed securities are ultimately
dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, the Fund
would generally have no recourse to the entity that originated the
loans in the event of default by a borrower. The underlying loans
are subject to prepayments, which shorten the weighted average life
of asset-backed securities and may lower their return, in the same
manner as described 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 security interest in
the underlying collateral as do mortgage-backed securities.
Zero Coupon Corporate Securities. The Fund may invest in
zero coupon securities issued by corporations. Corporate zero
coupon securities are: (i) notes or debentures which do not pay
current interest and are issued at substantial discounts from par
value, or (ii) notes or debentures that pay no current interest
until a stated date one or more years into the future, after which
the issuer is obligated to pay interest until maturity, usually at
a higher rate than if interest were payable from the date of
issuance. Such corporate zero coupon securities, in addition to
the risks identified below under "Zero Coupon U.S. Government
Securities," are subject to the risk of the issuer's failure to
pay interest and repay principal in accordance with the terms of
the obligation.
Mortgage-Backed Securities. Mortgage-backed securities may
be issued by private issuers such as commercial banks, savings and
loan associations, mortgage insurance companies and other secondary
market issuers that create pass-through pools of conventional
residential mortgage loans and on commercial mortgage loans. They
may be the originators of the underlying loans as well as the
guarantors of the mortgage-backed securities. There are no direct
or indirect government guarantees of payments on these pools.
However, timely payment of interest and principal of these pools is
generally supported by various forms of insurance or guarantees.
The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. The insurance
available, the guarantees, and the creditworthiness of the issuers
will be evaluated by the Manager to determine whether a particular
mortgage-backed security of this type meets the Fund's investment
standards. There can be no assurance that the private insurers and
guarantors can meet their obligations under the policies.
Securities issued by certain private poolers may not be readily
marketable, and will be treated as illiquid securities subject to
the Fund's limitations on investments in such securities.
Commercial Paper. The Fund's commercial paper investments,
in addition to those described in the Prospectus, include the
following:
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations which permit the investment of fluctuating
amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. They
permit daily changes in the amounts borrowed. The Fund has the
right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the
amount, and the borrower may prepay up to the full amount of the
note without penalty. These notes may or may not be backed by bank
letters of credit. Because these notes are direct lending
arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary
market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at principal amount, plus
accrued interest, at any time. Accordingly, the Fund's right to
redeem such notes is dependent upon the ability of the borrower to
pay principal and interest on demand. The Fund has no limitations
on the type of issuer from whom these notes will be purchased;
however, in connection with such purchases and on an ongoing basis,
the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. Investments in master
demand notes may be subject to the limitation on investments by the
Fund in illiquid securities, described in the Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund
may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals;
floating rates are automatically adjusted according to a specified
market rate for such investments, such as the percentage of the
prime rate of a bank, or the 91-day U.S. Treasury Bill rate. Such
obligations may be secured by bank letters of credit or other
credit support arrangements.
Zero Coupon U.S. Government Securities. The Fund may invest
in zero coupon securities issued by the U.S. Treasury. Zero coupon
U.S. Treasury securities include: (1) U.S. Treasury bills without
interest coupons, (2) U.S. Treasury notes and bonds that have been
stripped of their unmatured interest coupons and (3) receipts or
certificates representing interests in such stripped debt
obligations or coupons. These securities usually trade at a deep
discount from their face or par value and will be subject to
greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that
make current payments of interest. However, the lack of periodic
interest payments means that the interest rate is "locked in" and
while there is no opportunity to reinvest periodic interest
payments in securities having higher rates, there is no risk of
having to reinvest such interest payments in securities having
lower rates.
Because the Fund accrues taxable income from zero coupon
securities without receiving cash, the Fund may be required to sell
portfolio securities in order to pay dividends or redemption
proceeds for its shares, which require the payment of cash. This
will depend on several factors: the proportion of shareholders who
elect to receive dividends in cash rather than reinvesting
dividends in additional shares of the Fund, and the amount of cash
income the Fund receives from other investments and the sale of
shares. In any case, cash distributed or held by the Fund that is
not reinvested by investors in additional Fund shares will hinder
the Fund from seeking current income.
Portfolio Turnover. To the extent that increased portfolio
turnover results in gains from sales of securities held less than
three months, the Fund's ability to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code") may be affected. Although
changes in the value of the Fund's portfolio securities subsequent
to their acquisition are reflected in the net asset value of the
Fund's shares, such changes will not affect the income received by
the Fund from such securities. The dividends paid by the Fund will
increase or decrease in relation to the income received by the Fund
from its investments, which will in any case be reduced by the
Fund's expenses before being distributed to the Fund's
shareholders.
Municipal Securities. The two principal classifications of
Municipal Securities are "general obligations" (secured by the
issuer's pledge of its full faith, credit and taxing power) and
"revenue obligations" (payable only from the revenues derived from
a particular facility or class of facilities, or a specific excise
tax or other revenue source.) The Fund may invest in Municipal
Securities of both classifications.
Bank Obligations and Instruments Secured Thereby. The bank
obligations the Fund may invest in include time deposits,
certificates of deposit, and bankers' acceptances if they are: (i)
obligations of a domestic bank with total assets of at least $1
billion or (ii) U.S. dollar-denominated obligations of a foreign
bank with total assets of at least U.S. $1 billion. The Fund may
also invest in instruments secured by such obligations (e.g., debt
which is guaranteed by the bank). For purposes of this section,
the term "bank" includes commercial banks, savings banks, and
savings and loan associations which may or may not be members of
the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a
specified period of time at a stated interest rate, whether or not
subject to withdrawal penalties. However, time deposits that are
subject to withdrawal penalties, other than those maturing in seven
days or less, are subject to the limitation on investments by the
Fund in illiquid investments, set forth in the Prospectus under
"Restricted and Illiquid Securities."
Banker's acceptances are marketable short-term credit
instruments used to finance the import, export, transfer or storage
of goods. They are deemed "accepted" when a bank guarantees their
payment at maturity.
U.S. Government Securities. U.S. Government Securities are
debt obligations issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities, and include "zero coupon"
Treasury securities, mortgage-backed securities and money market
instruments.
Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans
which are guaranteed by agencies or instrumentalities of the U.S.
Government. Such securities differ from conventional debt
securities which generally provide for periodic payment of interest
in fixed or determinable amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Some 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 (e.g.,
direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to
borrow from the U.S. Government (e.g., obligations of Federal Home
Loan Mortgage Corporation); and some are backed by only the credit
of the issuer itself. Any of these government agencies may also
issue collateralized mortgage-backed obligations ("CMOs"),
discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual
life of any particular pool will be shortened by any unscheduled or
early payments of principal and interest. Principal prepayments
generally result from the sale of the underlying property or the
refinancing or foreclosure of underlying mortgages. The occurrence
of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to predict
accurately the average life of a particular pool. Yield on such
pools is usually computed by using the historical record of
prepayments for that pool, or, in the case of newly-issued
mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the
yield realized by the Fund to differ from the yield calculated on
the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments
will most likely decline. When prevailing interest rates rise, the
value of a pass-through security may decrease, as do the values of
other debt securities, but, when prevailing interest rates decline,
the value of a pass-through security is not likely to rise to the
extent that the value of other debt securities rise, because of the
prepayment feature of pass-through securities. The Fund's
reinvestment of scheduled principal payments and unscheduled
prepayments it receives may occur at times when available
investments offer higher or lower rates than the original
investment, thus affecting the yield of the Fund. Monthly interest
payments received by the Fund have a compounding effect which may
increase the yield to the Fund more than debt obligations that pay
interest semi-annually. Because of those factors, mortgage-backed
securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest
rates. The Fund may purchase mortgage-backed securities at par or
at a premium or at a discount. Accelerated prepayments adversely
affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of their principal amount) and may
involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is
repaid. The opposite is true for pass-through securities purchased
at a discount.
The Fund may invest in "stripped" mortgage backed securities,
in which the principal and interest portions of the security are
separated and sold. Stripped mortgage-backed securities usually
have at least two classes each of which receives different
proportions of interest and principal distributions on the
underlying pool of mortgage assets. One common variety of stripped
mortgage-backed security has one class that receives some of the
interest and most of the principal, while the other class receives
most of the interest and remainder of the principal. In some
cases, one class will receive all of the interest (the "interest-
only" or "I/O" class), while the other class will receive all of
the principal (the "principal-only" or "P/O" 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 I/O security. Conversely, a decrease in
principal payments or prepayments will reduce the value of a P/O
class. In other types of CMOs, the underlying principal payments
may apply to various classes in a particular order, and therefore
the value of certain classes or "tranches" of such securities may
be more volatile than the value of the pool as a whole, and losses
may be more severe than on other classes.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during
periods of declining interest rates. As new types of mortgage-
related securities are developed and offered to investors, the
Manager will, subject to the direction of the Board of Trustees and
consistent with the Fund's investment objective and policies,
consider making investments in such new types of mortgage-related
securities.
GNMA Certificates. Certificates of Government National
Mortgage Association ("GNMA") are mortgage-backed securities of
GNMA that evidence an undivided interest in a pool or pools of
mortgages ("GNMA Certificates"). The GNMA Certificates that the
Fund may purchase are of the "modified pass-through" type, which
entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to
the "issuer" and GNMA, regardless of whether the mortgagor actually
makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA
guarantee is backed by the full faith and credit of the U.S.
Government. GNMA is also empowered to borrow without limitation
from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
greater part of principal investment long before the maturity of
the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee, except to the
extent that the Fund has purchased the certificates at a premium in
the secondary market.
FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages
insured by the FHA. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates resemble
GNMA Certificates in that each FNMA Certificate represents a pro
rata share of all interest and principal payments made and owed on
the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates. The FNMA guarantee is not
backed by the full faith and credit of the U.S. Government.
FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide
secondary market for conventional residential mortgages. FHLMC
issues two types of mortgage pass-through certificates ("FHLMC
Certificates"): mortgage participation certificates ("PCs") and
guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying
pool. FHLMC guarantees timely monthly payment of interest on PCs
and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected
average life of these securities is approximately ten years. The
FHLMC guarantee is not backed by the full faith and credit of the
U.S. Government.
Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions with respect to mortgage-backed
securities issued by GNMA, FNMA or FHLMC. In a forward roll
transaction, which is considered to be a borrowing by the Fund, the
Fund will sell a mortgage security to a bank or other permitted
entity and simultaneously agree to repurchase a similar security
from the institution at a later date at an agreed upon price. The
mortgage securities that are repurchased will bear the same
interest rate as those sold, but generally will be collateralized
by different pools of mortgages with different prepayment histories
than those sold. Risks of mortgage-backed security rolls include:
(i) the risk of prepayment prior to maturity, (ii) the possibility
that the Fund may not be entitled to receive interest and principal
payments on the securities sold and that the proceeds of the sale
may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of
the roll, and (iii) the possibility that the market value of the
securities sold by the Fund may decline below the price at which
the Fund is obligated to purchase the securities. Upon entering
into a mortgage-backed security roll, the Fund will be required to
identify liquid securities to its Custodian in an amount equal to
its obligation under the roll.
Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs
are fully-collateralized bonds that are the general obligations of
the issuer thereof, either the U.S. Government, a U.S. government
instrumentality, or a private issuer, which may be a domestic or
foreign corporation. Such bonds generally are secured by an
assignment to a trustee (under the indenture pursuant to which the
bonds are issued) of collateral consisting of a pool of mortgages.
Payments with respect to the underlying mortgages generally are
made to the trustee under the indenture. Payments of principal and
interest on the underlying mortgages are not passed through to the
holders of the CMOs as such (i.e., the character of payments of
principal and interest is not passed through, and therefore
payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily
constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on
and repayment of principal of the CMOs. CMOs often are issued in
two or more classes with different characteristics such as varying
maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed
through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are
used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of prepayment on
such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such
prepayment, there will be sufficient collateral to secure CMOs that
remain outstanding.
Foreign Debt Securities. As noted in the Prospectus, the
Fund may invest in debt obligations and other securities (which may
be denominated in U.S. dollars or non-U.S. currencies) issued or
guaranteed by foreign corporations, certain supranational entities
(described below) and foreign governments or their agencies or
instrumentalities, and in debt obligations and other securities
issued by U.S. corporations denominated in non-U.S. currencies.
The types of foreign debt obligations and other securities in which
the Fund may invest are the same types of debt obligations
identified under "Fixed-Income Securities of U.S. Companies,"
above.
The percentage of the Fund's assets that will be allocated to
foreign fixed-income securities will vary from time to time
depending on, among other things, the relative yields of foreign
and U.S. securities, the economies of foreign countries, the
condition of such countries' financial markets, the interest rate
climate of such countries, sovereign credit risk and the
relationship of such countries' currency to the U.S. dollar. The
Manager will consider an issuer's affiliation, if any, with a
foreign government as one of the factors in determining whether to
purchase any particular foreign security. These factors are judged
on the basis of fundamental economic criteria (e.g., relative
inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and
political data. The Fund's portfolio of foreign securities may
include those of a number of foreign countries or, depending upon
market conditions, those of a single country.
Securities of foreign issuers that are represented by American
Depository Receipts, or that are listed on a U.S. securities
exchange, or are traded only 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 sub-custodians or
depositories holding them must be approved by the Fund's Board of
Trustees to the extent that approval is required under applicable
rules of the Securities and Exchange Commission.
The Fund may invest in U.S. dollar-denominated, collateralized
"Brady Bonds". These debt obligations of foreign entities may be
fixed-rate par bonds or floating- rate discount bonds and are
generally collateralized in full as to principal due at maturity by
U.S. Treasury zero coupon obligations that have the same maturity
as the Brady Bonds. Brady Bonds are often 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"). 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 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 to
public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.
The obligations of foreign governmental entities may or may not
be supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of
international organizations designated or supported by governmental
entities to promote economic reconstruction or development and of
international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel
Community, the Asian Development Bank and the Inter-American
Development Bank. The governmental members, or "stockholders," of
these entities usually make initial capital contributions to the
supranational entity and in many cases are committed to make
additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's
lending activities are limited to a percentage of its total capital
(including "callable capital" contributed by members at the
entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their
commitments.
Risks of Foreign Securities. Investing in foreign securities
involves considerations and possible risks not typically associated
with investing in securities in the U.S. The values of foreign
securities will be affected by changes in currency rates or
exchange control regulations or currency blockage, application of
foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in the
U.S. or abroad) or changed circumstances in dealings between
nations. 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. Investments in
foreign countries could be affected by other factors not generally
thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties
in enforcing contractual obligations, and could be subject to
extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the
U.S. dollar will result in a change in the U.S. dollar value of the
Fund's assets and its income available for distribution. In
addition, although a portion of the Fund's investment income may be
received or realized in foreign currencies, the Fund will be
required to compute and distribute its income in U.S. dollars, and
absorb the cost of currency fluctuations. The Fund may engage in
foreign currency exchange transactions for hedging purposes to
protect against changes in future exchange rates. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income
derived from them may also be affected unfavorably by changes in
currency exchange control regulations. Although the Fund will
invest only in securities denominated in foreign currencies that at
the time of investment do not have significant government-imposed
restrictions on conversion into U.S. dollars, there can be no
assurance against subsequent imposition of currency controls. In
addition, the values of foreign securities will fluctuate in
response to a variety of factors, including changes in U.S. and
foreign interest rates.
Investments in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers,
by offering the opportunity to invest in foreign issuers that
appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign bond or other markets that do not move in a
manner parallel to U.S. markets. From time to time, U.S.
government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be reimposed.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities due to
limited trading markets; interest rates and foreign currency
exchange rates may be more volatile; sovereign limitations on
foreign investments may be more likely to be imposed; there may be
significant balance of payment deficits; and their economies and
markets may respond in a more volatile manner to economic changes
than those of developed countries.
Domestic Equity Securities. Information about some of the
types of domestic equity securities the Fund may invest in is
provided below.
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 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 maturity 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.
Other Investment Techniques and Strategies
Hedging. As described in the Prospectus, the Fund may employ
one or more types of Hedging Instruments. When hedging to attempt
to protect against declines in the market value of the Fund's
portfolio, to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may:
(i) sell Futures, (ii) buy puts on such Futures or securities,
(iii) write calls on securities held by it or on Futures or (iv)
purchase Futures to hedge the value of certain assets whose values
decline as interest rates decline. When hedging to attempt to
protect against the possibility that portfolio securities are not
fully included in a rise in value of the debt securities market,
the Fund may: (i) buy Futures, or (ii) buy calls on such Futures or
on securities. Covered calls and puts may also be written on debt
and equity securities to attempt to increase the Fund's income.
When hedging to protect against declines in the dollar value of a
foreign currency-denominated security, the Fund may: (a) buy puts
on that foreign currency and on foreign currency Futures, (b) write
calls on that currency or on such Futures, or (c) enter into
Forward Contracts at a higher or lower rate than the spot ("cash")
rate.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's activities in the
underlying cash market. Additional Information about the Hedging
Instruments the Fund may use is provided below. In the future, the
Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent
such investment methods are consistent with the Fund's investment
objectives, legally permissible and adequately disclosed.
Writing Covered Call Options. When the Fund writes a call
on a security, it receives a premium and agrees to sell the
callable investment to a purchaser of a corresponding call on the
same security during the call period at a fixed exercise price
(which may differ from the market price of the underlying
security), regardless of market price changes during the call
period. The Fund has retained the risk of loss should the price of
the underlying security decline during the call period, which may
be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund
may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of the option transaction costs and
the premium received on the call written is more or less than the
price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains
the underlying investment and the premium received. Any such
profits are considered short-term capital gains for Federal income
tax purposes, and when distributed by the Fund are taxable as
ordinary income. An option position may be closed out only on a
market that provides secondary trading for options of the same
series, and there is no assurance that a liquid secondary market
will exist for a particular option. If the Fund could not effect
a closing purchase transaction due to lack of a market, it would
have to hold the callable investments until the call lapsed or was
exercised.
The Fund may also write calls on Futures without owning a
futures contract or a deliverable bond, provided that at the time
the call is written, the Fund covers the call by segregating in
escrow an equivalent dollar amount of liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed
assets drops below 100% of the 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 securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put is similar to the Fund writing a
covered call because the Fund must own the assets subject to the
call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying
investment remains above the exercise price. However, the Fund has
also assumed the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise
price, even though the value of the investment may fall below the
exercise price. If the put lapses unexercised, the Fund (as the
writer of the put) realizes a gain in the amount of the premium.
If the put is exercised, the Fund must fulfill its obligation to
purchase the underlying investment at the exercise price, which
will usually exceed the market value of the investment at that
time. In that case, the Fund may incur a loss, equal to the sum of
the current market value of the underlying investment and the
premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing put options on securities, to secure its obligation
to pay for the underlying security, the Fund will identify to its
Custodian liquid assets with a value equal to or greater than the
exercise price of the put option. The Fund therefore forgoes the
opportunity of investing the segregated assets or writing calls
against those assets. As long as the obligation of the Fund as the
put writer continues, it may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the Fund
to take delivery of the underlying security against payment of the
exercise price. The Fund has no control over when it may be
required to purchase the underlying security, since it may be
assigned an exercise notice at any time prior to the termination of
its obligation as the writer of the put. This obligation
terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once
the Fund has been assigned an exercise notice, it is thereafter not
allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
Purchasing Calls and Puts. When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium
and, except as to calls on indices or 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 an index or Future, it
pays a premium, but settlement is in cash rather than by delivery
of the underlying investment to the Fund. In purchasing a call,
the Fund benefits only if the call is sold at a profit or if,
during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction
costs and the premium paid and the call is exercised. If the call
is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its
premium payment and the right to purchase the underlying
investment.
When the Fund purchases a put, it pays a premium and, except as
to puts on 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 such underlying
investment at the exercise price to a seller of a corresponding
put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its
expiration date, and the Fund will lose its premium payment and the
right to sell the underlying investment. The put may, however, be
sold prior to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on
an index or a put on a Future not held by the Fund, permits the
Fund either to resell the put or buy the underlying investment and
sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price and as a result the put is not exercised, the put will become
worthless on its expiration date. When the Fund purchases a put on
an index, or on a Future not held by it, the put protects the Fund
to the extent that the index moves in a similar pattern to the
securities held. In the case of a put on an index or Future,
settlement is in cash rather than by delivery by the Fund of the
underlying investment.
Puts and calls on broadly-based indices or Financial Futures are
similar to puts and calls on securities or futures contracts except
that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in
the stock market generally) rather than on price movements in
individual securities or futures contracts. When the Fund buys a
calls on an index or Future, it pays a premium. During the call
period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an
amount of cash to settle the call if the closing level of the index
or Future upon which the call is based is greater than the exercise
price of the call. That cash payment is equal to the difference
between the closing price of the index and the exercise price of
the call times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of difference.
When the Fund buys a put on an index or Future, it pays a premium
and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver
to the Fund an amount of cash to settle the put if the closing
level of the index or Future upon which the put is based is less
than the exercise price of the put. That cash payment is
determined by the multiplier, in the same manner as described above
as to calls.
An option position may be closed out only on a market which
provides secondary trading for options of the same series and there
is no assurance that a liquid secondary market will exist for any
particular option. The Fund's option activities may affect its
turnover rate and brokerage commissions. The exercise by the Fund
of puts on securities will cause the sale of related investments,
increasing portfolio turnover. Although such exercise is within
the Fund's control, holding a put might cause the Fund to sell the
related investments for reasons which would not exist in the
absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys or sells an
underlying investment in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply
to direct purchases or sales of such underlying investments.
Premiums paid for options are small in relation to the market value
of the related investments, and consequently, put or call options
offer large amounts of leverage. The leverage offered by trading
in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investments.
Options on Foreign Currencies. The Fund intends to write and
purchase calls and puts on foreign currencies. The Fund may
purchase and write puts and calls on foreign currencies that are
traded on a securities or commodities exchange or over-the-counter
markets or are quoted by major recognized dealers in such options.
It does so to protect against declines in the dollar value of
foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If the Manager anticipates a
rise in the dollar value of a foreign currency in which securities
to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing
puts on that foreign currency. If a decline in the dollar value of
a foreign currency is anticipated, the decline in value of
portfolio securities denominated in that currency may be partially
offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations
adverse to the Fund's position, it would lose the premium it paid
and transaction costs.
A call written on a foreign currency by the Fund is covered if
the Fund owns the underlying foreign currency covered by the call
or has an absolute and immediate right to acquire that foreign
currency without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held in its
portfolio. A call may be written by the Fund on a foreign currency
to provide a hedge against a decline in the U.S. dollar value of a
security which the Fund owns or has the right to acquire and which
is denominated in the currency underlying the option due to an
expected adverse change in the exchange rate. This is a cross-
hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, liquid securities in an amount not less than the value
of the underlying currency in U.S. dollars marked-to market daily.
Interest Rate Futures. No price is paid or received upon the
purchase or sale of an Interest Rate Future. Interest Rate Futures
obligate one party to deliver and the other party to take a
specific debt security, respectively, at a specified price on a
specified date. Upon entering into a Futures transaction, the Fund
will be required to deposit an initial margin payment with the
futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however the futures broker
can gain access to that account only under specified conditions.
As the Future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
made to and from the futures broker on a daily basis. Prior to
expiration of the Future, if the Fund elects to close out its
position by taking an opposite position, a final determination of
variation margin is made, additional cash is required to be paid by
or released to the Fund, and any loss or gain is realized for tax
purposes. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most
cases the obligation is fulfilled by entering into an offsetting
position. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts
are traded.
Financial Futures. Financial Futures are similar to Interest
Rate Futures except that settlement is made in cash, and net gain
or loss on options on Financial Futures depends on price movements
of the securities included in the index. The strategies which the
Fund employs regarding Financial Futures are similar to those
described above with regard to Interest Rate Futures.
Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number
of days from the date of the contract agreed upon by the parties),
at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers.
The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the
currencies increase.
The Fund may also enter into a Forward Contract to sell a
foreign currency other than that in which the underlying security
is denominated. This is done in the expectation that there is a
significant correlation between the foreign currency of the Forward
Contract and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." A cross hedge
may be established with the U.S. dollar as the base currency or
with another currency closely correlated with the U.S. dollar as
the base currency.
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross hedge").
The Fund will not enter into such Forward Contracts or maintain
a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign
currency in excess of the value of the Fund's portfolio securities
or other assets denominated in that currency. The Fund, however,
in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value
of the Fund's portfolio securities or other assets denominated in
that currency, or a closely-correlated currency, provided the
excess amount is "covered" by liquid securities, denominated in any
currency, at least equal at all times to the amount of such excess.
As an alternative, the Fund may purchase a call option permitting
the Fund to purchase the amount of foreign currency being hedged by
a forward sale contract at a price no higher than the forward
contract price or the Fund may purchase a put option permitting the
Fund to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the forward
contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase), if the
market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Because such contracts are not
traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may
convert foreign currency from time to time, and investors should be
aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at
which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the
Fund under a swap agreement will have been greater than those
received by it. Credit risk arises from the possibility that the
counterparty will default. If the counterparty to an interest rate
swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received.
The Manager will monitor the creditworthiness of counterparties to
the Fund's interest rate swap transactions on an ongoing basis.
The Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements.
A master netting agreement provides that all swaps done between
the Fund and that counterparty under the master agreement shall be
regarded as parts of an integral agreement. If on any date amounts
are payable in the same currency in respect of one or more swap
transactions, the net amount payable on that date in that currency
shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the
counterparty may terminate the swaps with that party. Under such
agreements, if there is a default resulting in a loss to one party,
the measure of that party's damages is calculated by reference to
the average cost of a replacement swap with respect to each swap
(i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and
the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund
would have the absolute right to repurchase that OTC option. That
formula price would generally be based on a multiple of the premium
received for the option, plus the amount by which the option is
exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the
Fund writes an OTC option, it will treat as illiquid (for purposes
of the limit on its assets that may be invested in illiquid
securities, stated in the Prospectus) the mark-to-market value of
any OTC option held by it. The Securities and Exchange Commission
is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by
the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund
may cause the Fund to sell related portfolio securities, thus
increasing its turnover rate in a manner beyond the Fund's control.
The exercise by the Fund of puts on securities or Futures may cause
the sale of related investments, also increasing portfolio
turnover. Although such exercise is within the Fund's control,
holding a put might cause the Fund to sell the related investments
for reasons which would not exist in the absence of the put. The
Fund will pay a brokerage commission each time it buys or sells a
put, a call, or an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than
those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in
relation to the market value of the related investments, and
consequently, put and call options offer large amounts of leverage.
The leverage offered by trading in options could result in the
Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of Futures and options on Futures established by
the Commodity Futures Trading Commission ("CFTC"). In particular,
the Fund is exempted from registration with the CFTC as a
"commodity pool operator" if the Fund complies with the
requirements of a Rule adopted by the CFTC. The Rule does not
limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its
aggregate Futures margin and related options premiums to no more
than 5% of the Fund's net assets for hedging strategies that are
not considered bona fide hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus, the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an
amount equal to the market value of the securities underlying such
Future, less the margin deposit applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through"
its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Futures,
held for less than three months, whether or not they were purchased
on the exercise of a call held by the Fund; (ii) purchasing calls
or puts which expire in less than three months; (iii) effecting
closing transactions with respect to calls or puts purchased less
than three months previously; (iv) exercising puts or calls held by
the Fund for less than three months; or (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of disposition also are treated
as ordinary gain or loss. Currency gains and losses are offset
against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may
increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
Risks of Hedging With Options and Futures. An option
position may be closed out only on a market that provides secondary
trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular
option. In addition to the risks associated with hedging that are
discussed in the Prospectus and above, there is a risk in using
short hedging by selling Futures to attempt to protect against
decline in value of the Fund's portfolio securities (due to an
increase in interest rates) that the prices of such Futures will
correlate imperfectly with the behavior of the cash (i.e., market
value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures markets depend on
participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view
of speculators, the deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the equity securities being hedged and
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is
more than the historical volatility of the applicable index. It is
also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity
securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of equity securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in
the debt securities markets as a temporary substitute for the
purchase of individual debt securities (long hedging) by buying
Futures and/or calls on such Futures or on debt securities, it is
possible that the market may decline; if the Fund then concludes
not to invest in such 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 debt securities
purchased.
Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an
approved vendor (a U.S. commercial bank, the U.S. branch of a
foreign bank or a broker-dealer which has been designated a primary
dealer in U.S. government securities, which must meet the credit
requirements set by the Fund's Board of Trustees from time to
time), for delivery on an agreed-upon future date. The resale
price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment
Company Act, collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the
repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to fully collateralize the
repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value.
Small, Unseasoned Companies. As a matter of fundamental
policy, the Fund may invest up to 5% of its total assets in
securities of small, unseasoned companies that have been in
operation for less than three years, even after including the
operations of any of their predecessors. Securities of these
companies may have limited liquidity (which means that the Fund may
have difficulty selling them at an acceptable price when it wants
to) and the prices of these securities may be volatile.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral 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',
administrative or other fees the Fund pays in connection with the
loan. The Fund may share the interest it receives on the
collateral securities with the borrower as long as it realizes at
least a minimum amount of interest required by the lending
guidelines established by its Board of Trustees. 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.
Borrowing. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on a unsecured
basis and investing the borrowed funds, subject to the restrictions
stated in the Prospectus. Any such borrowing will be made only
from banks, and pursuant to the requirements of the Investment
Company Act, will be made only to the extent that the value of that
Fund's assets, less its liabilities other than borrowings, is equal
to at least 300% of all borrowings including the proposed borrowing
and amounts covering the Fund's obligations under "forward roll"
and certain other transactions. If the value of the Fund's assets
so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its
bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when
independent investment judgment would not dictate such sale.
Borrowing for investment increases both investment opportunity and
risk. Since substantially all of the Fund's assets fluctuate in
value, but borrowing obligations are fixed, when the Fund has
outstanding borrowings, its net asset value per share
correspondingly will tend to increase and decrease more when
portfolio assets fluctuate in value than otherwise would be the
case.
Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund will bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers, including securities purchased and sold pursuant to
Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved
guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of
trading interest in a particular security, the Fund's holding of
that security may be deemed to be illiquid.
When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or
sell such securities on a "delayed delivery" basis. Although the
Fund will enter into such transactions for the purpose of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment
prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery,
or to securities to be delivered at a later date. When such
transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a
later date. The commitment to purchase a security for which
payment will be made on a future date may be deemed a separate
security and involve risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally not more than 120
days), no payment is made for the securities purchased by the
purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation;
the value at delivery may be less than the purchase price. The
Fund will maintain a segregated account with, or identify liquid
assets to, its Custodian, at least equal to the value of purchase
commitments until payment is made.
The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund
losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received, in
determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed
delivery transactions, it will generally do so for the purpose of
acquiring or selling securities consistent with its investment
objectives and policies and not for the purposes of investment
leverage. The Fund enters into such transactions with the
intention of actually receiving or delivering the securities,
although (as noted above), when-issued securities and forward
commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other
than that expected by the Manager will affect the value of such
securities and may cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund
a technique to use against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and
falling prices, the Fund might sell securities in its portfolio on
a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates
and rising prices, the Fund might sell portfolio securities and
purchase the same or similar securities on a when-issued or forward
commitment basis, thereby obtaining the benefit of currently higher
cash yields.
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 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
objectives 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 at
a shareholder meeting if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (2) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
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 or
issued by companies, including real estate investment trusts, which
invest in 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;
buy securities on margin, except that the Fund may make
margin deposits in connection with any of the Hedging Instruments
which it may use;
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;
buy and retain securities of any issuer if those officers,
Trustees or Directors of the Fund or the Manager who beneficially
own more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
invest in oil, gas, or other mineral exploration or
development programs; or
buy the securities of any company for the purpose of
exercising management control, except in connection with a merger,
consolidation, reorganization or acquisition of assets.
For purposes of the Fund's policy not to concentrate described
in the investment restrictions in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix A to
this Statement of Additional Information. This 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 as
otherwise provided in the Fund's Declaration of Trust.
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.
Each share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the
same class and entitle the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to
their vote at shareholders' meetings. Shareholders of the Fund
vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of
appointment of auditors for the Fund. Shareholders of a particular
class vote separately on proposals which affect that class, and
shareholders of a class which is not affected by that matter are
not entitled to vote on the proposal. Shareholders of a class vote
on certain amendments to the Distribution and/or Service Plans if
the amendments affect that class.
The Trustees are authorized to create new series and classes of
series. The Trustees may
reclassify unissued shares of the Fund or its series or classes
into additional series or classes of shares. The Trustees may also
divide or combine the shares of a class into a greater or lesser
number of shares provided that the proportionate beneficial
interest of a shareholder in the Fund is not changed. Shares do
not have cumulative voting rights or preemptive or subscription
rights. Shares may be voted in person or by proxy.
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
Fund, and any shareholder of the Fund, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand which may arise out of any
dealings with the Fund, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and
officers and their principal occupations and business affiliations
and occupations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general
partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash
Reserves, Oppenheimer Municipal Fund, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc.,
Oppenheimer Champion Income Fund, Oppenheimer Main Street Funds,
Inc., Panorama Series Fund, Inc., Oppenheimer Strategic Income
Fund, Oppenheimer International Bond Fund, Oppenheimer Variable
Account Funds, and Oppenheimer Integrity Funds; as well as the
following "Centennial Funds": Centennial America Fund, L.P., Daily
Cash Accumulation Fund, Inc., Centennial Money Market Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial Tax Exempt Trust and Centennial California Tax Exempt
Trust, (all of the foregoing funds are collectively referred to as
the "Denver-based Oppenheimer funds") except for Mr. Fossel and Ms.
Macaskill, who are Trustees, Directors or Managing General
Partners of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Panorama Series Fund, Inc. and Oppenheimer Variable Account Funds
(in addition, Mr. Fossel is not a trustee of Centennial New York
Tax-Exempt Trust or a Managing General Partner of Centennial
America Fund, L.P.). All of the Fund's officers except Messrs.
Steinmetz, Doll and Negri are officers of the Denver-based
Oppenheimer funds. Ms. Macaskill is President and Mr. Swain is
Chairman of the Denver-based Oppenheimer funds. As of December 31,
1996, the Trustees and officers of the Fund as a group owned less
than 1% of each class of shares of the Fund. The foregoing
statement does not reflect ownership of shares held of record by an
employee benefit plan for employees of the Manager (for which plan
two officers of the Fund, Bridget A. Macaskill and Andrew J.
Donohue, are trustees), other than the shares beneficially owned
under that plan by officers of the Fund listed above.
Robert G. Avis, Trustee;* Age 65
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated
investment adviser and trust company, respectively).
William A. Baker, Trustee; Age 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines, Inc.
(a space services management company); formerly Vice President of
McDonnell Douglas Space Systems Co. and associated with the
National Aeronautics and Space Administration.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Sam Freedman, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc., Chairman, Chief Executive and Officer
and director of Shareholder Financial Services, Inc., Vice
President and director of Oppenheimer Acquisition Corporation and
a director of OppenheimerFunds, Inc.
Jon S. Fossel, Trustee;* Age 54
Box 44-Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company
Institute (a national trade association of investment companies),
Chairman of the Investment Company Institute Education Foundation;
formerly Chairman and a director of the Manager, President and a
director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of the Manager.
Raymond J. Kalinowski, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer
products training company); formerly Vice Chairman and a director
of A.G. Edwards, Inc., parent holding company of A.G. Edwards &
Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 81
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and
a Director of Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman, Chief Executive Officer and Trustee;* Age
63
6803 South Tucson Way, Englewood, Colorado 80012
Vice Chairman of the Manager; formerly President and a Director of
Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); a director of the Manager
and Chairman of the Board of SSI.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Bridget A. Macaskill, President and Trustee;* Age 48
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView") (a
subsidiary of the Manager); Chairman and a Director of SSI and
SFSI, President and a Director of OAC and Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a
director of Oppenheimer Real Asset Management, Inc.; formerly
Executive Vice President of the Manager.
Andrew J. Donohue, Vice President and Secretary; Age 46
Executive Vice President and General Counsel of OppenheimerFunds,
Inc. (the "Manager") and OppenheimerFunds Distributor, Inc. (the
"Distributor"); President and a director of Centennial; Executive
Vice President, General Counsel and a director of HarbourView, SSI,
SFSI, and Oppenheimer Partnership Holdings, Inc.; President and
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor;
Partner in, Kraft & McManimon (a law firm); an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser);
director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
George C. Bowen, Vice President, Assistant Secretary and Treasurer;
Age 60
6803 South Tucson Way, Englewood, Colorado 80012
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; Treasurer of OAC; Vice President and Treasurer of Oppenheimer
Real Asset Management, Inc.; Chief Executive Officer, Treasurer and
a director of MultiSource Services, Inc.; an officer of other
Oppenheimer funds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 38
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
Oppenheimer funds.
David P. Negri, Vice President and Portfolio Manager; Age 42
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds.
Robert C. Doll, Jr., Vice President and Portfolio Manager; Age 42
Executive Vice President and Director of the Manager; Executive VP
of HarbourView; Vice President and a director of OAC; an officer
of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller of the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., and
previously an Accountant and Commissions Supervisor for Stuart
James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Swain) who are
affiliated with the Manager receive no salary or fees from the
Fund. Mr. Fossel did not receive any salary or fees from the Fund
prior to January 1, 1997. The remaining Trustees of the Fund
received the compensation shown below from the Fund. Mr. Freedman
became a trustee June 27, 1996, and received no compensation from
the Fund before that date. The compensation from the Fund was paid
during its fiscal year ended September 30, 1996. The compensation
from all of the Denver-based Oppenheimer funds includes the Fund
and is compensation received as a director, trustee, managing
general partner or member of a committee of the Board of those
funds during the calendar year 1996.
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis, $333 $58,003
Trustee
William A. Baker, $457 $79,715
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr., $429 $74,717
Audit and Review
Committee Member
and Trustee
Raymond J. Kalinowski, $426 $74,173
Risk Management Oversight
Committee Member and Trustee
C. Howard Kast, $426 $74,173
Risk Management Oversight
Committee Member and Trustee
Robert M. Kirchner, $429 $74,717
Audit and Review
Committee Member
and Trustee
Ned M. Steel, $333 $58,003
Trustee
Sam Freedman, $169 $29,502
Trustee
______________________
1For the 1996 calendar year during which the Denver-based
Oppenheimer funds listed in the first paragraph of this section,
including Oppenheimer Strategic Investment Grade Bond Fund and
Oppenheimer Strategic Short-Term Income Fund (which ceased
operations following the acquisition of their assets by other
Oppenheimer funds). Panorama Series Fund, Inc. became a Denver-
based Oppenheimer fund in June of 1996.
Major Shareholders. As of December 31, 1996, 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,
except (i) Merrill Lynch Pierce Fenner & Smith Inc., 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246-6484, which
was the record owner of 60,795.000 Class C shares (equal to 19.80%
of the Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund, and two of whom (Ms.
Macaskill and Mr. Swain) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Compliance with
the Code of Ethics is carefully monitored and strictly enforced by
the Manager.
The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at
its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including
the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the
advisory agreement or by the Distributor under the General
Distributor's Agreement are paid by the Fund. The advisory
agreement lists examples of expenses paid by the Fund, the major
categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. For the Fund's fiscal years ended
September 30, 1994, 1995, and 1996, the management fees paid by the
Fund to the Manager were $425,265, $435,814 and $513,195,
respectively.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund's total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager's
undertaking has been withdrawn. During the Fund's last fiscal
year, the Fund's expenses did not exceed the most stringent state
regulatory limit and the voluntary undertaking was not invoked.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard for its obligations and duties
under the advisory agreement, the Manager is not liable for any
loss resulting from a good faith error or omission on its part with
respect to any of its duties thereunder. The advisory agreement
permits the Manager to act as investment adviser for any other
person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as
investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Fund, the right of the Fund
to use the name "Oppenheimer" as part of its name may be withdrawn.
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class
A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales
(excluding payments under the Distribution and Service Plans but
including advertising and the cost of printing and mailing
prospectuses other than those furnished to existing shareholders)
are borne by the Distributor. During the Fund's fiscal years ended
September 30, 1994, 1995 and 1996, the aggregate amounts of sales
charges on sales of the Fund's Class A shares were $231,950,
$126,096 and $277,077, respectively, of which the Distributor and
an affiliated broker retained $73,286, $39,054 and $91,918 in those
respective periods. During the Fund's fiscal year ended September
30, 1996, the contingent deferred sales charges on the Fund's Class
B shares totalled $79,826, all of which the Distributor retained.
During the Fund's fiscal year ended September 30, 1996, contingent
deferred sales charges collected on the Fund's Class C shares
totalled $929, 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. OppenheimerFunds Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the advisory agreement is to
arrange the portfolio transactions for the Fund. The advisory
agreement contains provisions relating to the employment of broker-
dealers ("brokers") to effect the Fund's portfolio transactions.
In doing so, the Manager is authorized by the advisory agreement to
employ broker-dealers, including "affiliated" brokers, as that term
is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the
Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of
such transactions. The Manager need not seek competitive
commission bidding but is expected to minimize the commissions paid
to the extent consistent with 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 that
the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment
companies managed by the Manager or its affiliates as a factor in
the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the advisory agreement, and the
procedures and rules described above, allocations of brokerage are
generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory
agreement and the procedures and rules described above. 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 transaction in the
securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account. Option
commissions may be relatively higher than those that would apply to
direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt (including
foreign debt) obligations are principal transactions at net prices.
Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market
maker unless it determines that a better price or execution can be
obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer
to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the Fund
and one or more of such other accounts. Such research, which may
be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as
well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If
a research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to
the Manager in the investment decision-making process may be paid
in commission dollars. The Board of Trustees permits the Manager
to use concessions on fixed-price offerings to obtain research, in
the same manner as is permitted for agency transactions. The Board
also permits the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for
the broker's own inventory, (ii) the trade was executed by the
broker on an agency basis at the stated commission, and (iii) the
trade is not a riskless principal transaction.
The research services provided by brokers broadens the scope
and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
by enabling the Manager to obtain market information for the
valuation of securities held in the Fund's portfolio or being
considered for purchase. The Manager provides information to the
Board of Trustees as to the commissions paid to brokers furnishing
such services together with the Manager's representation that the
amount of such commissions was reasonably related to the value or
benefit of such services.
During the Fund's fiscal years ended September 30, 1994, 1995
and 1996, total brokerage commissions paid by the Fund were
$44,137, $32,068 and $70,889, respectively. During the fiscal year
ended September 30, 1996, $47,790 was paid to brokers as
commissions in return for research services; the aggregate dollar
amount of those transactions was $38,402,460. The transactions
giving rise to those commissions were allocated in accordance with
the Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the
Prospectus, from time to time the "standardized yield," "dividend
yield," "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "cumulative
total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how these
total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
Standardized Yields.
Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is
calculated using the following formula set forth in rules adopted
by the Securities and Exchange Commission that apply to all funds
(other than money market funds) that quote yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled
to receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day
period may differ from its yield for any other period. The SEC
formula assumes that the standardized yield for a 30-day period
occurs at a constant rate for a six-month period and is annualized
at the end of the six-month period. This standardized yield is not
based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net
investment income from the Fund's portfolio investments calculated
for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally,
because each class of shares is subject to different expenses, it
is likely that the standardized yields of the Fund's classes of
shares will differ. For the 30-day period ended September 30,
1996, the standardized yields for the Fund's Class A, Class B and
Class C shares were 4.46%, 3.91% and 3.93%, respectively.
Dividend Yield and Distribution Return. From time to time
the Fund may quote a "dividend yield" or a "distribution return"
for each class. Dividend yield is based on the dividends paid on
shares of a class from dividends derived from net investment income
during a stated period. Distribution return includes dividends
derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the
dividends and/or distributions for that class declared during a
stated period of one year or less (for example, 30 days) are added
together, and the sum is divided by the maximum offering price per
share of that class on the last day of the period. When the result
is annualized for a period of less than one year, the "dividend
yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the
maximum front-end sales charge. For Class B and Class C shares,
the maximum offering price is the net asset value per share without
considering the effect of contingent deferred sales charges.
From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value
(instead of its respective maximum offering price) at the end of
the period. The dividend yields on Class A shares for the 30-day
period ended September 30, 1996, were 5.72% and 6.00% when
calculated at maximum offering price and at net asset value,
respectively. The dividend yield on Class B shares for the 30-day
period ended September 30, 1996 was 5.26% when calculated at net
asset value. The dividend yield on Class C shares for the 30-day
period ended September 30, 1996 was 5.30% when calculated at net
asset value.
Total Return Information.
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, payment of a contingent deferred sales charge of 5.0% for
the first year, 4.0% for the second year, 3.0% for the third and
fourth years, 2.0% for the fifth year and 1.0% for the sixth year,
and none thereafter, is applied 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, a 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 for
the fiscal year ended September 30, 1996, and for the period June
1, 1992 (commencement of operations) to September 30, 1996, were
11.0% and 8.51%, respectively. The average annual total returns on
an investment in Class B shares for the fiscal year ended September
30, 1996, and for the period November 30, 1992 (inception of the
class) to September 30, 1996 were 10.69% and 8.46%, respectively.
The cumulative total return on Class A shares for the period June
1, 1992 (commencement of operations) through September 30, 1996 was
42.42%. The cumulative total return on Class B shares for the
period November 30, 1992 through September 30, 1996 was 36.54%.
The cumulative total return on Class C shares for the period
October 2, 1995 (inception of the Class) through September 30, 1996
was 14.18%.
Total Returns At Net Asset Value. From time to time the
Fund may also quote an average annual total return at net asset
value or a cumulative total return at net asset value for Class A,
Class B or Class C shares. Each is based on the difference in net
asset value per share at the beginning and the end of the period
for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and
takes into consideration the reinvestment of dividends and capital
gains distributions. The cumulative total return at net asset
value on the Fund's Class A shares for the fiscal year ended
September 30, 1996, was 49.52%. The average annual total return at
net asset value for the period June 1, 1992 (commencement of
operations) to September 30, 1996, for Class A shares was 9.73%.
The average annual total returns at net asset value for Class B
shares for the fiscal year ended September 30, 1996 and for the
period November 30, 1992 (inception of the class) to September 30,
1996 were 15.69% and 9.08%, respectively. The cumulative total
return at net asset value on the Fund's Class C shares for the
fiscal year ended September 30, 1996 was 15.18%.
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, a number of factors should be considered before
using such information as a basis for comparison with other
investments.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds, (ii) all other "growth and
income" funds, and (iii) all other fixed-income funds, excluding
money market 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 include in its advertisements
and sales literature performance information about the Fund cited
in other newspapers and periodicals, such as The New York Times,
which may include performance quotations from other sources,
including Lipper.
From time to time the Fund may publish the star ranking of
the performance of its Class A, Class B and Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among international stock funds.
Investment return measures a fund's or class' one, three, five and
ten-year average annual total returns (depending on the inception
of the fund or class) in excess of 90-day U.S. Treasury bill
returns after considering the fund's sales charges and expenses.
Risk measures a fund's or class' performance below 90-day U.S.
Treasury bill returns. Risk and investment return are combined to
produce star rankings reflecting performance relative to the
average fund in the fund's category. Five stars is the "highest"
ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). The current
star ranking is the fund's or class' 3-year ranking or its combined
3- and 5-year ranking (weighted 60%/40%, respectively, or its
combined 3-, 5- and 10-year ranking (weighted 40%, 30% and 30%,
respectively), depending on the inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other
funds in its Morningstar Category. In addition to its star
ranking, Morningstar also categorizes and compares a fund's 3-year
performance based on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by
Morningstar are based on the same risk and return measurements as
its star rankings but do not consider the effect of sales charges.
The total return on an investment in the Fund's Class A,
Class B or Class C shares may be compared with the performance for
the same period of one or more of the following indices: the
Consumer Price Index, the Salomon Brothers World Government Bond
Index, the Salomon Brothers High Grade Corporate Bond Index, the
Lehman Government/Corporate Bond Index, the Lehman Brothers
Aggregate Bond Index, the Standard & Poor's 500 Index and the J.P.
Morgan Government Bond Index. The Consumer Price Index is
generally considered to be a measure of inflation. The Salomon
Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets
throughout the world, including the United States. The Salomon
Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, and the Lehman
Brothers Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment
grade corporate debt securities. The Lehman Brothers Aggregate
Bond Index generally represents the performance of the general
fixed-rate investment grade debt market. The Standard & Poor's 500
Index is widely recognized as a general measure of stock
performance. The J.P. Morgan Government Bond Index generally
represents the performance of government bonds issued by various
countries including the United States. Each index includes a
factor for the reinvestment of interest but does not reflect
expenses or taxes. The performance of the Fund's Class A, Class B
or Class C shares may also be compared in publications to (i) the
performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments
available from banks and thrift institutions, such as certificates
of deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return,
and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for its Class A shares
and Distribution and Service Plans for its Class B and Class C
shares under Rule 12b-1 of the Investment Company Act pursuant to
which the Fund will make payments to the Distributor in connection
with the servicing and/or distribution of the shares of each class,
as described in the Prospectus. Each Plan has been approved by the
vote of (i) the Board of Trustees of the Fund, including a majority
of the Independent Trustees, as required by the Rule, and (ii) the
holders of a "majority" (as defined in the Investment Company Act)
of the shares of each class. For the Distribution and Service Plan
for Class C shares, that required shareholder vote was cast by the
Manager as the sole shareholder of Class C shares at that time.
The Class A and Class B Plans are "reimbursement-type" Plans,
which means that they provide for the reimbursement of the
distributor's actual expenses incurred in connection with the
service/and or distribution of the Fund's shares of those classes.
The Class C Plan is a "compensation-type" plan, which means that it
provides for the compensation of the distributor for the service
and distribution of the Fund's shares of that class.
Each plan provides for the payment of a Service Fee which the
Distributor may pay to brokers, dealers and other persons or
entities ("Recipients") for providing personal services and account
maintenance services to accounts and shareholders that hold shares
of the Fund. The Service Fee is described more fully below under
Class A Plan. The Class B and Class C Plans also provide for the
payment of an asset-based sales charge of up to 0.75% of the
average annual net assets of Class B and Class C shares,
respectively. Asset-based sales charge payments are designed to
permit an investor to purchase Class B or Class C shares of the
Fund without the payment of a front-end sales load and at the same
time permit the Distributor to compensate Recipients in connection
with the sale of those shares. The asset-based sales charges are
described more fully below under Class B Plan and Class C Plan.
Under each Plan, the Manager and the Distributor, in their
sole discretion, may from time to time use their own resources, at
no cost to the Fund, to make payments to Recipients for
distribution and administrative services they perform. In the case
of the Manager, those payments may be made from profits from the
advisory fee it receives from the Fund. The Distributor and the
Manager may in their sole discretion increase or decrease the
amount of these payments. Under each Plan, the Fund's Board of
Trustees may change the amount paid to a Recipient, but may not
permit payment of an amount in excess of the maximum payment set
forth above. The Board may establish minimum assets levels to be
held by a Recipient, and may also establish a minimum holding
period for Recipients in each case to entitle a Recipient to
receive any payments under a Plan. The Board of Trustees has
established the payment level at the maximum provided for in each
Plan and has not set any minimum holding periods or minimum asset
levels.
All payments under the Class A, Class B and Class C Plans are
subject to the limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and Service Fees.
While the plans are in effect, the Treasurer of the Fund must
provide separate written reports to the Fund's Board of Trustees at
least quarterly describing the amount of payments made pursuant to
each Plan and the purposes for which the payments were made. The
Class B report also must include the Distributor's distribution
costs for the quarter, and such costs for previous quarters that
have been carried forward. The Class A and Class B reports also
must include the identity of each Recipient that received any
payment. These reports are subject to the review and approval of
the Independent Trustees.
A Plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by a vote of the holders of
a "majority" (as defined by the Investment Company Act) of the
outstanding voting securities of that Class. No amendment to a
Plan which increases materially the amount to be paid under the
Plan may be made unless the amendment is approved by the
shareholders of the class affected by the amendment. All material
amendments must be approved by the Board of Trustees. Unless
terminated earlier, each Plan continues in effect from year to year
but only so long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent
Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance.
For the fiscal year ended September 30, 1996, payments under
the Plan for Class A shares totaled $105,726, all of which was paid
by the Distributor to Recipients including $13,004 that was paid to
an affiliate of the Distributor. Payments made under the Class B
Plan during the fiscal year ended September 30, 1996 totalled
$242,309, of which $200,117 was retained by the Distributor,
including $3,257 paid to a dealer affiliated with the Distributor.
Payments made under the Class C Plan during the fiscal year ended
September 30, 1996, totalled $3,963, of which $3,838 was retained
by the Distributor.
Class A Plan
The Class A Plan provides for the payment of a Service Fee,
not to exceed 0.25% of the average annual net assets of the class,
for personal services and the maintenance of accounts holding Class
A shares, as described in the Prospectus.
Class B Plan
The Class B Plan provides for the payment of a Service Fee of
up to 0.25% of the annual net assets of that class. This Service
Fee is virtually identical to the Service Fee described in Class A
Plan above. The Class B Plan allows the Service Fee payments made
by the Distributor to be paid to Recipients in advance for the
first year such shares are outstanding, and thereafter on a
quarterly basis based on the average daily net asset value of
shares held in accounts at Recipients or by their customers, as
described in the Prospectus. Although the Class B Plan does not
require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients
in this manner. An exchange of shares does not entitle a Recipient
to an advance Service Fee payment. If shares are redeemed during
the first year they are outstanding, the Recipient is obligated to
repay to the Distributor a pro rata portion of the advance payment
for those shares.
The Class B Plan also provides for the payment of an asset-
based sales charge of up to 0.75% of the annual net assets of the
Class B shares. The asset-based sales charge paid to the
Distributor under the Class B Plan is intended to allow the
Distributor to recoup the cost of sales commission paid to
authorized Recipients at the time of sale, plus financing costs.
The Class B Plan provides that the Distributor may use the
asset-based sales charge to recover its distribution expenses in
connection with the distribution of Class B shares which include
sales commissions and Service Fees paid to Recipients, financing
costs with respect to distribution payments, compensation and
expenses of personnel employed by the Distributor to support
distribution of Class B shares, and the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" expenses.
The Distributor's actual Class B distribution expenses for
any given year may exceed the aggregate of payments received under
the Class B Plan and from recoveries of contingent deferred sales
charges. The Distributor anticipates that it will take a number of
years for it to recoup its Class B distribution expenses. The
Class B Plan allows such expenses to be carried forward and paid in
future years. The Class B shares will be charged only for interest
expenses, carrying charges or other financing costs that are
directly related to the carry forward of actual distribution
expenses.
Class C Plan
The Class C Plan provides for the payment of a Service Fee of
up to 0.25% of the annual net assets of each class. This Service
Fee is virtually identical to the Service Fee described in Class A
Plan above. The Class C Plan allows the Service Fee payments made
by the Distributor to be paid to Recipients in advance for the
first year such shares are outstanding, and thereafter on a
quarterly basis based on the average daily net asset value of
shares held in accounts at Recipients or by their customers, as
described in the Prospectus. Although the Class C Plan does not
require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients
in this manner. An exchange of shares does not entitle a Recipient
to an advance Service Fee payment. If shares are redeemed during
the first year they are outstanding, the Recipient is obligated to
repay to the Distributor a pro rata portion of the advance payment
for those shares.
The Class C Plan also provides for the payment of an asset-
based sales charge of 0.75% of the annual net assets of the Class
B shares. The Class C Plan provides for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less that the amount paid by the Fund.
The Distributor's services to the Class C shareholders of the
Fund include paying sales commissions and Service Fee payments to
Recipients, providing personnel to support distribution of shares,
and bearing other costs of distribution including the costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky" expenses.
The Class C asset-based sales charge paid during the first
year is retained by the Distributor and thereafter paid to the
Recipient as an ongoing commission on Class C shares that have been
outstanding for a year or more.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a
single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value,
dividends and distributions of the Fund's Class A, Class B and
Class C shares recognizes two types of expenses. General expenses
that do not pertain specifically to any class are allocated pro
rata to the shares of each class, based on the percentage of the
net assets of such class to the Fund's total assets, and then
equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal,
bookkeeping and audit fees, (iii) printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees
to unaffiliated Trustees, (v) custodian expenses, (vi) share
issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (a)
Distribution and Service Plan fees, (b) incremental transfer and
shareholder servicing agent fees and expenses, (c) registration
fees and (d) shareholder meeting expenses, to the extent that such
expenses pertain to a specific class rather than to the Fund as a
whole.
Determination of Net Asset Value Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier
on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
holiday schedule (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days. The Fund may invest a
substantial portion of its assets in foreign securities primarily
listed on foreign exchanges, in foreign over-the-counter markets or
in securities traded on the Exchange that may trade on Saturdays or
customary U.S. business holidays on which the Exchange is closed.
Because the Fund's net asset value per share of Class A, Class B
and Class C shares will not be calculated on those days, the Fund's
net asset value per share of Class A, Class B and Class C shares
may be significantly affected on such days when shareholders may
not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for
the valuation of the Fund's securities as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for
which last sale information is regularly reported are valued at the
last reported sale price on their primary exchange or NASDAQ that
day (or, in the absence of sales that day, at values based on the
last sale prices of the preceding trading day, or closing "bid"
price that day); (ii) securities traded on a foreign securities
exchange are valued generally at the last sales price available to
the pricing service approved by the Fund s Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately
preceding the valuation date, or at the mean between "bid" and
"asked" prices obtained from active market makers in the security
on the basis of reasonable inquiry; (iii) long-term debt securities
having a remaining maturity in excess of 60 days are valued based
on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund s Board of Trustees
or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments
having a maturity of more than 397 days when issued, and non-money
market type instruments having a maturity of 397 days 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 by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type
debt securities that had a maturity of less than 397 days 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 (vi) securities (including restricted securities)
not having readily-available market quotations are valued at fair
value determined under the Board s procedures. If the Manager is
unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above), the security may be priced at the mean
between the "bid" and "ask" prices provided by a single active
market maker (which in certain cases may be the "bid" price if no
"ask" price is available).
In the case of U.S. Government securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price U.S.
Government securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such
pricing services, which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in securities markets that occur between the time their
prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of its net asset value unless
the Board of Trustees, or the Manager under procedures established
by the Board, determines that the particular event would materially
affect the Fund's net asset value, in which case an adjustment
would be made. Foreign currency, including forward contracts,
will be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. The value of securities denominated in foreign currency
will be converted to U.S. dollars at the closing price in the
London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service. In the case of U.S. Government
Securities, mortgage-backed securities, foreign fixed-income
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.
Calls, puts and Futures are valued at the last sale prices on
the principal exchanges or on the NASDAQ market on which they are
traded, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales
that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing bid and asked
prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing bid price on the
principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall
be valued at the mean between bid and asked prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the
premium received by the Fund is included in its Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. The deferred credit is adjusted
("marked-to-market") to reflect the current market value of the
option. 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 put written by the Fund is exercised, the
required payment by the Fund is reduced by the premium received.
If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on
whether the premium received was more or less than the cost of the
closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment
is reduced by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy shares. Dividends
will begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and 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 incurs little or no selling
expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, aunts, uncles,
nieces and nephews, parents-in-law, sons- and daughters-in-law,
siblings, a sibling's spouse and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Developing Markets Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Rochester Fund Municipals*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Portfolio Series - Limited Term New York Municipal 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.
_______________________
*Shares of the Fund are not presently exchangeable for shares of
these funds.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is the investor's statement of intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other
eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestment of
dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed
the amount specified in the Letter. This enables the investor to
count the Class A and Class B shares to be purchased under the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual purchases. If
total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of
such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A or Class B shares acquired in exchange for either (i)
Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds
that were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application may
be obtained from the Distributor, completed and returned, and a
prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent deferred sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in
the Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has
the right to cause the involuntary redemption of the shares held in
any account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for the shareholder to increase the investment, and set other terms
and conditions so that the shares would not be involuntarily
redeemed.
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.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge, or (ii) Class B shares on which you paid a contingent
deferred sales charge when you redeemed them, without sales charge.
This privilege does not apply to Class C shares. The reinvestment
may be made without sales charge only in Class A shares of the Fund
or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any 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 and
Class C contingent deferred sales charges will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons
maintaining a plan account in their own name) in OppenheimerFunds-
sponsored prototype pension or 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 on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from a dealer or broker
after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value if
the order was received by the dealer or broker from its customers
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with signatures(s) of the registered owners guaranteed
on the redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where
the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the Oppenheimer
funds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all
such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer 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 Class A
shares in certificated form. Certificates for Class B and Class C
shares will not be issued. Upon written request from the
Planholder, the Transfer Agent will determine the number of shares
for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated
shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will
terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, Class B and
Class C shares except Oppenheimer Money Market Fund, Inc.,
Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial America Fund,
L.P., and Daily Cash Accumulation Fund, Inc., which only offer
Class A shares and Oppenheimer Main Street California Municipal
Fund, which only offers Class A and Class B shares (Class B and
Class C shares of Oppenheimer Cash Reserves are generally available
only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds sponsored 401(k) plans). A
current list showing which funds offer which classes can be
obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of the Fund and
other Oppenheimer funds without being subject to an initial or
contingent deferred sales charge, whichever is applicable. To
qualify for that privilege, the investor or the investor's dealer
must notify the Distributor of eligibility for this privilege at
the time the shares of Oppenheimer Money Market Fund, Inc. are
purchased, and, if requested, must supply proof of entitlement to
this privilege. Shares of this Fund acquired by reinvestment of
dividends or distributions from any other of the Oppenheimer funds
except Oppenheimer Cash Reserves or from any unit investment trust
for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges
of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a
Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of
the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares. The Class B contingent
deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial
purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining
the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability
and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares.
Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must
either have an existing account in, or obtain and acknowledge
receipt of a prospectus of, the fund to which the exchange is to be
made. For full or partial exchanges of an account made by
telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions
will be switched to the new account unless the Transfer Agent is
instructed otherwise. If all telephone lines are busy (which might
occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Dividends, distributions and the proceeds of the redemption
of Fund shares represented by checks returned to the Transfer Agent
by the Postal Service as undeliverable will be invested in shares
of Oppenheimer Money Market Fund, Inc., as promptly as possible
after the return of such checks to the Transfer Agent, in order to
enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower than dividends on Class A shares as a result
of the asset-based sales charges on Class B and Class C shares, and
dividends will also differ in amount as a consequence of any
difference in net asset value between the classes.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds, except Oppenheimer Cash Reserves, listed in
"Reduced Sales Charges," above, at net asset value without sales
charge. To elect this option, a shareholder must notify the
Transfer Agent in writing and either have an existing account in
the fund selected for reinvestment or must obtain a prospectus for
that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from
shares of other Oppenheimer funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the
delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the
Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund
and the Custodian. It will be the practice of the Fund to deal
with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess
of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit
the Fund's financial statements and perform other related audit
services. They also act as auditors for the Manager and certain
other funds advised by the Manager and its affiliates. <PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
=====================================================================
=========
The Board of Trustees and Shareholders of Oppenheimer Strategic Income
& Growth Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Strategic Income
& Growth Fund as of September 30, 1996, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended September 30, 1996 and 1995 and the
financial highlights for the period June 1, 1992 (commencement of
operations) to September 30, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at September 30, 1996 by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights present fairly, in all material respects, the financial
position of Oppenheimer Strategic Income & Growth Fund at September 30,
1996, the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
=====================================================================
===========================================
================
<S> <C>
<C>
MORTGAGE-BACKED OBLIGATIONS--18.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
GOVERNMENT AGENCY--15.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
FHLMC/FNMA/SPONSORED--8.2%
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ 59,951
$ 60,139
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Federal National Mortgage Assn.:
7.50%, 10/15/26(2) 5,000,000
4,940,650
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Trust 1992-103, Cl. JB, 10.50%, 11/25/20 315,000
351,323
Interest-Only Stripped Mtg.-Backed Security, Trust 257, Cl. 2, 10.955%, 2/1/24(3)
1,712,531
593,766
Series 1994-83, Cl. Z, 7.50%, 6/25/24 378,624
337,801
----------
6,283,679
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
GNMA/GUARANTEED--7.5%
Government National Mortgage Assn.:
6%, 3/20/26 1,437,892
1,434,298
7%, 4/15/26 4,460,633
4,296,705
----------
5,731,003
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
PRIVATE--2.3%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
COMMERCIAL--1.6%
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. F, 7.51%, 2/1/28(4)(5) 97,137
62,289
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 267,639
268,936
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980
259,621
Series 1994-C2, Cl. E, 8%, 4/25/25 449,792
436,721
Series 1994-C2, Cl. G, 8%, 4/25/25 209,655
180,337
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5) 27,688
22,566
----------
1,230,470
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
MULTI-FAMILY--0.5%
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) 400,000
302,625
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M6, Cl. B4, 7.103%, 6/25/21(4) 68,681
67,157
----------
369,782
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
RESIDENTIAL--0.2%
Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26
299,020
174,927
----------
Total Mortgage-Backed Obligations (Cost $13,599,896)
13,789,861
=====================================================================
===========================================
================
U.S. GOVERNMENT OBLIGATIONS--0.6%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
U.S. Treasury Nts., 6%, 2/15/26 (Cost $447,860)(6) 500,000
439,844
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
=====================================================================
===========================================
================
<S> <C>
<C>
FOREIGN GOVERNMENT OBLIGATIONS--20.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ARGENTINA--1.6%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(4)(7) $
559,749
$ 510,403
Past Due Interest Bonds, Series L, 6.312%, 3/31/05(4) 834,000
699,517
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Banco de Galicia y Buenos Aires SA Sr. Unsec. Nts., 9.387%, 4/15/99(4)
35,000
35,634
----------
1,245,554
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
AUSTRALIA--2.4%
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD 500,000
453,666
9.50%, 8/15/03 AUD 15,000
13,060
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 615,000
498,166
Gtd. Nts., 8%, 5/14/03 AUD 300,000
240,793
Gtd. Nts., 10.50%, 5/15/03 AUD 90,000
81,482
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Treasury Corp. of Victoria Gtd. Bonds, 10.25%, 11/15/06 AUD
425,000
390,210
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Western Australia Treasury Corp. Gtd. Bonds, 10%, 7/15/05 AUD
190,000
170,279
----------
1,847,656
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BRAZIL--0.9%
Brazil (Federal Republic of) Capitalization Bonds, 8%, 4/15/14 1,001,247
705,567
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Telecomunicacoes Brasileiras SA Medium-Term Nts., 11.30%, 12/9/99(4)
10,000
10,288
----------
715,855
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BULGARIA--0.6%
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24(4) 70,000
35,569
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(8)
755,000
248,442
Interest Arrears Bonds, 6.688%, 7/28/11(4) 325,000
149,500
----------
433,511
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CANADA--2.9%
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD 220,000
204,386
9.75%, 10/1/97 CAD 250,000
193,333
9.75%, 12/1/01 CAD 260,000
219,637
9.75%, 6/1/01(6) CAD 1,335,000
1,119,586
Series A-33, 11.50%, 9/1/00 CAD 140,000
122,410
Series A-76, 9%, 6/1/25 CAD 465,000
392,682
----------
2,252,034
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
DENMARK--0.7%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 1,670,000
312,070
8%, 3/15/06 DKK 1,130,000
206,646
----------
518,716
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
GERMANY--2.1%
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24(6) DEM
2,670,000
1,612,575
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
GREAT BRITAIN--1.4%
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP 355,000
633,054
Debs., 8.50%, 12/7/05 GBP 55,000
91,012
Nts., 12.50%, 11/21/05 GBP 62,000
123,738
Nts., 8%, 6/10/03 GBP 125,000
202,509
----------
1,050,313
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
IRELAND--0.1%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 60,000
110,024
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
<C>
ITALY--0.4%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
10.50%, 4/1/00ITL 285,000,000
$ 201,403
10.50%, 7/15/00ITL 170,000,000
121,241
----------
322,644
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
JAPAN--0.4%
Japan (Government of) Bonds, Series 174, 4.60%, 9/20/04 JPY
27,500,000
279,877
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
MEXICO--0.7%
Banco Nacional de Comercio Exterior SNC:
International Finance BV Gtd. Bonds, 10.758%, 6/23/97(4)(5) 120,000
123,900
International Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06
135,000
141,581
Nts., 7.25%, 2/2/04 75,000
64,687
- - ----------------------------------------------------------------------------------------------------------------
- - --------
United Mexican States Bonds:
10.375%, 1/29/03 DEM 150,000
103,851
16.50%, 9/1/08 GBP 35,000
74,486
----------
508,505
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
NEW ZEALAND--1.3%
New Zealand Government Bonds, 10%, 7/15/97 NZD 1,040,000
733,982
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds:
8%, 2/15/01(5) NZD 165,000
113,525
8%, 3/15/02 NZD 165,000
113,459
----------
960,966
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
PANAMA--0.1%
Panama (Republic of) Interest Reduction Bonds, 3.50%, 7/17/14(8)
130,000
81,738
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
POLAND--1.1%
Poland (Republic of) Treasury Bills, Zero Coupon:
21.464%, 10/16/96(9) PLZ 2,000,000
706,837
21.656%, 10/2/96(9) PLZ 430,000
152,854
----------
859,691
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
RUSSIA--0.2%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(2)(4) 260,000
167,294
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
SPAIN--1.2%
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado, 10.15%, 1/31/06 ESP
39,200,000
349,431
Gtd. Bonds, Bonos y Obligacion del Estado, 10.25%, 11/30/98 ESP
25,800,000
212,018
Gtd. Bonds, Bonos y Obligacion del Estado, 10.30%, 6/15/02 ESP
22,500,000
197,305
Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 ESP
17,700,000
157,405
----------
916,159
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
SWEDEN--1.2%
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK 2,200,000
414,114
Series 1033, 10.25%, 5/5/03 SEK 600,000
105,220
Series 1034, 9%, 4/20/09 SEK 1,400,000
233,811
Series 1035, 6%, 2/9/05 SEK 1,300,000
179,414
----------
932,559
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
VENEZUELA--0.7%
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 250,000
207,500
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4)
100,000
84,313
New Money Bonds, Series A, 6.75%, 12/18/05(4) 250,000
208,438
----------
500,251
----------
Total Foreign Government Obligations (Cost $14,828,341)
15,315,922
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
=====================================================================
===========================================
================
<S> <C>
<C>
LOAN PARTICIPATIONS--1.3%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Colombia (Republic of) 1989-1990 Integrated Loan
Facility Bonds, 6.563%, 7/1/01(4)(5) $ 314,320
$ 298,604
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4) 325,000
255,633
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Trinidad & Tobago Loan Participation Agreement,
Tranche A, 1.772%, 9/30/00(4)(5) JPY 44,836,363
358,288
- - ----------------------------------------------------------------------------------------------------------------
- - --------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 6.563%, 9/20/97(4)(5) 66,720
59,256
----------
Total Loan Participations (Cost $969,966)
971,781
=====================================================================
===========================================
================
CORPORATE BONDS AND NOTES--17.6%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC INDUSTRY--1.4%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--0.3%
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 200,000
211,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
METALS/MINING--0.2%
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 100,000
114,750
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
PAPER--0.9%
Repap New Brunswick, Inc., 8.937% First Priority Sr. Sec. Nts., 7/15/00(4)
200,000
200,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Riverwood International Corp., 10.25% Sr. Nts., 4/1/06 300,000
303,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02 200,000
210,500
----------
713,500
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER RELATED--1.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER PRODUCTS--0.1%
Fletcher Challenge Industries Ltd., 10% Cv. Sub. Unsec. Nts., 4/30/05 NZD
70,000
50,290
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE--0.3%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 190,000
247,475
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HOTEL/GAMING--0.1%
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 100,000
99,250
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
LEISURE--0.2%
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(5) 160,431
167,450
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TEXTILE/APPAREL--1.0%
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.,
36.897%, 10/23/96(9) IDR 1,200,000,000
511,932
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 200,000
217,000
----------
728,932
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY--0.5%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 10.394%, 11/1/97(9)
400,000
371,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL SERVICES--0.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BANKS & THRIFTS--0.2%
Banco Bamerindus do Brasil SA, 10.50% Debs., 6/23/97 25,000
24,687
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 50,000
46,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(2)(9) THB
2,000,000
77,981
----------
149,168
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED FINANCIAL--0.1%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 50,000
48,875
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--0.4%
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02(10) 300,000
328,125
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSING RELATED--1.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HOMEBUILDERS/
REAL ESTATE--1.0%
Blue Bell Funding, Inc., 11.85% Sec. Extendible Adjustable Rate Nts., 5/1/99
396,000
397,980
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 500,000
402,500
----------
800,480
</TABLE>
8 Oppenheimer Strategic Income & Growth Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
<C>
MANUFACTURING--0.2%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
AUTOMOTIVE--0.2%
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 $ 150,000
$ 146,250
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--3.6%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CABLE TELEVISION--2.1%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(11) 100,316
75,488
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Australis Media Ltd., Units (each unit consists of $1,000
principal amount of 0%/14% sr. sub. disc. nts., 5/15/03 and
one warrant to purchase 57.721 ordinary shares)(11)(12) 200,000
121,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(11) 500,000
383,750
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Cablevision Systems Corp., 10.50% Sr. Sub. Debs., 5/15/16 250,000
255,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11)
200,000
158,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07
300,000
301,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000
333,264
----------
1,628,502
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED MEDIA--0.9%
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(11)
750,000
682,500
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ENTERTAINMENT/FILM--0.4%
Imax Corp., 7% Sr. Nts., 3/1/01(8) 320,000
313,600
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
PUBLISHING/PRINTING--0.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(11)
250,000
176,250
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
OTHER--1.1%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ENVIRONMENTAL--0.3%
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000
191,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
SERVICES--0.8%
Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(13) 500,000
525,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Protection One Alarm Monitoring, Inc., 6.75% Cv. Sr. Sub. Nts., 9/15/03
110,000
108,144
----------
633,144
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL--1.1%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
SUPERMARKETS--1.1%
Grand Union Co., 12% Sr. Nts., 9/1/04 198,000
200,722
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(7) 564,400
567,222
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 50,000
44,625
----------
812,569
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TRANSPORTATION--0.6%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
AIR TRANSPORTATION--0.1%
American International Group, Inc., 11.70% Unsec. Unsub. Bonds, 12/4/01 ITL
95,000,000
71,778
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
RAILROADS--0.5%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(11) 500,000
378,125
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIE--5.8%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES--2.3%
CalEnergy Co., Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04(11) 450,000
460,125
- - ----------------------------------------------------------------------------------------------------------------
- - --------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 250,000
258,750
- - ----------------------------------------------------------------------------------------------------------------
- - --------
First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16
300,000
317,250
- - ----------------------------------------------------------------------------------------------------------------
- - --------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD 330,000
245,092
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 431,034
431,573
9.50% Sr. Sec. Nts., 12/28/0813 86,206
86,315
----------
1,799,105
</TABLE>
9 Oppenheimer Strategic Income & Growth Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
<C>
TELECOMMUNICATIONS--3.5%
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(11) $ 200,000
$ 156,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(5)(11) 350,000
282,625
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.323%, 8/15/00(9) 600,000
382,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(11)
300,000
186,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(11)(13)
400,000
246,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(11) 270,000
168,075
0%/13.50% Sr. Disc. Nts., 9/15/05(11) 100,000
67,375
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(13) 300,000
314,250
- - ----------------------------------------------------------------------------------------------------------------
- - --------
ORBCOMM Global LP/ORBCOMM Global Capital Corp., 14% Sr. Nts., 8/15/04(13)
155,000
160,037
- - ----------------------------------------------------------------------------------------------------------------
- - --------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(11)
500,000
471,250
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(11)
400,000
258,000
----------
2,692,612
----------
Total Corporate Bonds and Notes (Cost $13,013,563)
13,555,730
SHARES
=====================================================================
===========================================
================
COMMON STOCKS--41.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC INDUSTRY--2.3%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--2.3%
Morton International, Inc. 24,000
954,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Union Carbide Corp. 18,000
821,250
----------
1,775,250
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CONTAINERS--0.0%
Equitable Bag, Inc.(5)(14) 1,861
4,653
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER RELATED--6.4%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD/BEVERAGES/TOBACCO--3.4%
PepsiCo, Inc. 26,000
734,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Philip Morris Cos., Inc. 11,000
987,250
- - ----------------------------------------------------------------------------------------------------------------
- - --------
UST, Inc. 31,000
918,375
----------
2,640,125
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE--1.5%
Johnson & Johnson 22,000
1,127,500
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TEXTILE/APPAREL--1.5%
Russell Corp. 36,000
1,161,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY--4.9%
Phillips Petroleum Co. 29,000
1,239,750
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Unocal Corp. 35,000
1,260,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
USX-Marathon Group 57,000
1,232,625
----------
3,732,375
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL SERVICES--14.9%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
BANKS & THRIFTS--3.2%
BankAmerica Corp. 15,000
1,231,875
- - ----------------------------------------------------------------------------------------------------------------
- - --------
NationsBank Corp. 14,000
1,216,250
----------
2,448,125
</TABLE>
10 Oppenheimer Strategic Income & Growth Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
<C>
DIVERSIFIED FINANCIAL--8.8%
Dean Witter, Discover & Co. 3,000
$ 165,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Federal Home Loan Mortgage Corp. 13,000
1,272,375
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Federal National Mortgage Assn. 27,000
941,625
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Green Tree Financial Corp. 36,000
1,413,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Merrill Lynch & Co., Inc. 19,000
1,246,875
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Morgan Stanley Group, Inc. 10,000
497,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Salomon, Inc. 27,000
1,231,875
----------
6,768,250
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--2.9%
Cigna Corp. 10,000
1,198,750
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Loews Corp. 13,000
1,005,875
----------
2,204,625
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSING RELATED--1.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
HOMEBUILDERS/REAL ESTATE--1.7%
Capstone Capital Corp. 260
5,460
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Fleetwood Enterprises, Inc. 42,000
1,291,500
----------
1,296,960
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
MANUFACTURING--5.3%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
AEROSPACE/ELECTRONICS/
COMPUTERS--5.1%
Applied Materials, Inc.(14) 3,000
82,875
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Compaq Computer Corp.(14) 18,000
1,154,250
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Data General Corp.(14) 110,000
1,540,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
International Business Machines Corp. 9,000
1,120,500
----------
3,897,625
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CAPITAL GOODS--0.2%
Dover Corp. 4,000
191,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--0.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
CABLE TELEVISION--0.0%
EchoStar Communications Corp., Cl. A(14) 900
24,525
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TRANSPORTATION--5.4%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
AIR TRANSPORTATION--3.8%
AMR Corp.(14) 22,000
1,751,750
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Delta Air Lines, Inc. 16,000
1,152,000
----------
2,903,750
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
RAILROADS--1.6%
CSX Corp. 24,000
1,212,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES--0.1%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TELECOMMUNICATIONS--0.1%
Celcaribe SA(5)(14) 65,040
94,308
----------
Total Common Stocks (Cost $27,693,470)
31,482,071
=====================================================================
===========================================
================
PREFERRED STOCKS--0.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
California Federal Bank, 10.625% Non-Cum., Series B 500
55,125
- - ----------------------------------------------------------------------------------------------------------------
- - --------
First Nationwide Bank, 11.50% Non-Cum. 2,000
226,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Prime Retail, Inc., $19.00 Cv., Series B 12,000
240,000
----------
Total Preferred Stocks (Cost $551,813)
521,625
</TABLE>
11 Oppenheimer Strategic Income & Growth Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
=====================================================================
===========================================
================
<S> <C>
<C>
OTHER SECURITIES--0.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Kaiser Aluminum Corp., 8.255% Cv. Preferred Redeemable
Increased Dividend Equity Securities (Cost $25,344) 2,400
$ 27,000
<CAPTION>
<S> <C>
UNITS
=====================================================================
===========================================
================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
American Telecasting, Inc. Wts., Exp. 6/99 2,000
9,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Comunicacion Celular SA Wts., Exp. 11/03(5) 300
1,500
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5) 400
4,000
- - ----------------------------------------------------------------------------------------------------------------
- - --------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 300
--
----------
Total Rights, Warrants and Certificates (Cost $0)
14,500
<CAPTION>
FACE
AMOUNT(1)
=====================================================================
===========================================
================
<S> <C>
STRUCTURED INSTRUMENTS--2.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Bayerische Landesbank Girozentrale, New York Branch,
7.15% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97
$70,000
69,454
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) 550,000
543,070
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 100,000
99,400
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 200,000
199,200
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.486%, 4/28/97(9)CZK 4,600,000
160,735
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Czech Koruna Linked Nts., 11.60%, 12/23/96 70,000
69,165
Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(9) 130,000
126,386
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Salomon Brothers, Inc., Zero Coupon Chilean Peso Indexed
Enhanced Access Nts.:
12.145%, 12/11/96(9) 70,000
68,180
10.853%, 12/18/96(9) 70,000
67,914
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Swiss Bank Corp., New York Branch, 6.60% CD Linked Nts.,
1/30/97 (indexed to the closing Nikkei 225 Index on 1/23/97)NZD
256,720
186,629
- - ----------------------------------------------------------------------------------------------------------------
- - --------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96)
380,000
462,808
----------
Total Structured Instruments (Cost $2,010,133)
2,052,941
<CAPTION>
DATE STRIKE CONTRACTS
=====================================================================
===========================================
================
<S> <C> <C> <C>
<C>
PUT OPTIONS PURCHASED--0.0%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 $ 102.30 211
1,057
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Swiss Franc Put Opt. 10/96 1.22 CHF 885,245
23,628
----------
Total Put Options Purchased (Cost $12,370)
24,685
</TABLE>
12 Oppenheimer Strategic Income & Growth Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
=====================================================================
===========================================
================
<S> <C>
<C>
REPURCHASE AGREEMENT--2.7%
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
Repurchase agreement with PaineWebber, Inc., 5.62%, dated 9/30/96,
to be repurchased at $2,100,328 on 10/1/96, collateralized by
U.S. Treasury Bonds, 6.75%, 8/15/26, with a value of $2,067,056 and
U.S. Treasury Nts., 6.125%, 5/15/98, with a value of $77,236 (Cost $2,100,000)
$2,100,000
$ 2,100,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
TOTAL INVESTMENTS, AT VALUE (COST $75,252,756)
104.6%
80,295,960
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------
LIABILITIES IN EXCESS OF OTHER ASSETS (4.6)
(3,509,389)
----------
-----------
NET ASSETS 100.0%
$76,786,571
==========
===========
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
AUD -- Australian Dollar IDR -- Indonesian Rupiah
CAD -- Canadian Dollar IEP -- Irish Punt
CHF -- Swiss Franc ITL -- Italian Lira
CZK -- Czech Koruna JPY -- Japanese Yen
DEM -- German Deutsche Mark NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
ESP -- Spanish Peseta SEK -- Swedish Krona
GBP -- British Pound Sterling THB -- Thai Baht
2. When-issued security to be delivered and settled after
September 30, 1996.
3. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 8 of
Notes to Financial Statements.
6. A sufficient amount of securities has been designated to
cover outstanding written call options, as follows:
<TABLE>
<CAPTION>
CONTRACTS/FACE EXPIRATION EXERCISE
PREMIUM
MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED
SEE
NOTE 1
- - ----------------------------------------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C> <C>
<C>
Call Option on Australian Dollar 461,100 10/96 1.258 AUD $ 3,074
$555
- - ----------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on New Zealand Dollar 191,675 10/96 1.435 NZD 930
1,131
- - ----------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on New Zealand Dollar 163,560 10/96 1.437 NZD 816
1,112
- - ----------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on Swiss Franc 939,130 10/96 1.15 CHF 2,047
94
- - ----------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 500,000 10/96 $90.438 3,711
1,016
-------
-----
$10,578
$3,908
=======
======
</TABLE>
7. Interest or dividend is paid in kind.
8. Represents the current interest rate for an increasing rate security.
9. For zero coupon bonds, the interest rate shown is the
effective yield on the date of purchase.
10. Securities with an aggregate market value of $328,125 are
held in collateralized accounts to cover initial margin requirements on
open futures sales contracts. See Note 6 of Notes to Financial
Statements.
11. Denotes a step bond: a zero coupon bond that converts to a
fixed rate of interest at a designated future date.
12. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the
future. For units which represent debt securities, face amount disclosed
represents total underlying principal.
13. Represents a security sold under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines established
by the Board of Trustees. These securities amount to $1,331,602 or 1.73%
of the Fund's net assets, at September 30, 1996.
14. Non-income producing security.
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
=====================================================================
===========================================
================
<S>
<C>
ASSETS
Investments, at value (cost $75,252,756)--see accompanying statement
$80,295,960
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Cash
611,472
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
43,919
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Receivables:
Investments sold
1,717,088
Interest, dividends and principal paydowns
926,291
Shares of beneficial interest sold
387,169
Closed forward foreign currency exchange contracts
59,215
Daily variation on futures contracts--Note 6
6,862
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Other
2,864
-----------
Total assets
84,050,840
=====================================================================
===========================================
================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
4,400
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Options written, at value (premiums received $15,908)--
see accompanying statement--Note 7
5,777
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Payables and other liabilities:
Investments purchased (including $5,119,263 purchased on a when-issued basis)--Note 1
6,610,736
Dividends
313,878
Shares of beneficial interest redeemed
115,879
Daily variation on futures contracts--Note 6
1,500
Other
212,099
-----------
Total liabilities
7,264,269
=====================================================================
===========================================
================
NET ASSETS
$76,786,571
===========
=====================================================================
===========================================
================
COMPOSITION OF
NET ASSETS
Paid-in capital
$66,681,618
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Overdistributed net investment income
(318,871)
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Accumulated net realized gain on investments and foreign currency transactions
5,349,088
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
5,074,736
-----------
Net assets
$76,786,571
===========
=====================================================================
===========================================
================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $46,746,928
and 7,956,397 shares of beneficial interest outstanding)
$5.88
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price)
$6.17
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $28,933,298 and 4,932,725 shares of beneficial interest outstanding)
$5.87
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,106,345 and 188,933 shares of beneficial interest outstanding)
$5.86
See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Strategic Income & Growth Fund
<PAGE> 15
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
=====================================================================
===========================================
================
<S>
<C>
INVESTMENT INCOME
Interest
$4,441,077
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Dividends (net of foreign withholding taxes of $5,550)
457,180
-----------
Total income
4,898,257
=====================================================================
===========================================
================
EXPENSES
Management fees--Note 4
513,195
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Distribution and service plan fees--Note 4:
Class A
105,726
Class B
242,309
Class C
3,963
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Transfer and shareholder servicing agent fees--Note 4
128,032
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Shareholder reports
86,699
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Custodian fees and expenses
51,822
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Legal and auditing fees
14,158
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Insurance expenses
3,974
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Registration and filing fees:
Class A
837
Class B
2,469
Class C
393
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Trustees' fees and expenses
3,002
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Other
8,985
-----------
Total expenses
1,165,564
=====================================================================
===========================================
================
NET INVESTMENT INCOME
3,732,693
=====================================================================
===========================================
================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised)
8,028,979
Closing of futures contracts
(14,626)
Closing and expiration of options written
(106,455)
Foreign currency transactions
44,109
-----------
Net realized gain
7,952,007
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Net change in unrealized appreciation or depreciation on:
Investments
(1,417,530)
Translation of assets and liabilities denominated in foreign currencies
(45,705)
-----------
Net change
(1,463,235)
-----------
Net realized and unrealized gain
6,488,772
=====================================================================
===========================================
================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$10,221,465
===========
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Strategic Income & Growth Fund
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1996
1995
=====================================================================
===========================================
================
<S> <C>
<C>
OPERATIONS
Net investment income $ 3,732,693
$ 3,570,349
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Net realized gain (loss) 7,952,007
(1,642,262)
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Net change in unrealized appreciation or depreciation (1,463,235)
6,666,394
------------
------------
Net increase in net assets resulting from operations 10,221,465
8,594,481
=====================================================================
===========================================
================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,671,884)
(2,612,318)
Class B (1,293,779)
(977,840)
Class C (20,396)
--
=====================================================================
===========================================
================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial
interest transactions--Note 2:
Class A 1,764,170
(5,203,387)
Class B 6,853,287
2,275,946
Class C 1,071,210
--
=====================================================================
===========================================
================
NET ASSETS
Total increase 15,924,073
2,076,882
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Beginning of period 60,862,498
58,785,616
------------
------------
End of period (including overdistributed net investment income
of $318,871 and $129,448, respectively) $ 76,786,571
$ 60,862,498
============
============
See accompanying Notes to Financial Statements.
</TABLE>
16 Oppenheimer Strategic Income & Growth Fund
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992(3)
=====================================================================
==============
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.36 $4.92 $5.26 $5.03 $5.00
- - -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .32 .21 .22 .07(4)
Net realized and unrealized
gain (loss) .54 .44 (.23) .22 .02
----- ----- ----- ----- -----
Total income (loss) from
investment operations .86 .76 (.02) .44 .09
- - -----------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.34) (.32) (.21) (.20) (.06)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.34) (.32) (.32) (.21) (.06)
- - -----------------------------------------------------------------------------------
Net asset value, end of period $5.88 $5.36 $4.92 $5.26 $5.03
===== ===== ===== ===== =====
=====================================================================
==============
TOTAL RETURN, AT NET ASSET VALUE(5) 16.53% 16.09% (0.23)% 8.84% 1.74%
=====================================================================
==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $46,747 $40,977 $42,733 $55,291 $48,3973
- - -----------------------------------------------------------------------------------
Average net assets (in thousands) $43,764 $40,799 $48,360 $59,209 $30,2643
- - -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.75% 6.37% 4.56% 4.33% 4.59%(6)
Expenses 1.43% 1.35% 1.43% 1.36% 1.46%(4)(6)
- - -----------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3% 114.0% 80.0% 122.4% 25.8%
Average brokerage
commission rate(8) $0.0595 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993(2) 1996(1)
=====================================================================
===============================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.35 $4.91 $5.26 $5.10 $5.36
- - ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .28 .19 .14 .28
Net realized and unrealized
gain (loss) .53 .44 (.25) .16 .49
----- ----- ----- ----- -----
Total income (loss) from
investment operations .82 .72 (.06) .30 .77
- - ----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.30) (.28) (.18) (.13) (.27)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.30) (.28) (.29) (.14) (.27)
- - ----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.87 $5.35 $4.91 $5.26 $5.86
===== ===== ===== ===== =====
=====================================================================
===============================
TOTAL RETURN, AT NET ASSET VALUE(5) 15.69% 15.26% (1.17)% 5.86%
15.18%
=====================================================================
===============================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $28,93 $19,885 $16,053 $12,386 $1,106
- - ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,26 $17,316 $14,986 $ 7,541 $ 400
- - ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94% 5.61% 3.86% 3.32%(6) 4.58%(6)
Expenses 2.19% 2.10% 2.17% 2.21%(6) 2.28%(6)
- - ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3 114.0% 80.0% 122.4% 147.3%
Average brokerage
commission rate(8) $0.0595 -- -- -- $0.0595
</TABLE>
1. For the period from October 2, 1995 (inception of offering)
to September 30, 1996.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from June 1, 1992 (commencement of operations)
to September 30, 1992.
4. Net investment income would have been $.07 per share absent
the voluntary expense reimbursement, resulting in an expense ratio of
1.74%.
5. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering),
with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for
a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended
September 30, 1996 were $106,528,444 and $95,769,996, respectively.
8. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period divided by the total number
of related shares purchased and sold. See accompanying Notes to
Financial Statements.
17 Oppenheimer Strategic Income & Growth Fund
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
=====================================================================
=========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Strategic Income & Growth 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 primary investment
objective is to seek a high level of current income and capital
appreciation. The Fund's investment adviser is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge.
All three classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution
and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a
single class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Forward foreign currency exchange contracts are valued based
on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a
reliable bank or dealer. Options are valued based upon the last sale
price on the principal exchange on which the option is traded or, in
the absence of any transactions that day, the value is based upon the
last sale price on the prior trading date if it is within the spread
between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
----------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the
transaction date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or
decrease in value prior to their delivery. The Fund maintains, in a
segregated account with its custodian, assets with a market value equal
to the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes
such purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding when-issued
or forward commitments of $5,119,263.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into
mortgage "dollar-rolls" in which the Fund sells securities for delivery
in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type coupon and maturity) but
not identical securities on a specified future date. The Fund records
each dollar-roll as a sale and a new purchase transaction.
----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from
changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's Statement of
Operations.
----------------------------------------------------------------------
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.
18 Oppenheimer Strategic Income & Growth Fund
<PAGE> 19
=====================================================================
=========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and
losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating
expenses directly attributable to a specific class are charged against
the operations of that class.
----------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
----------------------------------------------------------------------
ORGANIZATION COSTS. The Manager advanced $20,590 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund
is withdrawn during the amortization period, the redemption proceeds
will be reduced to reimburse the Fund for any unamortized expenses, in
the same ratio as the number of shares redeemed bears to the number of
initial shares outstanding at the time of such redemption.
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and
pay such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $128,640, a
decrease in overdistributed net investment income of $37,503, and an
increase in accumulated net realized gain on investments of $91,137. In
addition, to properly reflect foreign currency gain in the components of
capital, $26,440 of foreign exchange gain determined according to U.S.
federal income tax rules has been reclassified from net realized gain to
net investment income.
----------------------------------------------------------------------
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. Dividends-in-kind are
recognized as income on the ex-dividend date, at the current market
value of the underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market
adjustment is made on the ex-date.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
19 Oppenheimer Strategic Income & Growth Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
=========
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR
ENDED
SEPTEMBER 30, 1995
--------------------------------
- - ---------------------------
SHARES AMOUNT SHARES
AMOUNT
- - ----------------------------------------------------------------------------------------------------------------
- - -------
<S> <C> <C> <C>
<C>
Class A:
Sold 2,387,772 $ 13,431,087 1,075,489
$ 5,403,694
Dividends and distributions reinvested 402,412 2,264,550 452,310
2,248,812
Redeemed (2,477,164) (13,931,467) (2,567,818)
(12,855,893)
---------- ------------ -----------
------------
Net increase (decrease) 313,020 $ 1,764,170 (1,040,019)
$ (5,203,387)
========== ============ ===========
============
- - ----------------------------------------------------------------------------------------------------------------
- - -------
Class B:
Sold 2,134,954 $ 12,031,686 1,180,146
$ 5,932,623
Dividends and distributions reinvested 179,351 1,009,405 162,515
808,194
Redeemed (1,096,517) (6,187,804) (894,830)
(4,464,871)
---------- ------------ -----------
------------
Net increase 1,217,788 $ 6,853,287 447,831
$ 2,275,946
========== ============ ===========
============
- - ----------------------------------------------------------------------------------------------------------------
- - -------
Class C:
Sold 253,236 $ 1,433,118 --
$ --
Dividends and distributions reinvested 2,268 12,899 --
--
Redeemed (66,571) (374,807) --
--
---------- ------------ -----------
------------
Net increase 188,933 $ 1,071,210 --
$ --
========== ============ ===========
============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class B shares
and for the period from October 2, 1995 (inception of offering) to
September 30, 1996 for Class C shares.
=====================================================================
=========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $5,053,335 was composed of gross appreciation of
$5,766,008, and gross depreciation of $712,673.
=====================================================================
=========
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.75% on the first $200 million of average annual net assets, 0.72% on
the next $200 million, 0.69% on the next $200 million, 0.66% on the
next $200 million, 0.60% on the next $200 million, and 0.50% on net
assets in excess of $1 billion. 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 September 30, 1996, commissions (sales
charges paid by investors) on sales of Class A shares totaled $277,077,
of which $91,918 was retained by OppenheimerFunds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an
affiliated broker/dealer. Sales charges advanced to broker/dealers by
OFDI on sales of the Fund's Class B and Class C shares totaled $415,535
and $13,819, of which $12,807 and $208, respectively, was paid to an
affiliated broker/dealer. During the year ended September 30, 1996,
OFDI received contingent deferred sales charges of $79,826 and $929,
respectively, upon redemption of Class B and Class C shares, as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for
other registered investment companies. OFS's total costs of providing
such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse brokers, dealers, banks
and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class
A shares. During the year ended September 30, 1996, OFDI paid $13,004
to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
20 Oppenheimer Strategic Income & Growth Fund
<PAGE> 21
=====================================================================
=========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a reimbursement type Distribution and Service Plan
for Class B shares to reimburse OFDI for its services and costs in
distributing Class B shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of 0.75% per year on
Class B shares. OFDI also receives a service fee of 0.25% per year to
reimburse dealers for providing personal services for accounts that
hold Class B shares. Both fees are computed on the average annual net
assets of Class B shares, determined as of the close of each regular
business day. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plan
was terminated. During the year ended September 30, 1996, OFDI paid
$3,237 to an affiliated broker/dealer as reimbursement for Class B
personal service and maintenance expenses and retained $200,117 as
reimbursement for Class B sales commissions and service fee advances,
as well as financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $1,292,158 for Class B.
The Fund has adopted a compensation type Distribution and
Service Plan for Class C shares to compensate OFDI for its services and
costs in distributing Class C shares and servicing accounts. Under the
Plan, the Fund pays OFDI an annual asset-based sales charge of 0.75%
per year on Class C shares. OFDI also receives a service fee of 0.25%
per year to compensate dealers for providing personal services for
accounts that hold Class C shares. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to OFDI for certain expenses it incurred
before the Plan was terminated. During the year ended September 30,
1996, OFDI retained $3,838 as compensation for Class C sales
commissions and service fee advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred unreimbursed expenses of $35,740
for Class C.
=====================================================================
=========
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at
a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio
currency risk. The Fund generally enters into forward contracts as a
hedge upon the purchase or sale of a security denominated in a foreign
currency. In addition, the Fund may enter into such contracts as a
hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets
on a daily basis as provided by a reliable bank or dealer. The Fund
will realize a gain or loss upon the closing or settlement of the
forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments
where applicable. Unrealized appreciation or depreciation on forward
contracts is reported in the Statement of Assets and Liabilities.
Realized gains and losses are reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to
meet the terms of the contract and unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
At September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT
AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPT. 30,
1996 APPRECIATION
DEPRECIATION
- - ----------------------------------------------------------------------------------------------------------------
- - -----------
<S> <C> <C> <C> <C>
<C>
Japanese Yen (JPY) 11/5/96 29,536 JPY $ 266,144 $ 6,168
$ --
New Zealand Dollar (NZD) 11/6/96 900 NZD 626,118 --
4,395
Swedish Krona (SEK) 11/1/96 1,490 SEK 224,826 747
--
Swiss Franc (CHF) 10/21/96--11/4/96 870 CHF 695,969 30,902
--
---------- -------
-------
$1,813,057 37,817
4,395
========== -------
-------
CONTRACTS TO SELL
- - ----------------------------------------------------------------------------------------------------------------
- - -----------
Australian Dollar (AUD) 11/6/96 795 AUD $629,016 $ 6,102
$ 4
Danish Krone (DKK) 10/1/96 3 DKK 587 --
1
---------- -------
-------
$629,603 6,102
5
========== -------
-------
Net Unrealized Appreciation and Depreciation $43,919
$ 4,400
=======
=======
</TABLE>
21 Oppenheimer Strategic Income & Growth Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
=========
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the
value of fixed rate portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin) equal
to a certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The
Fund recognizes a realized gain or loss when the contract is closed or
expires.
Securities held in collateralized accounts to cover initial
margin requirements on open futures contracts are noted in the
Statement of Investments. The Statement of Assets and Liabilities
reflects a receivable or payable for the daily mark to market for
variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with
changes in the value of the underlying securities.
At September 30, 1996, the Fund had outstanding futures contracts to
purchase and sell debt securities as follows:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
EXPIRATION FUTURES VALUATION AS OF
APPRECIATION
CONTRACTS TO PURCHASE DATE CONTRACTS SEPT. 30, 1996
(DEPRECIATION)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 12/96 12 $ 1,267,125 $ 10,500
------------- ----------
CONTRACTS TO SELL
-----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 12/96 5 $ 545,937 $ (8,781)
French Government Bonds 12/96 10 1,209,203 (17,686)
------------- ----------
1,755,140 (26,467)
------------- ----------
$ 3,022,265 $ (15,967)
============= ==========
</TABLE>
=====================================================================
=========
7. OPTIONS ACTIVITY
The Fund may buy and sell put and call options, or write put and
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.
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.
22 Oppenheimer Strategic Income & Growth Fund
<PAGE> 23
=====================================================================
=========
7. OPTIONS ACTIVITY
(CONTINUED)
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments. Options written
are reported as a liability in the Statement of Assets and Liabilities.
Gains and losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases
and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security decreases
and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund
also has the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Written option activity for the year ended September 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
----------------------------
- - ------------------------
NUMBER OF AMOUNT OF NUMBER OF
AMOUNT OF
OPTIONS PREMIUMS OPTIONS
PREMIUMS
- - ----------------------------------------------------------------------------------------------------------------
- - --------
<S> <C> <C> <C>
<C>
Options outstanding at September 30, 1995 -- $ -- --
$ --
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Options written 5,406,361 78,714 123,388
5,330
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Options canceled in closing transactions (943,840) (43,677) --
--
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Options expired prior to exercise (1,717,882) (18,500) --
--
- - ----------------------------------------------------------------------------------------------------------------
- - --------
Options exercised (988,674) (5,959) --
--
----------- ---------- --------
--------
Options outstanding at September 30, 1996 1,755,965 $ 10,578 123,388
$ 5,330
=========== ========== ========
========
</TABLE>
=====================================================================
=========
8. ILLIQUID AND
RESTRICTED SECURITIES
At September 30, 1996, investments in securities included issues that
are illiquid or restricted. Restricted securities are often purchased
in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale,
and are valued under methods approved by the Board of Trustees as
reflecting fair value. A security may be considered illiquid if it
lacks a readily-available market or if its valuation has not changed
for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
from time to time) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this limitation at
September 30, 1996 was $2,298,088, which represents 2.99% of the Fund's
net assets. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT
SEPT. 30, 1996
- - ----------------------------------------------------------------------------------------------------------------
- - ---------
<S> <C> <C>
<C>
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds, 8%, 2/15/01 5/17/96 $66.10
$68.80
</TABLE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Transmission*
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
*For purposes of the Fund's investment policy not to concentrate in
securities of issues in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
ANNUAL REPORT SEPTEMBER 30, 1996
[Photograph]
"We need the comfort that comes from diversifying across different types of
investments--but we want it from one fund."
[Logo]
<PAGE>
NEWS
BEAT THE AVERAGE
Cumulative Total Return for the
5-Year Period Ended 9/30/96:
Oppenheimer Asset Allocation Fund
Class A (at net asset value)(1)
77.40%
Lipper Flexible Portfolio Funds
Average for 45 Funds for the
5-Year Period(3)
71.56%
THIS FUND IS FOR PEOPLE WHO WANT AN INVESTMENT THAT'S STRATEGICALLY
ALLOCATED TO
PURSUE GROWTH WITH LESS RISK.
HOW YOUR FUND IS MANAGED
Oppenheimer Asset Allocation Fund uses a combination of investment styles to
seek high total return while managing risk.
The Fund seeks to achieve its goals by investing in a combination of
stocks, bonds and money market instruments--strategically allocated to take
advantage of current economic conditions.
Investing in stocks can offer the best potential for long-term growth. The
Fund's managers invest in established U.S. and international companies that
they believe have excellent potential for appreciation.
And the Fund seeks income from diversified fixed income and money market
investments which can act as a cushion against fluctuations in the value of the
stocks in the Fund's portfolio.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 were 13.70% for
Class A shares, 12.55% for Class B shares, and 12.71% for Class C shares.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1- and 5-year periods ended 9/30/96 and since inception
on 4/24/87 were 7.16%, 10.83% and 9.28%, respectively. For Class B shares,
average annual total returns for the 1-year period ended 9/30/96 and since
inception on 8/29/95 were 7.55% and 10.33%, respectively. For Class C shares,
average annual total returns for the 1-year period ended 9/30/96 and since
inception on 12/1/93 were 11.71% and 10.90%, respectively.(2)
OUTLOOK
"Our outlook remains optimistic. We are looking to our international investments
to provide solid growth and diversification and believe we may begin to see
stronger growth as those countries move through their economic cycles."
Richard Rubinstein, Portfolio Manager
September 30, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware that past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
1. Based on the change in net asset value per share for the period shown,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
2. Class A returns show results of hypothetical investments on 9/30/95, 9/30/91
and 4/24/87 (inception of class), after deducting the current maximum initial
sales charge of 5.75%. Prior to 4/1/91, the Fund's maximum sales charge rate for
Class A shares was higher, so that actual account results would have been less.
Class B returns show results of hypothetical investments on 9/30/95 and 8/29/95
(inception of class), after the deduction of the applicable contingent deferred
sales charge of 5% (1-year) and 4% (since inception). Class C returns show
results of hypothetical investments on 9/30/95 and 12/1/93 (inception of class),
after the deduction of the 1% contingent deferred sales for the 1-year result.
An explanation of the different performance calculations is in
the Fund's prospectus.
3. Source: Lipper Analytical Services, 9/30/96, an independent mutual fund
monitoring service. The average is shown for comparative purposes only.
Oppenheimer Asset Allocation Fund is characterized by Lipper as a flexible
portfolio fund. Lipper performance does not take sales charges into
consideration.
2 Oppenheimer Asset Allocation Fund
<PAGE>
[Photograph]
Bridget A. Macaskill
President
Oppenheimer
Asset Allocation Fund
DEAR SHAREHOLDER,
So far, 1996 has been a good year for investors seeking diversification across
market sectors. It has also been a tough year full of anticipation. The U.S.
markets have been waiting anxiously for a correction or downturn believed by
many to be imminent after six years of a bullish stock market, and with emotions
running high, the market has reacted to announcements of each new economic
indicator with fervor.
Aside from the decline in late July, the long-awaited correction has not
come. Instead, we have seen economic indicators that show an economy growing at
a pace just steady enough to keep inflation in check and prevent the Federal
Reserve from raising interest rates.
We have seen volatile but continued growth from the U.S. equity market
through the first three quarters of 1996, bringing the Dow Jones Industrial
Average to new highs. Perhaps due to concerns of a correction, the market has
edged away from technology and small-cap growth stocks and leaned more heavily
toward larger blue chip growth companies. We remain optimistic on the domestic
equities market, but are keeping in mind that the U.S. is in the late stages of
its economic cycle and high returns such as we saw last year cannot continue
unabated forever. More realistically, we anticipate a return to the high single-
digit returns of the "normal nineties."
In the bond market, fears of rising interest rates led to volatility
during the first nine months of the year. This interest rate uncertainty
fueled a decline in bond prices and forced yields to rise. Although it has
been a tough period for fixed-income investors, we consider this period's
devaluation in bonds as an opportunity to find good value at cheaper prices.
More recent indicators have shown that the economy should continue on its
course of steady growth and low inflation. As a result, we could see a
decline in interest rates in the coming twelve months, which could lead to a
rebound in the bond market.
When you look at the opportunities available in both the U.S. fixed-income
and equity markets, the outlook for diversified investing is very positive.
Using a mutual fund that invests in both stocks and bonds gives you access to
professional managers who are continually evaluating the appropriate mixture of
stocks and bonds. Although stocks tend to produce the highest returns, they also
typically present the greatest risk. Bonds, on the other hand, will produce more
stable returns, but tend to fluctuate less on the downside than do stocks.
Your portfolio managers discuss the outlook for your Fund in light of these
broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping your reach your investment goals in
the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
October 21, 1996
3 Oppenheimer Asset Allocation Fund
<PAGE>
Q & A [Photograph] [Photograph]
Q - WHAT INVESTMENTS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW DID THE FUND PERFORM OVER THE PERIOD?
The portfolio has performed well over the period while keeping within its
objectives of seeking high total investment return, which includes current
income as well as capital appreciation. The portfolio is structured to perform
in many market environments. The Fund's Class A shares are ranked 62nd out of
178 funds in its category rated by Lipper Analytical Services for the
1-year period ended 9/30/96. This ranking put the Fund in the second quartile
versus its competitors.(1)
[Photograph]
WHAT WERE THE PRIMARY REASONS FOR THE FUND'S STRONG PERFORMANCE?
Our domestic stock and bond holdings were the primary drivers of our
performance. Our energy stocks also proved an important source of return. During
the period, we increased the portfolio's energy holdings anticipating better
profits. We expected that higher oil prices and cheaper finding costs would
increase profits. We saw higher than expected demand from the emerging markets
and unexpected political events in Iraq and Saudi Arabia. These incidents
combined to increase the price of oil and provide higher returns to our fund.
Another reason for the Fund's strong performance was our exposure to
emerging markets, in particular, our investments in Brady Bonds, which are U.S.
dollar-denominated bonds. Also, high yield bonds were another significant
contributor to the Fund's positive return. However, investors in high yield
bonds are subject to a greater risk that the issuer will default in its
principal or interest payments. But over time, we expect the long-term returns
will more than compensate for temporary risks.
1. Source:Lipper Analytical Services, 9/30/96. Oppenheimer Asset Allocation Fund
is characterized by Lipper as a flexible portfolio fund. This comparison does
not take sales charges into consideration.
4 Oppenheimer Asset Allocation Fund
<PAGE>
FACING PAGE
Top left: Richard Rubinstein, Portfolio Manager, with Robert Doll,
Executive VP, Director of Equity Investments
Top right: Paul LaRocco, Member of Equity Investments Team
Bottom: Robert Doll
THIS PAGE
Top: Richard Rubinstein
Bottom: Bruce Bartlett, Member of Equity Investments Team
A - OUR DOMESTIC STOCK AND BOND HOLDINGS WERE THE PRIMARY DRIVERS
OF OUR
PERFORMANCE.
WERE THERE ANY INVESTMENTS THAT DIDN'T PERFORM AS EXPECTED?
Though we remain committed to the international sector, many of our foreign
holdings have continued to underperform the U.S. equity markets. International
investments are good diversifiers of risk and over the long term, have the
potential to grow faster than many of our U.S. companies.
Some of our technology holdings didn't perform as well as we had expected.
We attribute this, in part, to the hefty competition in the technology sector
and pricing wars between competitors.
WHAT AREAS ARE YOU CURRENTLY TARGETING?
We are targeting companies related to agriculture. We believe that the growth of
emerging markets will lead to an increase in food consumption, which will keep
agricultural prices high. As a result, we are seeking companies that stand to
benefit from higher grain prices, like fertilizer companies and equipment
manufacturers.
[Photograph]
Additionally, we have recently added to our technology sector. Technology
stocks, despite temporary declines, are currently undervalued. We feel there is
good upside potential in this sector over the long term for the dominant
companies.(2)
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook remains optimistic. The domestic equity markets have performed well,
though we may be due for another correction over the next twelve months. We are
also looking to our international investments to provide solid growth and
diversification and believe we may begin to see stronger growth as those
countries move through their economic cycles.
[Photograph]
2. The Fund's portfolio is subject to change.
5 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Federal National Mortgage Assn.:
11.50%, 7/1/11 $ 146,907 $
162,530
11.75%, 1/1/16 175,012
196,833
- - -------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 9%, 11/15/08--5/15/09
524,930 558,216
- - -------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 375,127
364,225
-------------
Total Mortgage-Backed Obligations (Cost $1,162,963)
1,281,804
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
U.S. GOVERNMENT OBLIGATIONS--11.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.10%, 11/15/18(2) 17,000,000
3,502,476
7.313%, 8/15/19(2) 18,700,000
3,651,736
- - -------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,000,000
16,590,000
8.875%, 11/15/98 950,000
1,001,062
9.25%, 8/15/98 9,450,000
9,972,697
-------------
Total U.S. Government Obligations (Cost $34,052,281)
34,717,971
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOREIGN GOVERNMENT OBLIGATIONS--14.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(3)(4)
1,544,136 1,408,007
Par Bonds, 5.25%, 3/31/23(5) 10,000,000
5,850,000
Past Due Interest Bonds, Series L, 6.625%, 3/31/05(3)
5,880,000 4,931,850
- - -------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon,
48.252%, 10/3/96(2) MXP 4,384,900
579,822
- - -------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Par Bonds, 5%, 4/15/24(5)
7,500,000 4,476,563
- - -------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
9.75%, 12/1/01 CAD 6,000,000
5,068,535
9.75%, 6/1/01 CAD 2,000,000
1,677,282
- - -------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 3/15/06 DKK
21,900,000 4,004,914
- - -------------------------------------------------------------------------------------------------------
Eskom Depositary Receipts, Series E168, 11%, 6/1/08 ZAR
6,430,000 1,093,837
- - -------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 8.50%, 8/1/99 ITL 1,800,000,000
1,204,257
- - -------------------------------------------------------------------------------------------------------
New Zealand Government Bonds, 8%, 2/15/01 NZD
7,460,000 5,203,616
- - -------------------------------------------------------------------------------------------------------
Poland (Republic of) Treasury Bills, Zero Coupon:
20.70%, 1/8/97(2) PLZ 2,360,000
799,056
24.131%, 11/13/96(2) PLZ 2,300,000
801,216
- - -------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts., 10.50%, 5/15/03 AUD
2,500,000 2,263,395
- - -------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 AUD
1,500,000 1,219,490
- - -------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00 GBP
1,050,000 1,967,831
-------------
Total Foreign Government Obligations (Cost $39,944,054)
42,549,671
</TABLE>
6 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--12.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC MATERIALS--2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--0.5% Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03
$ 500,000 $ 546,146
- - -------------------------------------------------------------------------------------------------------
Viridian, Inc., 9.75% Nts., 4/1/03 750,000
780,000
-------------
1,326,146
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
METALS--0.2% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03
500,000 545,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PAPER--1.5% Gaylord Container Corp., 12.75% Sr. Sub. Disc. Debs., 5/15/05
750,000 826,875
- - -------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.875% Second Priority Sr. Nts., 5/1/06
1,000,000 985,000
- - -------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.875% Sr. Sub. Nts., 4/1/08
1,000,000 990,000
- - -------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04
1,000,000 1,083,750
- - -------------------------------------------------------------------------------------------------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05
500,000 485,000
-------------
4,370,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER CYCLICALS--4.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AUTOS & HOUSING--0.6% Hovnanian K. Enterprises, Inc., 11.25% Sub. Gtd. Nts.,
4/15/02 725,000 712,312
- - -------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 1,000,000
1,047,500
-------------
1,759,812
LEISURE &
ENTERTAINMENT--0.2% Apple South, Inc., 9.75% Sr. Nts., 6/1/06
500,000 495,000
- - -------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(6)
213,908 223,266
-------------
718,266
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--2.8% Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(7)
200,000 153,500
- - -------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08
1,000,000 1,030,000
- - -------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 10.75% Sr. Sub. Debs., 4/1/04
500,000 518,125
- - -------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.50% Sr. Nts., 2/15/05
1,000,000 1,061,373
- - -------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts.,
8/1/03(7) 1,250,000 1,137,500
- - -------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07
1,000,000 1,005,000
- - -------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Nts., 6/30/05 500,000
535,625
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc., 7.95% Nts., 2/1/00 1,000,000
1,028,109
- - -------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,100,000
1,221,967
- - -------------------------------------------------------------------------------------------------------
United International Holdings, Inc.,
Zero Coupon Sr. Sec. Disc. Nts., 12.819%, 11/15/99(2)
550,000 385,000
-------------
8,076,199
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: GENERAL--0.3% Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02
900,000 976,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY--0.2% Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01
500,000 534,375
</TABLE>
7 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
CONSUMER NON-CYCLICALS--1.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD--0.7% Grand Union Co., 12% Sr. Nts., 9/1/04 $
1,137,000 $ 1,152,634
- - -------------------------------------------------------------------------------------------------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 500,000
511,250
11% Sr. Sub. Nts., 6/15/05 500,000
505,625
-------------
2,169,509
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES &
SERVICES--0.5% Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A,
4/15/04 1,000,000 1,095,000
- - -------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02
345,000 383,813
-------------
1,478,813
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS--0.3% Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 12.09%, 5/27/98(2) 1,000,000
855,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY--1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY SERVICES & Global Marine, Inc., 12.75% Sr. Sec. Nts., 12/15/99
400,000 434,000
PRODUCERS--1.6%
- - -------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06
1,000,000 1,022,500
- - -------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15
1,000,000 1,045,000
- - -------------------------------------------------------------------------------------------------------
Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06
1,000,000 1,056,250
- - -------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02
1,000,000 1,065,000
-------------
4,622,750
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL--0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED
FINANCIAL--0.4% GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98
1,250,000 1,262,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--0.4% Conseco, Inc., 8.125% Sr. Nts., 2/15/03
1,000,000 1,023,948
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL
MATERIALS--0.4% Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 500,000
521,250
11% Sr. Debs., 12/1/03 650,000
713,375
-------------
1,234,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL SERVICES--0.3% EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03
1,000,000 955,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TECHNOLOGY--0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AEROSPACE/DEFENSE--0.4% Communications & Power Industries, Inc., 12% Sr. Sub.
Nts.,
Series B, 8/1/05 1,000,000
1,092,500
- - -------------------------------------------------------------------------------------------------------
Unisys Corp., 15% Credit Sensitive Nts., 7/1/97(3) 200,000
212,000
-------------
1,304,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELECOMMUNICATIONS- Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts.,
Series B, 4/15/03(7)(8) 500,000
307,500
- - -------------------------------------------------------------------------------------------------------
TECHNOLOGY--0.4% PriCellular Wireless Corp., 0%/12.25% Sr. Sub. Disc. Nts.,
10/1/03(7) 1,000,000 815,000
-------------
1,122,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES--0.4% First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16 1,000,000
1,057,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES--0.3% Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06
750,000 770,625
-------------
Total Non-Convertible Corporate Bonds and Notes (Cost $35,105,263)
36,164,193
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONVERTIBLE CORPORATE BONDS AND NOTES--0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIQ, Inc., 7.50% Exchangeable Sub. Debs., 7/15/03 (Cost $1,552,096)
1,650,000 1,476,750
</TABLE>
8 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
COMMON STOCKS--51.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BASIC MATERIALS--2.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CHEMICALS--1.5% Agrium, Inc. 80,000 $
1,086,250
- - -------------------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 90,000
3,304,341
-------------
4,390,591
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
METALS--0.5% Brush Wellman, Inc. 72,300
1,391,775
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PAPER--0.6% Aracruz Celulose SA, Sponsored ADR, Cl. B
99,000 866,250
- - -------------------------------------------------------------------------------------------------------
Stone Container Corp. 54,200
846,875
-------------
1,713,125
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER CYCLICALS--9.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Autos & Housing--0.8% Duracell International, Inc.
16,000 1,026,000
- - -------------------------------------------------------------------------------------------------------
General Motors Corp. 18,000
864,000
- - -------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones, SA 193,056
563,796
-------------
2,453,796
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LEISURE &
ENTERTAINMENT--4.8% Alaska Air Group, Inc.(9)
77,000 1,645,875
- - -------------------------------------------------------------------------------------------------------
AMR Corp.(9)(10) 17,600
1,401,400
- - -------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 43,800
1,357,800
- - -------------------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc.(9) 18,000
636,750
- - -------------------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 55,300
1,251,162
- - -------------------------------------------------------------------------------------------------------
Eastman Kodak Co. 22,000
1,727,000
- - -------------------------------------------------------------------------------------------------------
International Game Technology 68,000
1,394,000
- - -------------------------------------------------------------------------------------------------------
King World Productions, Inc.(9) 27,000
995,625
- - -------------------------------------------------------------------------------------------------------
Mattel, Inc. 39,437 1,020,432
- - -------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc.(9) 2,400
57,900
- - -------------------------------------------------------------------------------------------------------
Shangri-La Asia Ltd. 550,000
732,573
- - -------------------------------------------------------------------------------------------------------
Shimano, Inc. 54,000 1,003,636
- - -------------------------------------------------------------------------------------------------------
U S West Media Group(9) 47,000
793,125
-------------
14,017,278
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MEDIA--1.6% Comcast Corp., Cl. A Special
112,800 1,734,300
- - -------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 21,000
777,000
- - -------------------------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 1,440,000
1,070,733
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc. 30,000
1,158,750
-------------
4,740,783
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: GENERAL--1.2% Cone Mills Corp.(9)
161,500 1,271,812
- - -------------------------------------------------------------------------------------------------------
Donna Karan International, Inc.(9) 44,500
1,017,937
- - -------------------------------------------------------------------------------------------------------
Price/Costco, Inc.(9) 54,300
1,113,150
-------------
3,402,899
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY--0.7% Gymboree Corp.(9)(10)
33,000 1,002,375
- - -------------------------------------------------------------------------------------------------------
Toys 'R' Us, Inc.(9)(10) 32,600
949,475
-------------
1,951,850
</TABLE>
9 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
CONSUMER NON-CYCLICALS--8.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BEVERAGES--0.4% Guinness PLC 144,000
$ 1,029,967
- - -------------------------------------------------------------------------------------------------------
Whitman Corp. 11,500
265,938
-------------
1,295,905
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD--1.3% Chiquita Brands International, Inc. 45,000
551,250
- - -------------------------------------------------------------------------------------------------------
Groupe Danone 3,707
541,550
- - -------------------------------------------------------------------------------------------------------
IBP, Inc.(10) 27,000 627,750
- - -------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 20,000
1,115,232
- - -------------------------------------------------------------------------------------------------------
Sara Lee Corp. 30,000
1,072,500
-------------
3,908,282
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/DRUGS--4.3% Abbott Laboratories
20,000 985,000
- - -------------------------------------------------------------------------------------------------------
American Home Products Corp. 15,400
981,750
- - -------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 23,000
971,240
- - -------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co.(10) 21,400
2,062,425
- - -------------------------------------------------------------------------------------------------------
Ciba-Geigy AG 2,275
2,911,013
- - -------------------------------------------------------------------------------------------------------
Genzyme Corp.(9) 42,000
1,071,000
- - -------------------------------------------------------------------------------------------------------
Johnson & Johnson 36,800
1,886,000
- - -------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 45,800
784,325
- - -------------------------------------------------------------------------------------------------------
SmithKline Beecham PLC, ADR 16,000
974,000
-------------
12,626,753
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES & Manor Care, Inc.(10)
21,600 828,900
SERVICES--1.3%
- - -------------------------------------------------------------------------------------------------------
Medtronic, Inc.(10) 19,800
1,269,675
- - -------------------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc.(9) 36,000
792,000
- - -------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(9) 30,009
975,293
-------------
3,865,868
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS--1.0% Kimberly-Clark Corp.
9,800 863,625
- - -------------------------------------------------------------------------------------------------------
Procter & Gamble Co. 12,000
1,170,000
- - -------------------------------------------------------------------------------------------------------
Wella AG 1,350 812,515
-------------
2,846,140
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TOBACCO--0.6% Philip Morris Cos., Inc. 20,600
1,848,850
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Energy--3.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Energy Services & Kerr-McGee Corp. 9,000
547,875
Producers--0.7%
- - -------------------------------------------------------------------------------------------------------
Landmark Graphics Corp.(9) 28,600
840,125
- - -------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc.(9) 27,000
739,125
-------------
2,127,125
</TABLE>
10 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
OIL-INTEGRATED--2.9% Atlantic Richfield Co.
13,500 $ 1,721,250
- - -------------------------------------------------------------------------------------------------------
Enterprise Oil PLC 90,000
768,254
- - -------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 12,000
631,500
- - -------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 6,300
983,588
- - -------------------------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 63,000
925,397
- - -------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR 17,800
696,425
- - -------------------------------------------------------------------------------------------------------
Unocal Corp. 50,000 1,800,000
- - -------------------------------------------------------------------------------------------------------
YPF Sociedad Anonima, Cl. D, ADR 35,000
800,625
-------------
8,327,039
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FINANCIAL--8.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BANKS--5.4% Akbank T.A.S. 1,995,500
204,215
- - -------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 81,675
710,663
- - -------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New)(10) 90,000
7,211,250
- - -------------------------------------------------------------------------------------------------------
Citicorp(10) 9,900 897,188
- - -------------------------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 22,500
1,060,634
- - -------------------------------------------------------------------------------------------------------
NationsBank Corp.(10) 65,200
5,664,250
-------------
15,748,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVERSIFIED
FINANCIAL--1.0% American Express Co.
29,000 1,341,250
- - -------------------------------------------------------------------------------------------------------
Dean Witter, Discover & Co. 14,000
770,000
- - -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 8,600
841,725
-------------
2,952,975
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INSURANCE--2.0% ACE Ltd. 20,000
1,057,500
- - -------------------------------------------------------------------------------------------------------
American International Group, Inc.(10) 8,100
816,075
- - -------------------------------------------------------------------------------------------------------
American Re Corp.(10) 36,000
2,286,000
- - -------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 27,000
747,206
- - -------------------------------------------------------------------------------------------------------
UNUM Corp. 12,000
769,500
-------------
5,676,281
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL--4.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRICAL
EQUIPMENT--0.4% General Electric Co. 13,400
1,219,400
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
INDUSTRIAL
MATERIALS--1.2% Owens Corning 54,000
1,991,250
- - -------------------------------------------------------------------------------------------------------
Rubbermaid, Inc. 25,300
619,850
- - -------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.(9) 23,500
1,010,500
-------------
3,621,600
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
MANUFACTURING--1.8% AGCO Corp.
32,400 826,200
- - -------------------------------------------------------------------------------------------------------
Mannesmann AG 3,500
1,312,100
- - -------------------------------------------------------------------------------------------------------
Pacific Dunlop Ltd. 333,000
690,320
- - -------------------------------------------------------------------------------------------------------
Tenneco, Inc. 38,000 1,904,750
- - -------------------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 42,600
479,250
-------------
5,212,620
</TABLE>
11 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
TRANSPORTATION--1.4% Burlington Northern Santa Fe Corp.
24,500 $2,067,188
- - -------------------------------------------------------------------------------------------------------
Canadian National Railway Co. 27,000
554,949
- - -------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA 58,200
909,375
- - -------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 25,650
400,781
-------------
3,932,293
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TECHNOLOGY--11.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
AEROSPACE/DEFENSE--0.3% Rockwell International Corp.
15,000 845,625
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPUTER HARDWARE--1.5% Digital Equipment Corp.(9)(10)
17,000 607,750
- - -------------------------------------------------------------------------------------------------------
International Business Machines Corp. 12,300
1,531,350
- - -------------------------------------------------------------------------------------------------------
Moore Corp. Ltd. 40,000
735,000
- - -------------------------------------------------------------------------------------------------------
Xerox Corp.(10) 30,000
1,608,750
-------------
4,482,850
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPUTER SOFTWARE--4.1% America Online, Inc.(9)
23,600 840,750
- - -------------------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR(9) 50,000
962,500
- - -------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.(10) 54,300
3,244,425
- - -------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(9)(10) 38,500
1,438,938
- - -------------------------------------------------------------------------------------------------------
Microsoft Corp.(9)(10) 6,700
883,563
- - -------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 31,500
2,022,222
- - -------------------------------------------------------------------------------------------------------
Novell, Inc.(9) 97,000 1,067,000
- - -------------------------------------------------------------------------------------------------------
Sybase, Inc.(9) 32,000 476,000
- - -------------------------------------------------------------------------------------------------------
Symantec Corp.(9) 90,502
984,209
-------------
11,919,607
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRONICS--3.5% Hewlett-Packard Co.
31,500 1,535,625
- - -------------------------------------------------------------------------------------------------------
Intel Corp.(10) 54,000 5,153,625
- - -------------------------------------------------------------------------------------------------------
Kyocera Corp. 12,000 856,566
- - -------------------------------------------------------------------------------------------------------
LSI Logic Corp.(9) 36,500
848,625
- - -------------------------------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR, A Shares(10) 20,500
907,125
- - -------------------------------------------------------------------------------------------------------
VLSI Technology, Inc.(9) 51,200
832,000
-------------
10,133,566
</TABLE>
12 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
TELECOMMUNICATIONS- Airtouch Communications, Inc.(9)
32,900 $ 908,863
TECHNOLOGY--1.9%
- - -------------------------------------------------------------------------------------------------------
Bay Networks, Inc.(9) 19,180
522,655
- - -------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(9) 13,700
850,256
- - -------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd.(10) 45,000
945,000
- - -------------------------------------------------------------------------------------------------------
MCI Communications Corp. 89,000
2,280,625
-------------
5,507,399
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES--2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES--1.0% Korea Electric Power Corp.
15,800 522,203
- - -------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 42,000
1,123,500
- - -------------------------------------------------------------------------------------------------------
Verbund Oest Electriz 17,100
1,182,642
-------------
2,828,345
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
GAS UTILITIES--0.2% Hong Kong & China Gas Co. Ltd.
374,488 636,817
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES--1.1% BCE, Inc.
30,600 1,308,150
- - -------------------------------------------------------------------------------------------------------
Portugal Telecom SA 10,500
270,107
- - -------------------------------------------------------------------------------------------------------
U S West Communications Group 50,000
1,487,500
-------------
3,065,757
-------------
Total Common Stocks (Cost $103,868,767)
148,691,394
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
PREFERRED STOCKS--0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Alumax, Inc., $4.00 Cv., Series A 6,333
861,288
- - -------------------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A 17,666
925,257
- - -------------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Cum., Series K, Exchangeable Preferred
Stock(4)(6) 734 774,370
-------------
Total Preferred Stocks (Cost $1,973,515)
2,560,915
</TABLE>
<TABLE>
<CAPTION>
UNITS
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Hong Kong & China Gas Wts., Exp. 9/97 57,874
17,587
- - -------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(6)
500 5,000
-------------
Total Rights, Warrants and Certificates (Cost $15,337)
22,587
</TABLE>
13 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
REPURCHASE AGREEMENT--8.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Repurchase agreement with Zion First National Bank,
5.62%, dated 9/30/96, to be repurchased at $24,003,747 on
10/1/96, collateralized by U.S. Treasury Nts., 5.75%--8.875%,
5/15/97--8/15/04, with a value of $24,493,438 (Cost $24,000,000)
$24,000,000 $24,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TOTAL INVESTMENTS, AT VALUE (COST $241,674,276)
100.0% 291,465,285
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LIABILITIES IN EXCESS OF OTHER ASSETS
(0.0) (23,538)
------------- -------------
NET ASSETS 100.0% $
291,441,747
------------- -------------
------------- -------------
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD -- Australian Dollar MXP -- Mexican Peso
CAD -- Canadian Dollar NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
GBP -- British Pound Sterling ZAR -- South African Rand
ITL -- Italian Lira
2. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
3. Represents the current interest rate for a variable rate security.
4. Interest or dividend is paid in kind.
5. Represents the current interest rate for an increasing rate security.
6. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial
Statements.
7. Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated
future date.
8. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act
of 1933, as amended. This security has been determined to be liquid under
guidelines established by the
Board of Trustees. This security amounts to $307,500 or 0.11% of the Fund's
net assets, at September 30,
1996.
9. Non-income producing security.
10. A sufficient amount of securities has been designated to cover outstanding
call options, as follows:
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES EXPIRATION EXERCISE
PREMIUM VALUE
SUBJECT TO CALL DATE PRICE
RECEIVED SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 3,200 1/97 $95 $8,300
$3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International Group, Inc. 1,600 2/97 100
5,752 9,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 7,200 1/97 50 25,175
106,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 4,500 10/96 65 4,927
563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bristol-Myers Squibb Co. 4,400 12/96 95 7,568
18,700
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chase Manhattan Corp. (New) 19,000 3/97 80
73,053 114,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citicorp 2,000 1/97 90 9,440
11,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 55
34,775 87,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 60
50,974 67,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Digital Equipment Corp. 3,400 1/97 45 7,123
4,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ECI Telecommunications Ltd. 9,000 2/97 25 16,604
12,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronic Arts, Inc. 8,400 3/97 30 30,197
87,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gymboree Corp. 6,600 1/97 35 8,877
14,438
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IBP, Inc. 27,000 11/96 25 59,938
10,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Intel Corp. 10,800 1/97 90 33,425
113,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manor Care, Inc. 4,200 4/97 40 5,649
9,713
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Medtronic, Inc. 3,800 2/97 55 12,236
40,850
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Microsoft Corp. 6,700 1/97 125 60,097
97,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NationsBank Corp. 13,000 2/97 90 67,858
47,124
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nokia Corp., Sponsored ADR, A Shares 4,000 4/97 45
10,880 18,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Toys 'R' Us, Inc. 6,400 3/97 35 6,608
3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Xerox Corp. 6,000 1/97 55 12,738
18,750
---------- ----------
$ 552,194 $ 896,088
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Financial Statements.
14 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
ASSETS Investments, at value (cost $241,674,276)--see accompanying statement
$ 291,465,285
- - -------------------------------------------------------------------------------------------------------
Cash 397,482
- - -------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note
5 974
- - -------------------------------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns
2,638,803
Investments sold 679,786
Shares of beneficial interest sold
286,715
- - -------------------------------------------------------------------------------------------------------
Other 19,537
-------------
Total assets 295,488,582
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
LIABILITIES Options written, at value (premiums received $552,194)--
see accompanying statement--Note 6
896,088
- - -------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased
1,918,420
Shares of beneficial interest redeemed
629,197
Trustees' fees 182,123
Distribution and service plan fees
144,390
Shareholder reports 56,678
Transfer and shareholder servicing agent fees
26,623
Other 193,316
-------------
Total liabilities 4,046,835
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSETS $
291,441,747
-------------
-------------
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
COMPOSITION OF Paid-in capital $
225,707,312
NET ASSETS
- - -------------------------------------------------------------------------------------------------------
Undistributed net investment income
615,057
- - -------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions 15,672,173
- - -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
49,447,205
-------------
Net assets $ 291,441,747
-------------
-------------
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSET VALUE Class A Shares:
PER SHARE
- - -------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (based on net assets
of $264,358,580 and 18,756,434 shares of beneficial interest outstanding)
$14.09
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price)
$14.95
- - -------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets
of $5,996,160 and 428,130 shares of beneficial interest outstanding)
$14.01
- - -------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets
of $21,087,007 and 1,503,813 shares of beneficial interest outstanding)
$14.02
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Asset Allocation Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Nine Months Ended September
30, 1996
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C>
INVESTMENT INCOME Interest (net of foreign withholding taxes of $9,260)
$ 9,646,866
- - -------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $77,444)
2,710,998
-------------
Total income 12,357,864
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
EXPENSES Management fees--Note 4
1,544,001
- - -------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 345,838
Class B 26,446
Class C 133,941
- - -------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
263,045
- - -------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1
98,917
- - -------------------------------------------------------------------------------------------------------
Shareholder reports 98,446
- - -------------------------------------------------------------------------------------------------------
Custodian fees and expenses
72,595
- - -------------------------------------------------------------------------------------------------------
Legal and auditing fees 49,590
- - -------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class B 2,428
Class C 4,485
- - -------------------------------------------------------------------------------------------------------
Other 22,415
-------------
Total expenses 2,662,147
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET INVESTMENT INCOME
9,695,717
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
REALIZED AND UNREALIZED Net realized gain on:
GAIN (LOSS) Investments and options written (including premiums on options
exercised) 14,287,148
Closing and expiration of options written
836,046
Foreign currency transactions
421,291
-------------
Net realized gain 15,544,485
- - -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 5,331,900
Translation of assets and liabilities denominated in foreign currencies
(938,617)
-------------
Net change 4,393,283
-------------
Net realized and unrealized gain
19,937,768
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 29,633,485
-------------
-------------
The Fund changed its fiscal year end from December 31 to September 30.
See accompanying Notes to Financial Statements.
</TABLE>
16 Oppenheimer Asset Allocation Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED
ENDED SEPT. 30,
DECEMBER 31,
1996(1) 1995
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C>
OPERATIONS Net investment income $ 9,695,717
$ 10,269,144
- - -------------------------------------------------------------------------------------------------------
Net realized gain 15,544,485
11,752,299
- - -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,393,283
31,347,982
--------------- ---------------
Net increase in net assets resulting from operations 29,633,485
53,369,425
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A (8,029,426)
(9,264,819)
SHAREHOLDERS Class B (114,496)
(14,574)
Class C (478,886) (386,395)
- - -------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (10,313,461)
Class B -- (52,208)
Class C -- (630,243)
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS beneficial interest transactions--Note 2:
Class A (6,428,157)
(18,002,247)
Class B 4,480,009 1,310,712
Class C 4,355,405 5,054,751
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NET ASSETS Total increase 23,417,934
21,070,941
- - -------------------------------------------------------------------------------------------------------
Beginning of period 268,023,813
246,952,872
--------------- ---------------
End of period [including undistributed (overdistributed) net
investment income of $615,057 and $(621,120), respectively] $
291,441,747 $ 268,023,813
--------------- ---------------
--------------- ---------------
1. The Fund changed its fiscal year end from December 31 to September 30.
See accompanying Notes to Financial Statements.
</TABLE>
17 Oppenheimer Asset Allocation Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- - ------------------------------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993 1992
1991(4)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.07 $11.52 $13.05 $11.63
$11.22 $10.19
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Income (loss) from investment operations:
Net investment income (loss) .49 .52 .54 .44 .39
.40
Net realized and unrealized gain (loss) .96 2.08 (.75) 1.43 .44
1.06
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.45 2.60 (.21) 1.87 .83 1.46
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Dividends and distributions to shareholders:
Dividends from net investment income (.43) (.49) (.53) (.44)
(.42) (.43)
Distributions from net realized gain -- (.56) (.79) (.01) --
--
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.43) (1.05) (1.32) (.45) (.42)
(.43)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Net asset value, end of period $14.09 $13.07 $11.52 $13.05
$11.63 $11.22
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TOTAL RETURN, AT NET ASSET VALUE(5) 11.22% 22.79% (1.59)%
16.30% 7.54% 14.67%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $264,359 $251,353 $237,771 $277,914
$266,713 $276,800
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Average net assets (in thousands) $256,765 $249,660 $260,767 $272,303
$269,096 $192,870
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Ratios to average net assets:
Net investment income 4.73%(6) 3.97% 4.10% 3.58%
3.41% 3.78%
Expenses 1.21%(6) 1.15% 1.09% 1.14% 1.17%
1.27%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Portfolio turnover rate(7) 31.7% 28.5% 31.5% 32.7%
60.3% 102.0%
Average brokerage commission rate(8) $0.0336 $0.0350 -- --
- - -- --
18 Oppenheimer Asset Allocation Fund
<PAGE>
<CAPTION>
CLASS B CLASS C
- - ------------------------------------------------------------------------------
NINE MONTHS NINE MONTHS
ENDED PERIOD ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, YEAR
ENDED DECEMBER 31,
1996(2) 1995(3) 1996(2) 1995 1994
1993(1)
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.03 $13.28 $13.01 $11.49
$13.05 $12.86
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Income (loss) from investment operations:
Net investment income (loss) .41 .17 .40 .40 .44
(.97)
Net realized and unrealized gain (loss) .93 .41 .96 2.07 (.77)
1.29
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.34 .58 1.36 2.47 (.33) .32
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.27) (.35) (.39)
(.44) (.12)
Distributions from net realized gain -- (.56) -- (.56) (.79)
(.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.36) (.83) (.35) (.95) (1.23)
(.13)
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Net asset value, end of period $14.01 $13.03 $14.02 $13.01
$11.49 $13.05
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.37% 4.44% 10.55%
21.69% (2.50)% 2.51%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,996 $1,265 $21,087 $15,405
$9,182 $396
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Average net assets (in thousands) $3,546 $ 520 $17,898 $11,827
$5,601 $194
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Ratios to average net assets:
Net investment income 3.69%(6) 2.62%(6) 3.84%(6) 3.08%
3.30% 2.19%(6)
Expenses 2.12%(6) 2.27%(6) 2.07%(6) 1.99%
2.00% 2.50%(6)
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Portfolio turnover rate(7) 31.7% 28.5% 31.7% 28.5%
31.5% 32.7%
Average brokerage commission rate(8) $0.0336 $0.0350 $0.0336 $0.0350
-- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to
December 31, 1993.
2. The Fund changed its fiscal year end from December 31 to September 30.
3. For the period from August 29, 1995 (inception of offering) to
December 31, 1995.
4. Per share amounts calculated based on the weighted average number of shares
outstanding during the year.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1996 were $80,364,625 and $89,523,738, respectively.
8. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
19 Oppenheimer Asset Allocation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Asset Allocation Fund (the Fund) is
ACCOUNTING POLICIES registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management
investment company. On August 15, 1996, the Board of
Trustees elected to change the fiscal year end of the
Fund from December 31 to September 30. Accordingly,
these financial statements include information for
the nine month period from January 1, 1996 to
September 30, 1996. The Fund's investment objective
is to seek high total investment return (current
income and capital appreciation in the value of its
shares). The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent
deferred sales charge. All three classes of shares
have identical rights to earnings, assets and voting
privileges, except that each class has its own
distribution and/or service plan, expenses directly
attributable to a particular class and exclusive
voting rights with respect to matters affecting a
single class. Class B shares will automatically
convert to Class A shares six years after the date of
purchase. The following is a summary of significant
accounting policies consistently followed by the
Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which
such information is regularly reported are valued at
the last sale price of the day or, in the absence of
sales, at values based on the closing bid or the last
sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are
valued using dealer-supplied valuations provided the
Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect
current market value, or are valued under
consistently applied procedures established by the
Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities
having a remaining maturity of 60 days or less are
valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium
or discount. Forward foreign currency exchange
contracts are valued based on the closing prices of
the forward currency contracts rates in the London
foreign exchange markets on a daily basis as provided
by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal
exchange on which the option is traded or, in the
absence of any transactions that day, the value is
based upon the last sale price on the prior trading
date if it is within the spread between the closing
bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
-----------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records
of the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of
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 Statement of Operations.
-----------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the
custodian to take possession, to have legally
segregated in the Federal Reserve Book Entry System
or to have segregated within the custodian's vault,
all securities held as collateral for repurchase
agreements. The market value of the underlying
securities is required to be at least 102% of the
resale price at the time of purchase. If the seller
of the agreement defaults and the value of the
collateral declines, or if the seller enters an
insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
20 Oppenheimer Asset Allocation Fund
<PAGE>
1. SIGNIFICANT Allocation of Income, Expenses, and Gains and Losses.
ACCOUNTING POLICIES Income, expenses (other than those attributable to a
(CONTINUED) specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
-----------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply
with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income or excise tax provision is required. At
September 30, 1996, the Fund had available for
federal income tax purposes an unused capital loss
carryover of approximately $890,000, which expires in
1997 and 1998.
-----------------------------------------------------
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 nine months ended September 30,
1996, a provision of $58,255 was made for the Fund's
projected benefit obligations, and payments of $4,853
were made to retired trustees, resulting in an
accumulated liability of $166,286 at September 30,
1996.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
-----------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net
investment income (loss) and net realized gain (loss)
may differ for financial statement and tax purposes.
The character of the distributions made during the
year from net investment income or net realized gains
may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that
the income or realized gain (loss) was recorded by
the Fund.
During the nine months ended September 30,
1996, the Fund adjusted the classification of
distributions to shareholders to reflect the
differences between financial statement amounts and
distributions determined in accordance with income
tax regulations. Accordingly, during the nine months
ended September 30, 1996, amounts have been
reclassified to reflect an increase in paid-in
capital of $445,208, an increase in undistributed net
investment income of $15,671, and a decrease in
accumulated net realized gain on investments of
$460,879. In addition, to properly reflect foreign
currency gain in the components of capital, $147,597
of foreign exchange gain determined according to U.S.
federal income tax rules has been reclassified from
net realized gain to net investment income.
-----------------------------------------------------
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.
Dividends in kind are recognized as income on the ex-
dividend date, at the current market value of the
underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate
and a market adjustment is made periodically.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of income and
expenses during the reporting period. Actual results
could differ from those estimates.
21 Oppenheimer Asset Allocation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest for each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30, 1996(2) YEAR ENDED
DECEMBER 31, 1995(1)
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES
AMOUNT
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C> <C>
Class A:
Sold 860,353 $ 11,689,114 1,154,810 $
14,750,208
Dividends and distributions reinvested 524,674 7,190,397 1,346,436
17,504,698
Redeemed (1,862,109) (25,307,668) (3,900,352)
(50,257,153)
------------- ------------- ------------- -------------
Net decrease (477,082) $ (6,428,157) (1,399,106) $
(18,002,247)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class B:
Sold 366,656 $ 4,968,484 93,459 $ 1,262,882
Dividends and distributions reinvested 6,864 93,829 4,293
55,836
Redeemed (42,546) (582,304) (596) (8,006)
------------- ------------- ------------- -------------
Net increase 330,974 $ 4,480,009 97,156 $
1,310,712
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class C:
Sold 448,796 $ 6,095,106 556,244 $ 7,139,931
Dividends and distributions reinvested 33,327 455,037 74,748
969,689
Redeemed (162,380) (2,194,738) (245,902)
(3,054,869)
------------- ------------- ------------- -------------
Net increase 319,743 $ 4,355,405 385,090 $
5,054,751
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
1. For the year ended December 31, 1995 for Class A
and Class C shares and for the period from August 29,
1995 (inception of offering) to December 31, 1995 for
Class B shares.
2. The Fund changed its fiscal year end from December
31 to September 30.
- - --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND At September 30, 1996, net unrealized appreciation on
LOSSES ON INVESTMENTS investments and options written of $49,447,115 was
AND OPTIONS WRITTEN composed of gross appreciation of $53,680,163, and
gross depreciation of $4,233,048.
- - --------------------------------------------------------------------------------
4. MANAGEMENT FEES Management fees paid to the Manager are in accordance
AND OTHER TRANSACTIONS with the investment advisory agreement with the Fund
WITH AFFILIATES which provides for a fee of 0.75% of the first $200
million of average annual net assets, 0.72% of the
next $200 million, 0.69% of the next $200 million,
0.66% of the next $200 million, and 0.60% of
aggregate 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 nine months ended September 30, 1996,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $286,317, of which
$100,671 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to
broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $169,693 and $59,436, of
which $6,767 and $1,886, respectively, was paid to an
affiliated broker/dealer. During the nine months
ended September 30, 1996, OFDI received contingent
deferred sales charges of $1,119 and $3,419,
respectively, upon redemption of Class B and Class C
shares as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division
of the Manager, is the transfer and shareholder
servicing agent for the Fund, and for other
registered investment companies. OFS's total costs of
providing such services are allocated ratably to
these companies.
The Fund has adopted a Service Plan for Class
A shares to reimburse OFDI for a portion of its costs
incurred in connection with the personal service and
maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate
that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the
service fee to reimburse brokers, dealers, banks and
other financial institutions quarterly for providing
personal service and maintenance of accounts of their
customers that hold Class A shares. During the nine
months ended September 30, 1996, OFDI paid $34,848 to
an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
22 Oppenheimer Asset Allocation Fund
<PAGE>
- - --------------------------------------------------------------------------------
4. MANAGEMENT FEES The Fund has adopted a compensation type Distribution
AND OTHER TRANSACTIONS and Service Plan for Class B shares to compensate
WITH AFFILIATES OFDI for its services and costs in distributing Class
(CONTINUED) B shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of
0.75% per year on Class B shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers
for providing personal services for accounts that
hold Class B shares. Both fees are computed on the
average annual net assets of Class B shares,
determined as of the close of each regular business
day. If the Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments
of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated.
During the nine months ended September 30, 1996, OFDI
retained $25,989 as compensation for Class B sales
commissions and service fee advances, as well as
financing costs. As of September 30, 1996, OFDI had
incurred unreimbursed expenses of $227,661 for
Class B.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class C shares to
reimburse OFDI for its services and costs in
distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays OFDI an annual asset-
based sales charge of 0.75% per year on Class C
shares. OFDI also receives a service fee of 0.25% per
year to reimburse dealers for providing personal
services for accounts that hold Class C shares. Both
fees are computed on the average annual net assets of
Class C shares, determined as of the close of each
regular business day. If the Plan is terminated by
the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to
OFDI for certain expenses it incurred before the Plan
was terminated. During the nine months ended
September 30, 1996, OFDI paid $6,442 to an affiliated
broker/dealer as reimbursement for Class C personal
service and maintenance expenses and retained $53,420
as reimbursement for Class C sales commissions and
service fee advances, as well as financing costs. As
of September 30, 1996, OFDI had incurred unreimbursed
expenses of $201,723 for Class C.
- - --------------------------------------------------------------------------------
5. FORWARD CONTRACTS A forward foreign currency exchange contract (forward
contract) is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated
rate.
The Fund uses forward contracts to seek to
manage foreign currency risks. They may also be used
to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge
upon the purchase or sale of a security denominated
in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes
in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the
closing prices of the forward currency contract rates
in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The
Fund will realize a gain or loss upon the closing or
settlement of the forward transaction.
Securities held in segregated accounts to
cover net exposure on outstanding forward contracts
are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation
on forward contracts is reported in the Statement of
Assets and Liabilities. Realized gains and losses are
reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and
unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At September 30, 1996, outstanding forward currency
exchange contracts to sell foreign currencies were as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Date Amounts (000s) Sept. 30, 1996 Appreciation
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Italian Lira (ITL) 10/1/96 412,344 ITL $270,914 $974
</TABLE>
23 Oppenheimer Asset Allocation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------------------------
6. OPTION ACTIVITY The Fund may buy and sell put and call options, or
write put and 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.
Options are valued daily based upon the last
sale price on the principal exchange on which the
option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a
gain or loss upon the expiration or closing of the
option transaction. When an option is exercised, the
proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost
of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding
call options are noted in the Statement of
Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and
market value are detailed in a footnote to the
Statement of Investments. Options written are
reported as a liability in the Statement of Assets
and Liabilities. Gains and losses are reported in the
Statement of Operations.
The risk in writing a call option is that the
Fund gives up the opportunity for profit if the
market price of the security increases and the option
is exercised. The risk in writing a put option is
that the Fund may incur a loss if the market price of
the security decreases and the option is exercised.
The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The
Fund also has the additional risk of not being able
to enter into a closing transaction if a liquid
secondary market does not exist.
Written option activity for the nine months ended
September 30, 1996 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS
---------------------------------------------------------------------
NUMBER AMOUNT
OF OPTIONS OF PREMIUMS
---------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1995 3,206 $ 948,975
---------------------------------------------------------------------
Options written 3,997 1,112,991
---------------------------------------------------------------------
Options closed or expired (4,750) (1,234,937)
---------------------------------------------------------------------
Options exercised (725) (274,835)
---------- -----------
Options outstanding at September 30, 1996 1,728 $552,194
---------- -----------
---------- -----------
</TABLE>
7. ILLIQUID AND At September 30, 1996, investments in securities
RESTRICTED SECURITIES included issues that are illiquid or restricted.
Restricted securities are often purchased in private
placement transactions, are not registered under the
Securities Act of 1933, may have contractual
restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair
value. A security may be considered illiquid if it
lacks a readily-available market or if its valuation
has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net
assets (determined at the time of purchase and
reviewed from time to time) in illiquid or restricted
securities. Certain restricted securities, eligible
for resale to qualified institutional investors, are
not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this
limitation at September 30, 1996 was $1,002,636 which
represents 0.34% of the Fund's net assets.
24 Oppenheimer Asset Allocation Fund
<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 September 30, 1996, and
the related statement of operations for the nine month period then ended, the
statements of changes in net assets for the nine month period then ended and the
year ended December 31, 1995, and the financial highlights for the nine month
period ended September 30, 1996 and for each of the years in the five year
period ended December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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
September 30, 1996, 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 September 30, 1996, the results of its
operations for the nine month period then ended, the changes in its net assets
for the nine month period then ended and the year ended December 31, 1995, and
the financial highlights for the nine month period ended September 30, 1996 and
for each of the years in the five year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1996
25 Oppenheimer Asset Allocation Fund
<PAGE>
FEDERAL INCOME TAX INFORMATION (Unaudited)
- - --------------------------------------------------------------------------------
In early 1997, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1996. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends paid by the Fund during the nine month period ended September 30,
1996 which are not designated as capital gain distributions should be multiplied
by 11.36% to arrive at the net amount eligible for the corporate dividend-
received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax adviser for specific guidance.
26 Oppenheimer Asset Allocation Fund
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
- - --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Richard H. Rubinstein, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
- - --------------------------------------------------------------------------------
INVESTMENT ADVISER OppenheimerFunds, Inc.
- - --------------------------------------------------------------------------------
Distributor OppenheimerFunds Distributor, Inc.
- - --------------------------------------------------------------------------------
TRANSFER AND OppenheimerFunds Services
SHAREHOLDER
SERVICING AGENT
- - --------------------------------------------------------------------------------
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
- - --------------------------------------------------------------------------------
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer Asset Allocation Fund. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Asset Allocation Fund. For material information
concerning the Fund, see the Prospectus. Shares
of Oppenheimer funds are not deposits or obligations of
any bank, are not guaranteed by any bank, and are not
insured by the FDIC or any other agency, and involve
investment risks, including possible loss of the
principal amount invested.
27 Oppenheimer Asset Allocation Fund
<PAGE>
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMER FUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0240.001.0996 November 30, 1996
[Photograph]
Customer Service Representative
OppenheimerFunds Services
"HOW MAY I HELP YOU?"
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
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handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- - --------------------------------------------------------------------------------
[Logo] OppenheimerFunds Distributor, Inc. ---------------
P.O. Box 5270 Bulk Rate
Denver, CO 80217-5270 U.S. Postage
PAID
Permit No. 130
Torrington, CT
---------------
<PAGE>
[FRONT COVER]
Oppenheimer Fund
Annual Report June 30, 1996
[Picture of Walk in Park]
"We have
some important
goals, so
our money
needs to
grow solidly
over time."
[LOGO-OPPENHEIMERFUNDS(R)]
<PAGE>
This Fund is for people who want the potential for solid growth
over time from a
highly diversified investment.
How Your Fund Is Managed
Oppenheimer Fund seeks capital appreciation and income consistent
with growth in
capital. It uses a combination of five distinct investment
styles, which can
also help manage risk.
The Fund's managers invest in stocks of established U.S. and
international
companies they believe have excellent potential for growth. They
use a "value"
approach, which emphasizes undervalued companies; a "contrarian"
approach,
which seizes opportunities in out-of-favor industries they
believe to be poised
for rebound; and a "growth" approach, which seeks companies the
managers believe
have above-average growth rates.
The Fund's managers seek balance from international stocks
and income from
high yield stocks and bonds to help cushion the portfolio against
fluctuations
in the U.S. stock market.
Performance
Total return at net asset value for the twelve months ended
6/30/96 was 17.56%
for Class A shares and 16.51% for Class C shares. Cumulative
total return at
net asset value for Class B shares since inception on 11/1/95 was
11.86%.(1)
Your Fund's average annual total returns at maximum offering
price for
Class A shares for the 1-, 5-, and 10-year periods ended 6/30/96
were 10.80%,
12.07% and 8.41%, respectively. For Class B shares, cumulative
total return
since inception on 11/1/95 was 6.86%. For Class C shares, average
annual total
returns for the 1-year period and since inception of the Class on
12/1/93 were
15.51% and 12.79%, respectively.(2)
Outlook
"Despite the volatility we experienced in the first half of 1996,
our long-term
outlook is positive. Whether stocks continue to climb at an
accelerated pace or
experience more normal growth, we believe the Fund, through its
broad
diversification, is well-positioned to respond with competitive
returns and
lower-than-average risk."
Richard Rubinstein,
Portfolio Manager
June 30, 1996
Total returns include change in share price and reinvestment of
dividends and
capital gains distributions. Past performance does not guarantee
future results.
Investment return and principal value of an investment in the
Fund will
fluctuate so that an investor's shares, when redeemed, may be
worth more or less
than the original cost. For more complete information, please
review the
prospectus carefully before you invest.
1. Based on the change in net asset value per share for the
period shown,
without deducting any sales charges. Such performance would have
been lower if
sales charges were taken into account.
2. Class A returns show results of hypothetical investments on
6/30/95, 6/30/91
and 6/30/86, after deducting the current maximum initial sales
charge of 5.75%.
Class A shares were first publicly offered on 4/30/59. Class B
returns show
results of a hypothetical investment on 11/1/95 (inception of
class), after the
deduction of the 5% contingent deferred sales charge. Class C
returns show
results of hypothetical investments on 6/30/95 and 12/1/93
(inception of class),
with the 1% contingent deferred sales charge deducted for the
1-year result. The
Fund's maximum sales charge rate for Class A shares was higher
during a portion
of some of the periods shown, so that actual investment results
would have been
lower. An explanation of the different performance calculations
is in the Fund's
prospectus.
2 Oppenheimer Fund
<PAGE>
[PHOTO-BRIDGET A. MACASKILL]
Bridget A. Macaskill
President
Oppenheimer Fund
Dear Shareholder,
Against all odds, the stock market showed remarkable strength
during the first
five months of 1996. However, in the few months that followed,
the market
experienced significant volatility that resulted in a decline in
the Dow of
about 7 percent.
Many experts said the stock market, having advanced to
record heights in
1995 and void of any real market correction since 1990, was due
for a downturn.
This was, after all, the longest bull market of the post-World
War II era.
Thanks to the 10% rise in blue chip stocks during the first half
of 1996 and the
early success of small stocks, the decline that occurred recently
was somewhat
cushioned. While it's impossible to tell what will happen next,
we are
optimistic that this turn was a correction within a bull market
rather than the
onset of a bear market.
What made the market perform so well during the first part
of the year? It
was another surprise: corporate profits. Between 1992 and 1995,
corporate
profits of U.S. companies advanced at a double-digit rate.
Investors widely
expected this year's profit tallies to be flat compared to 1995.
After all, the
economy had been sluggish--growing at an annual rate of just 2.3%
in the first
quarter of 1996. But corporate America continued to perform.
The reason corporate profits were so strong is that many
U.S. companies
continued to successfully reduce costs. Often when a company
achieves a small
increase in sales, the benefit goes straight to the bottom line.
Indeed, the
U.S. Commerce Department reports indicated that corporate profits
rose 15% for
the four quarters ended March 1996, while the economy grew only
marginally.
Still, profits are not what they were in the early 1990s.
That's why
investors are seeking out companies that can grow earnings
regardless of the
fortunes of the economy. Which is just what many small companies
in such fields
as technology, healthcare and specialty retailing have been
doing, growing
earnings at double-digit--and even triple-digit rates. So it's
not surprising
that the stocks of many of these small fast-growing companies
have been such
strong performers.
The early strength of the stock market is all the more
remarkable when you
consider that during the same period, interest rates moved up
sharply. The yield
on the benchmark 30-year U.S. Treasury bond rose from about 6% in
January to
over 7% today. Interest rates have been rising partly because
investors are
concerned that the economy is growing fast enough to generate
higher inflation.
However, we are watching this very closely, and would become very
cautious
regarding the stock market's performance if inflation were to
flare up.
As always, remember stock investments are generally meant
for long-term
growth objectives, and often involve short-term volatility. So,
it's critical
for investors to keep their focus on long-term goals and to put
near-term
setbacks in proper prospective.
Your portfolio managers discuss the outlook for your Fund in
light of these
broad issues on the following pages. Thank you for your
confidence in
OppenheimerFunds. We look forward to helping you reach your
investment goals in
the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
July 22, 1996
3 Oppenheimer Fund
<PAGE>
[PHOTO-RICHARD RUBINSTEIN and ROBERT DOLL]
[PHOTO-PAUL LAROCCO]
[PHOTO-ROBERT DOLL]
Q + A
Q How did the Fund perform?
An interview with your Fund's managers.
How did the Fund perform over the past year?
The Fund delivered solid results for the period, finishing ahead
of many of the
funds in our peer group.(1) While we benefited from an investment
strategy
designed to work well under a variety of conditions, our success
this period was
due in large part to the continued strength in growth-oriented
domestic stocks.
What are the primary reasons for the Fund's positive performance?
A combination of factors contributed to our performance this
period. First, our
domestic stock holdings, which included large positions in
technology and
healthcare stocks, performed well for us, even as U.S. corporate
earnings
momentum in general began to slow.
Second, our approach--to diversify our investments across
five different
investment styles--has also helped performance. By using this
approach, we
generally won't capture quite as much of the strength of a
prolonged market
rally as a more stylistically focused fund might. However, when
stocks become
more volatile, as they have over the past six months, our
defensive approach
positions us to outperform.(2)
Did any investments negatively impact the Fund?
In general, our foreign stock holdings, while providing positive
results,
failed to meet our expectations. Of course, investing abroad
involves
substantial costs and risks--such as fluctuations in foreign
currency. Over the
near term, however, our philosophy for including foreign
securities in the
portfolio to help limit overall portfolio risk remains intact.
And over the long
term, we are optimistic about their potential to outperform
domestic stocks.
1. Source: Lipper Analytical Services, 6/30/96. Does not take
sales charges into
consideration.
2. The Fund's portfolio is subject to change.
4 Oppenheimer Fund
<PAGE>
[PHOTO-RICHARD RUBINSTEIN]
[PHOTO-BRUCE BARTLETT]
Facing page
Top left: Richard Rubinstein,
Portfolio Manager with Robert
Doll, Executive VP, Director of
Equity Investments
Top right: Paul LaRocco, Member
of Equity Investments Team
Bottom: Robert Doll
This page
Top: Richard Rubinstein
Bottom: Bruce Bartlett, Member
of Equity Investments Team
A We
finished
ahead of
many
of the funds
in our peer
group.
What areas are you currently targeting?
Over the past few months, the combination of slowing U.S.
corporate earnings
momentum, high valuations and an increase in interest rates has
led us to
allocate the Fund's assets more conservatively. We've decreased
the total number
of securities in the portfolio, while at the same time we've
increased, on a
percentage basis, holdings we believe are best positioned for the
future.
Over the period, we continued to focus on growth stocks,
issued by
companies with strong competitive positions and consistent
earnings. We also
recently added to our position in energy stocks, which have been
selling at low
prices relative to cash flows, because we believe they offer
reward potential if
energy prices increase.
Because part of our overall strategy involves a contrarian
approach--looking for opportunities in out-of-favor industries
and companies on
the rebound--we bought retail stocks. Though many consumer retail
companies
have suffered from consumer malaise, a lot have attractive store
economics. As a
result, we think their prospects look good.
On the international side, we increased our positions in
companies having
comparative advantages over U.S. competitors or that sell at
valuation
discounts. In either case, the foreign company may be better
positioned for
long-term profits by offering a comparative advantage. We
identified companies
offering such advantages in Argentina, Turkey, and the Far East,
as well as in
several more-established European markets.
What is your outlook for the Fund?
Despite the increased volatility of the stock market in the first
half of 1996,
our long-term outlook is positive. Whether stocks continue to
climb at an
accelerated pace or experience more normal growth, we believe the
Fund, through
its broad diversification, is well-positioned to respond with
competitive
returns and lower-than-average risk. [solid box]
5 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments June 30, 1996
Face Market Value
Amount See Note 1
<S>
<C> <C>
=================================================================
=================================================================
=
Foreign Government Obligations--1.1%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Argentina (Republic of) Past Due Interest
Bonds, Series L, 6.312%, 3/31/05
(Cost $2,264,894)(1)
$ 3,960,000 $ 3,101,155
=================================================================
=================================================================
=
Convertible Corporate Bonds and Notes--0.6%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
MEDIQ, Inc., 7.50% Exchangeable Sub. Debs.,
7/15/03 (Cost $1,748,461) 1,850,000
1,572,500
Shares
=================================================================
=================================================================
=
Common Stocks--86.5%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Basic Materials--6.3%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Chemicals--3.2%
Agrium, Inc.
30,000 393,281
- - -----------------------------------------------------------------
- - ----------------------------------------------
ARCO Chemical Co.
28,900 1,502,800
- - -----------------------------------------------------------------
- - ----------------------------------------------
Bayer AG, Sponsored ADR
170,000 6,003,058
- - -----------------------------------------------------------------
- - ----------------------------------------------
Georgia Gulf Corp.
22,100 646,425
- - -----------------------------------------------------------------
- - ----------------------------------------------
IMC Global, Inc.
12,400 466,550
------------
9,012,114
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Gold--0.5%
Santa Fe Pacific Gold Corp.
92,800 1,310,800
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Metals--1.3%
Brush Wellman, Inc.
151,400 2,876,600
- - -----------------------------------------------------------------
- - ----------------------------------------------
J&L Specialty Steel, Inc.
54,500 810,687
------------
3,687,287
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Paper--1.3%
Aracruz Celulose SA, Sponsored ADR
165,000 1,567,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
MacMillan Bloedel Ltd.
90,323 1,197,146
- - -----------------------------------------------------------------
- - ----------------------------------------------
MacMillan Bloedel Ltd.
4,900 64,925
- - -----------------------------------------------------------------
- - ----------------------------------------------
Stone Container Corp.
64,800 891,000
------------
3,720,571
=================================================================
=================================================================
=
Consumer Cyclicals--12.4%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Autos & Housing--1.3%
Chromcraft Revington, Inc.(2)
18,500 432,437
- - -----------------------------------------------------------------
- - ----------------------------------------------
Fiat SpA
350,000 1,172,412
- - -----------------------------------------------------------------
- - ----------------------------------------------
General Motors Corp.(3)
26,000 1,361,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
IRSA Inversiones y Representaciones, SA
214,506 730,355
------------
3,696,954
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Leisure & Entertainment--5.6%
AMR Corp.(2)
19,300 1,756,300
- - -----------------------------------------------------------------
- - ----------------------------------------------
Carnival Corp., Cl. A
30,800 889,350
- - -----------------------------------------------------------------
- - ----------------------------------------------
Circus Circus Enterprises, Inc.(2)(3)
31,800 1,303,800
- - -----------------------------------------------------------------
- - ----------------------------------------------
Cracker Barrel Old Country Store, Inc.
90,800 2,201,900
- - -----------------------------------------------------------------
- - ----------------------------------------------
Eastman Kodak Co.(3)
25,500 1,982,625
- - -----------------------------------------------------------------
- - ----------------------------------------------
International Game Technology
57,000 961,875
- - -----------------------------------------------------------------
- - ----------------------------------------------
King World Productions, Inc.(2)(3)
56,500 2,055,187
- - -----------------------------------------------------------------
- - ----------------------------------------------
Mattel, Inc.(3)
76,093 2,178,162
- - -----------------------------------------------------------------
- - ----------------------------------------------
Shimano, Inc.
82,000 1,465,334
- - -----------------------------------------------------------------
- - ----------------------------------------------
U S West Media Group(2)
45,700 834,025
------------
15,628,558
6 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Media--2.6%
Bowne & Co., Inc.
34,000 $ 701,250
- - -----------------------------------------------------------------
- - ----------------------------------------------
Comcast Corp., Cl. A Special
130,000 2,405,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Dow Jones & Co., Inc.
25,200 1,052,100
- - -----------------------------------------------------------------
- - ----------------------------------------------
South China Morning Post Holdings Ltd.
2,400,000 1,643,303
- - -----------------------------------------------------------------
- - ----------------------------------------------
Time Warner, Inc.
40,600 1,593,550
------------
7,395,203
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Retail: General--1.8%
Cone Mills Corp.(2)
243,000 2,733,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
Price/Costco, Inc.(2)
73,100 1,580,787
- - -----------------------------------------------------------------
- - ----------------------------------------------
Wal-Mart Stores, Inc.
32,900 834,837
------------
5,149,374
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Retail: Specialty--1.1%
Gymboree Corp.(2)(3)
40,700 1,241,350
- - -----------------------------------------------------------------
- - ----------------------------------------------
Toys 'R' Us, Inc.(2)
69,200 1,972,200
------------
3,213,550
=================================================================
=================================================================
=
Consumer Non-Cyclicals--17.1%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Beverages--1.2%
Buenos Aires Embotelladora SA, Sponsored ADR
35,000 463,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
Guinness PLC
182,000 1,323,466
- - -----------------------------------------------------------------
- - ----------------------------------------------
Whitman Corp.(3)
63,100 1,522,287
------------
3,309,503
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Food--2.2%
Chiquita Brands International, Inc.
32,249 419,237
- - -----------------------------------------------------------------
- - ----------------------------------------------
Groupe Danone
6,241 944,377
- - -----------------------------------------------------------------
- - ----------------------------------------------
IBP, Inc.(3)
31,500 870,187
- - -----------------------------------------------------------------
- - ----------------------------------------------
Nestle SA, Sponsored ADR
40,000 2,283,400
- - -----------------------------------------------------------------
- - ----------------------------------------------
Sara Lee Corp.(3)
52,700 1,706,163
------------
6,223,364
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Healthcare/Drugs--7.3%
Abbott Laboratories
24,000 1,044,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
American Home Products Corp.
24,000 1,443,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Astra AB Free, Series A
37,250 1,644,834
- - -----------------------------------------------------------------
- - ----------------------------------------------
Bristol-Myers Squibb Co.
48,000 4,320,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Ciba-Geigy AG
2,825 3,441,981
- - -----------------------------------------------------------------
- - ----------------------------------------------
Foundation Health Corp.(2)
23,000 825,125
- - -----------------------------------------------------------------
- - ----------------------------------------------
Genzyme Corp.(2)(3)
31,500 1,582,875
- - -----------------------------------------------------------------
- - ----------------------------------------------
Johnson & Johnson
38,600 1,910,700
- - -----------------------------------------------------------------
- - ----------------------------------------------
Mylan Laboratories, Inc.
50,000 862,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
NBTY, Inc.(2)
204,400 2,056,775
- - -----------------------------------------------------------------
- - ----------------------------------------------
SmithKline Beecham PLC, ADR
22,500 1,223,438
------------
20,355,228
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Healthcare/Supplies &
Services--3.2%
Biomet, Inc.(2)
45,000 646,875
- - -----------------------------------------------------------------
- - ----------------------------------------------
Cardinal Health, Inc.(3)
4,472 322,543
- - -----------------------------------------------------------------
- - ----------------------------------------------
Manor Care, Inc.(3)
30,770 1,211,569
- - -----------------------------------------------------------------
- - ----------------------------------------------
Medtronic, Inc.
20,000 1,120,000
7 Oppenheimer Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Healthcare/Supplies &
Services (continued)
Nellcor Puritan Bennett, Inc.(2)
10,800 $ 523,800
- - -----------------------------------------------------------------
- - ----------------------------------------------
Sofamor Danek Group, Inc.(2)(3)
22,000 610,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
U.S. Healthcare, Inc.(3)
63,500 3,492,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
WellPoint Health Networks, Inc.(2)(3)
34,417 1,075,531
------------
9,003,318
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Household Goods--1.2%
Kimberly-Clark Corp.
13,100 1,011,975
- - -----------------------------------------------------------------
- - ----------------------------------------------
Procter & Gamble Co.(3)
14,000 1,268,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
Wella AG
1,750 1,003,686
------------
3,284,411
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Tobacco--2.0%
Philip Morris Cos., Inc.
54,300 5,647,200
=================================================================
=================================================================
=
Energy--4.9%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Energy Services &
Producers--1.2%
Kerr-McGee Corp.(3)
13,000 791,375
- - -----------------------------------------------------------------
- - ----------------------------------------------
Landmark Graphics Corp.(2)
66,600 1,282,050
- - -----------------------------------------------------------------
- - ----------------------------------------------
Western Atlas, Inc.(2)
20,000 1,165,000
------------
3,238,425
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Oil-Integrated--3.7%
Atlantic Richfield Co.
13,900 1,647,150
- - -----------------------------------------------------------------
- - ----------------------------------------------
Enterprise Oil PLC
118,000 843,403
- - -----------------------------------------------------------------
- - ----------------------------------------------
Royal Dutch Petroleum Co.
9,500 1,460,625
- - -----------------------------------------------------------------
- - ----------------------------------------------
Saga Petroleum AS, Cl. B
82,000 1,110,781
- - -----------------------------------------------------------------
- - ----------------------------------------------
Total SA, Sponsored ADR(3)
52,680 1,955,745
- - -----------------------------------------------------------------
- - ----------------------------------------------
Unocal Corp.
88,000 2,970,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Yukong Ltd., GDR(4)
39,500 258,081
- - -----------------------------------------------------------------
- - ----------------------------------------------
Yukong Ltd., GDR
1,438 12,237
- - -----------------------------------------------------------------
- - ----------------------------------------------
Yukong Ltd., GDR
3,294 28,032
------------
10,286,054
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Financial--10.4%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Banks--6.5%
Akbank T.A.S.
2,661,250 320,662
- - -----------------------------------------------------------------
- - ----------------------------------------------
Banco Frances del Rio de la Plata SA
109,900 1,058,737
- - -----------------------------------------------------------------
- - ----------------------------------------------
Chase Manhattan Corp. (New)(3)
94,600 6,681,125
- - -----------------------------------------------------------------
- - ----------------------------------------------
Citicorp(3)
16,000 1,322,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Deutsche Bank, Sponsored ADR
60,000 2,838,108
- - -----------------------------------------------------------------
- - ----------------------------------------------
NationsBank Corp.
72,200 5,965,525
------------
18,186,157
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Diversified Financial--1.4%
American Express Co.
44,100 1,967,963
- - -----------------------------------------------------------------
- - ----------------------------------------------
Federal Home Loan Mortgage Corp.
9,700 829,350
- - -----------------------------------------------------------------
- - ----------------------------------------------
H & R Block, Inc.(3)
30,600 998,325
------------
3,795,638
8 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Insurance--2.5%
ACE Ltd.
21,600 $ 1,015,200
- - -----------------------------------------------------------------
- - ----------------------------------------------
Aetna Life & Casualty Co.
5,600 400,400
- - -----------------------------------------------------------------
- - ----------------------------------------------
American International Group, Inc.
13,700 1,351,163
- - -----------------------------------------------------------------
- - ----------------------------------------------
American Re Corp.(3)
48,800 2,189,900
- - -----------------------------------------------------------------
- - ----------------------------------------------
Skandia Forsakrings AB
40,000 1,057,950
- - -----------------------------------------------------------------
- - ----------------------------------------------
UNUM Corp.
13,500 840,375
------------
6,854,988
=================================================================
=================================================================
=
Industrial--10.9%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Electrical Equipment--1.2%
General Electric Co.(3)
39,600 3,425,400
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Industrial Materials--2.0%
Insituform Technologies, Cl. A(2)
72,000 558,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Interpool, Inc.
42,500 775,625
- - -----------------------------------------------------------------
- - ----------------------------------------------
Owens Corning
77,000 3,311,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Wolverine Tube, Inc.(2)
25,700 899,500
------------
5,544,125
=================================================================
=================================================================
=
Industrial Services--0.4%
Ecolab, Inc.(3)
35,400 1,168,200
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Manufacturing--3.7%
Citic Pacific Ltd.
214,000 865,344
- - -----------------------------------------------------------------
- - ----------------------------------------------
Harnischfeger Industries, Inc.(3)
21,800 724,850
- - -----------------------------------------------------------------
- - ----------------------------------------------
Hutchison Whampoa Ltd.
132,000 830,488
- - -----------------------------------------------------------------
- - ----------------------------------------------
Mannesmann AG
6,000 2,065,514
- - -----------------------------------------------------------------
- - ----------------------------------------------
Pacific Dunlop Ltd.
476,000 1,071,463
- - -----------------------------------------------------------------
- - ----------------------------------------------
Tenneco, Inc.(3)
75,800 3,875,275
- - -----------------------------------------------------------------
- - ----------------------------------------------
Westinghouse Air Brake Co.
60,200 790,125
------------
10,223,059
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Transportation--3.6%
Airborne Freight Corp.(3)
44,000 1,144,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Burlington Northern Santa Fe Corp.(3)
57,400 4,642,225
- - -----------------------------------------------------------------
- - ----------------------------------------------
Canadian National Railway Co.
38,000 699,828
- - -----------------------------------------------------------------
- - ----------------------------------------------
Consolidated Freightways, Inc.
14,200 299,975
- - -----------------------------------------------------------------
- - ----------------------------------------------
Stolt-Nielsen SA
116,000 2,102,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
Stolt-Nielsen SA, ADR
58,000 1,080,250
------------
9,968,778
=================================================================
=================================================================
=
Technology--21.1%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Aerospace/Defense--0.6%
Rockwell International Corp.(3)
27,300 1,562,925
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Computer Hardware--3.9%
Digital Equipment Corp.(2)
21,000 945,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
EMC Corp.(2)
36,800 685,400
- - -----------------------------------------------------------------
- - ----------------------------------------------
International Business Machines Corp.(3)
17,400 1,722,600
- - -----------------------------------------------------------------
- - ----------------------------------------------
Moore Corp. Ltd.
37,400 705,925
- - -----------------------------------------------------------------
- - ----------------------------------------------
Storage Technology Corp. (New)(2)(3)
11,000 420,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
Sun Microsystems, Inc.(2)(3)
7,000 412,125
- - -----------------------------------------------------------------
- - ----------------------------------------------
Xerox Corp.(3)
111,000 5,938,500
------------
10,830,300
9 Oppenheimer Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Computer Software--6.8%
American Software, Inc.
50,000 $ 231,250
- - -----------------------------------------------------------------
- - ----------------------------------------------
Computer Associates International, Inc.(3)
44,100 3,142,125
- - -----------------------------------------------------------------
- - ----------------------------------------------
Davidson & Associates, Inc.(2)
34,000 1,020,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Electronic Arts, Inc.(2)
48,600 1,300,050
- - -----------------------------------------------------------------
- - ----------------------------------------------
Informix Corp.(2)(3)
52,800 1,188,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Microsoft Corp.(2)
9,800 1,177,225
- - -----------------------------------------------------------------
- - ----------------------------------------------
Nintendo Co. Ltd.
45,000 3,347,876
- - -----------------------------------------------------------------
- - ----------------------------------------------
Novell, Inc.(2)
238,400 3,307,800
- - -----------------------------------------------------------------
- - ----------------------------------------------
Structural Dynamics Research Corp.(2)
67,100 1,476,200
- - -----------------------------------------------------------------
- - ----------------------------------------------
Sybase, Inc.(2)
46,600 1,100,925
- - -----------------------------------------------------------------
- - ----------------------------------------------
Symantec Corp.(2)
137,340 1,716,750
------------
19,008,201
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Electronics--7.2%
Duracell International, Inc.
18,500 797,813
- - -----------------------------------------------------------------
- - ----------------------------------------------
General Motors Corp., Cl. H
20,800 1,250,600
- - -----------------------------------------------------------------
- - ----------------------------------------------
Hewlett-Packard Co.
34,000 3,387,250
- - -----------------------------------------------------------------
- - ----------------------------------------------
Intel Corp.
119,800 8,797,813
- - -----------------------------------------------------------------
- - ----------------------------------------------
Kyocera Corp.
17,000 1,201,205
- - -----------------------------------------------------------------
- - ----------------------------------------------
LSI Logic Corp.(2)(3)
32,000 832,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Nokia Corp., Preference
22,000 814,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Proxima Corp.(2)
70,000 848,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
Samsung Electronics (First New)(2)
79 6,282
- - -----------------------------------------------------------------
- - ----------------------------------------------
Samsung Electronics Co.
265 22,247
- - -----------------------------------------------------------------
- - ----------------------------------------------
Teradyne, Inc.(2)
55,000 948,750
- - -----------------------------------------------------------------
- - ----------------------------------------------
VLSI Technology, Inc.(2)
76,500 1,061,438
------------
19,968,148
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Telecommunications-
Technology--2.6%
Airtouch Communications, Inc.(2)(3)
45,500 1,285,375
- - -----------------------------------------------------------------
- - ----------------------------------------------
Bay Networks, Inc.(2)(3)
26,870 691,903
- - -----------------------------------------------------------------
- - ----------------------------------------------
ECI Telecommunications Ltd.(3)
57,500 1,336,875
- - -----------------------------------------------------------------
- - ----------------------------------------------
Kinnevik Investments AB Free, Series B
31,500 954,190
- - -----------------------------------------------------------------
- - ----------------------------------------------
MCI Communications Corp.
100,000 2,562,500
- - -----------------------------------------------------------------
- - ----------------------------------------------
NetCom Systems AB, B Shares(2)
31,500 356,041
------------
7,186,884
=================================================================
=================================================================
=
Utilities--3.4%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Electric Utilities--1.3%
Korea Electric Power Corp.
20,000 814,622
- - -----------------------------------------------------------------
- - ----------------------------------------------
Public Service Enterprise Group, Inc.
30,000 821,250
- - -----------------------------------------------------------------
- - ----------------------------------------------
Verbund Oest Electriz
25,200 1,923,113
------------
3,558,985
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Gas Utilities--0.7%
Hong Kong & China Gas
591,648 943,976
- - -----------------------------------------------------------------
- - ----------------------------------------------
Southwestern Energy Co.
72,500 1,024,063
------------
1,968,039
10 Oppenheimer Fund
<PAGE>
Market Value
Shares See Note 1
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Telephone Utilities--1.4%
BCE, Inc.
34,000 $ 1,343,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Portugal Telecom SA(2)
15,900 415,321
- - -----------------------------------------------------------------
- - ----------------------------------------------
U S West Communications Group
65,500 2,087,813
------------
3,846,134
------------
Total Common Stocks (Cost $164,928,947)
241,257,875
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Preferred Stocks--1.5%
- - -----------------------------------------------------------------
- - ----------------------------------------------
Alumax, Inc., $4.00 Cv., Series A
6,333 825,665
- - -----------------------------------------------------------------
- - ----------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A
20,666 1,131,463
- - -----------------------------------------------------------------
- - ----------------------------------------------
Delta Air Lines, Inc., $3.50 Cv. Depositary
Shares, Series C 36,300
2,286,900
------------
Total Preferred Stocks (Cost $3,245,783)
4,244,028
Units
=================================================================
=================================================================
=
Rights, Warrants and Certificates--0.0%
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Hong Kong & China Gas Wts., Exp. 9/97 (Cost
$19,691) 74,304
19,439
Face
Amount
=================================================================
=================================================================
=
Repurchase Agreement--10.8%
- - -----------------------------------------------------------------
- - ----------------------------------------------
Repurchase agreement with Canadian Imperial
Bank of Commerce,
5.45%, dated 6/28/96, to be repurchased at
$30,213,716 on 7/1/96,
collateralized by U.S. Treasury Bonds,
9.125%--11.25%, 2/15/15--5/11/18,
with a value of $10,675,333, and U.S.
Treasury Nts., 5.25%--8.50%,
1/11/97--11/15/04, with a value of
$20,174,956 (Cost $30,200,000) $ 30,200,000
30,200,000
- - -----------------------------------------------------------------
- - ----------------------------------------------
Total Investments, at Value (Cost $202,407,776)
100.5% 280,394,997
- - -----------------------------------------------------------------
- - ----------------------------------------------
Liabilities in Excess of Other Assets
(0.5) (1,460,799)
------------ ------------
Net Assets
100.0% $278,934,198
============ ============
</TABLE>
1. Represents the current interest rate for a
variable rate
security.
2. Non-income producing security.
11 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
3. A sufficient amount of liquid assets has
been designated
to cover outstanding written call options, as
follows:
Shares
Expiration Exercise Premium Market Value
Subject
To Call Date Price Received See Note 1
<S> <C>
<C> <C> <C> <C>
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Airborne Freight Corp. 15,000
8/96 $ 30 $ 26,125 $ 3,746
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Airtouch Communications, Inc. 9,000
7/96 34 12,771 563
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
American Re Corp. 10,800
7/96 45 19,925 14,175
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Bay Networks, Inc. 21,000
9/96 35 91,242 14,438
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Burlington Northern Santa Fe Corp. 11,200
7/96 85 43,063 7,000
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Cardinal Health, Inc. 11,000
7/96 18 17,544 129,250
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Chase Manhattan Corp. (New) 18,500
9/96 70 73,443 97,125
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Circus Circus Enterprises, Inc. 6,200
9/96 33 19,188 58,900
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Citicorp 3,200
7/96 75 10,704 24,400
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Computer Associates International, Inc. 8,800
7/96 50 35,551 8,800
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Eastman Kodak Co. 5,000
7/96 75 20,474 18,750
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
ECI Telecommunications Ltd. 15,200
8/96 30 26,143 3,800
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Ecolab, Inc. 5,000
7/96 35 5,850 1,563
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
General Electric Co. 8,000
9/96 80 24,759 64,000
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
General Motors Corp. 4,000
9/96 65 15,379 7,500
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Genzyme Corp. 5,400
7/96 80 27,679 338
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Gymboree Corp. 9,000
7/96 20 13,230 97,875
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
H & R Block, Inc. 12,000
7/96 40 24,635 750
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Harnischfeger Industries, Inc. 14,600
8/96 35 67,335 12,775
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Harnischfeger Industries, Inc. 7,200
8/96 40 7,884 1,800
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
IBP, Inc. 31,500
11/96 25 69,928 110,250
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Informix Corp. 29,000
8/96 35 129,626 3,625
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
International Business Machines Corp. 2,800
7/96 120 13,216 350
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Kerr-McGee Corp. 2,600
7/96 70 2,684 650
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
King World Productions, Inc. 16,000
8/96 45 27,519 4,000
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
LSI Logic Corp. 8,000
7/96 35 25,759 1,000
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
LSI Logic Corp. 8,000
7/96 45 20,259 500
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Manor Care, Inc. 6,000
7/96 45 5,820 750
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Mattel, Inc. 15,000
7/96 28 20,414 23,438
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Procter & Gamble Co. 2,800
7/96 95 5,341 1,050
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Rockwell International Corp. 5,400
7/96 65 14,013 675
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Sara Lee Corp. 12,200
7/96 35 16,408 763
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Sofamor Danek Group, Inc. 12,000
9/96 30 55,138 33,750
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Storage Technology Corp. (New) 11,000
9/96 23 50,545 177,375
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Sun Microsystems, Inc. 7,000
7/96 48 56,331 84,000
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Tenneco, Inc. 15,000
8/96 60 22,049 2,813
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Total SA, Sponsored ADR 11,000
8/96 40 10,670 6,188
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
U.S. Healthcare, Inc. 15,000
7/96 55 20,174 9,375
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Wellpoint Health Networks, Inc. 10,200
7/96 30 10,383 2,550
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Whitman Corp. 15,000
9/96 25 14,550 11,250
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - -
Xerox Corp. 22,200
7/96 50 60,827 88,800
---------- ------------
$1,234,581 $ 1,130,700
========== ============
</TABLE>
4. Represents a security sold under Rule
144A, which is
exempt from registration under the Securities
Act of 1933,
as amended. This security has been determined
to be liquid
under guidelines established by the Board of
Trustees. These
securities amount to $258,081 or 0.09% of the
Fund's net
assets, at June 30, 1996.
See accompanying Notes to Financial Statements.
12 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities June
30, 1996
<S>
<C>
=================================================================
=================================================================
=
Assets Investments, at value (including repurchase
agreement of $30,200,000)
(cost $202,407,776)--see accompanying
statement
$280,394,997
- - -----------------------------------------------------------------
- - ----------------------------------------------
Cash
101,788
- - -----------------------------------------------------------------
- - ----------------------------------------------
Receivables:
Interest and dividends
595,026
Shares of beneficial interest sold
108,283
- - -----------------------------------------------------------------
- - ----------------------------------------------
Other
66,034
------------
Total assets
281,266,128
=================================================================
=================================================================
=
Liabilities Options written, at value (premiums received
$1,234,581)--
see accompanying statement--Note 5
1,130,700
- - -----------------------------------------------------------------
- - ----------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed
426,981
Investments purchased
350,990
Trustees' fees
118,521
Distribution and service plan fees
91,662
Transfer and shareholder servicing agent fees
66,305
Shareholder reports
60,356
Other
86,415
------------
Total liabilities
2,331,930
=================================================================
=================================================================
=
Net Assets
$278,934,198
============
=================================================================
=================================================================
=
Composition of Paid-in capital
$178,389,656
Net Assets
- - -----------------------------------------------------------------
- - ----------------------------------------------
Undistributed net investment income
4,179,246
- - -----------------------------------------------------------------
- - ----------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions
18,274,717
- - -----------------------------------------------------------------
- - ----------------------------------------------
Net unrealized appreciation on investments
and translation of assets and
liabilities denominated in foreign currencies
78,090,579
------------
Net assets
$278,934,198
============
=================================================================
=================================================================
=
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per
share (based on net assets of
$273,193,978 and 22,495,412 shares of
beneficial interest outstanding) $
12.14
Maximum offering price per share (net asset
value plus sales charge of
5.75% of offering price)
$ 12.88
- - -----------------------------------------------------------------
- - ----------------------------------------------
Class B Shares:
Net asset value, redemption price and
offering price per share (based on
net assets of $1,654,505 and 137,088 shares
of beneficial interest outstanding) $
12.07
- - -----------------------------------------------------------------
- - ----------------------------------------------
Class C Shares:
Net asset value, redemption price and
offering price per share (based
on net assets of $4,085,715 and 342,672
shares of beneficial interest outstanding) $
11.92
</TABLE>
See accompanying Notes to Financial
Statements.
13 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations For the Year Ended
June 30, 1996
<S>
<C>
=================================================================
=================================================================
=
Investment Income Dividends (net of foreign withholding taxes
of $112,278) $
5,887,471
- - -----------------------------------------------------------------
- - ----------------------------------------------
Interest
1,929,027
------------
Total income
7,816,498
=================================================================
=================================================================
=
Expenses Management fees--Note 4
2,036,339
- - -----------------------------------------------------------------
- - ----------------------------------------------
Transfer and shareholder servicing agent
fees--Note 4
616,198
- - -----------------------------------------------------------------
- - ----------------------------------------------
Distribution and service plan fees--Note 4:
Class A
350,307
Class B
4,128
Class C
34,894
- - -----------------------------------------------------------------
- - ----------------------------------------------
Shareholder reports
108,816
- - -----------------------------------------------------------------
- - ----------------------------------------------
Trustees' fees and expenses--Note 1
91,485
- - -----------------------------------------------------------------
- - ----------------------------------------------
Custodian fees and expenses
85,190
- - -----------------------------------------------------------------
- - ----------------------------------------------
Legal and auditing fees
71,929
- - -----------------------------------------------------------------
- - ----------------------------------------------
Registration and filing fees:
Class A
334
Class B
561
Class C
496
- - -----------------------------------------------------------------
- - ----------------------------------------------
Other
98,175
------------
Total expenses
3,498,852
=================================================================
=================================================================
=
Net Investment Income
4,317,646
=================================================================
=================================================================
=
Realized and Net realized gain on:
Unrealized Investments (including premiums on options
exercised)
21,639,931
Gain (Loss) Foreign currency transactions
309,497
Closing and expiration of options
written--Note 5
845,454
------------
Net realized gain
22,794,882
- - -----------------------------------------------------------------
- - ----------------------------------------------
Net change in unrealized appreciation or
depreciation on:
Investments
18,834,911
Translation of assets and liabilities
denominated in foreign currencies
(1,955,886)
------------
Net change
16,879,025
------------
Net realized and unrealized gain
39,673,907
=================================================================
=================================================================
=
Net Increase in Net Assets Resulting From Operations
$ 43,991,553
============
See accompanying Notes to Financial
Statements
</TABLE>
14 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended June 30,
1996 1995
<S>
<C> <C>
=================================================================
=================================================================
=
Operations Net investment income
$ 4,317,646 $ 2,806,853
- - -----------------------------------------------------------------
- - ----------------------------------------------
Net realized gain
22,794,882 19,743,628
- - -----------------------------------------------------------------
- - ----------------------------------------------
Net change in unrealized appreciation or
depreciation 16,879,025
23,440,270
------------- -------------
Net increase in net assets resulting from
operations 43,991,553
45,990,751
=================================================================
=================================================================
=
Dividends and Dividends from net investment income:
Distributions to Class A
(2,763,277) (498,859)
Shareholders Class B
(1,333) --
Class C
(19,415) --
- - -----------------------------------------------------------------
- - ----------------------------------------------
Distributions from net realized gain:
Class A
(20,559,886) (24,601,920)
Class B
(10,043) --
Class C
(287,511) (100,620)
=================================================================
=================================================================
=
Beneficial Net increase (decrease) in net assets
resulting from
Interest beneficial interest transactions--Note 2:
Transactions Class A
(17,324,834) 12,428,700
Class B
1,639,742 --
Class C
1,733,727 1,742,306
=================================================================
=================================================================
=
Net Assets Total increase
6,398,723 34,960,358
- - -----------------------------------------------------------------
- - ----------------------------------------------
Beginning of period
272,535,475 237,575,117
------------- -------------
End of period (including undistributed net
investment income
of $4,179,246 and $3,477,408, respectively)
$ 278,934,198 $ 272,535,475
============= =============
</TABLE>
See accompanying Notes to Financial
Statements
15 Oppenheimer Fund
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
- - ----------------------------------------------------------------
Year Ended June 30,
1996 1995
1994 1993 1992
<S> <C> <C>
<C> <C> <C>
=================================================================
====================================================
Per Share Operating Data:
Net asset value, beginning of period $ 11.34 $
10.55 $ 10.41 $ 9.72 $ 9.31
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Income (loss) from investment operations:
Net investment income .20
.31 .07 .11 .16
Net realized and unrealized
gain (loss) 1.69
1.58 .55 1.15 .84
--------
- - -------- -------- -------- --------
Total income (loss) from investment
operations 1.89
1.89 .62 1.26 1.00
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13)
(.02) (.03) (.10) (.32)
Distributions from net realized gain (.96)
(1.08) (.45) (.47) (.27)
--------
- - -------- -------- -------- --------
Total dividends and distributions
to shareholders (1.09)
(1.10) (.48) (.57) (.59)
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Net asset value, end of period $ 12.14 $
11.34 $ 10.55 $ 10.41 $ 9.72
========
======== ======== ======== ========
=================================================================
====================================================
Total Return, at Net Asset Value(3) 17.56%
19.60% 5.84% 13.33% 11.22%
=================================================================
====================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $273,194
$270,381 $237,281 $216,180 $209,495
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Average net assets (in thousands) $270,211
$254,011 $229,976 $212,660 $221,369
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Ratios to average net assets:
Net investment income 1.59%
1.10% 0.69% 1.05% 1.71%
Expenses 1.26%
1.29% 1.16% 1.10% 1.09%
- - -----------------------------------------------------------------
- - ----------------------------------------------------
Portfolio turnover rate(5) 29.7%
34.1% 41.6% 35.6% 58.2%
Average brokerage commission rate(6) $ 0.0324
- - -- -- -- --
<CAPTION>
Class B
Class C
-------
- - ------------------------------------
Period
Ended
June 30,
Year Ended June 30,
1996(2) 1996
1995 1994(1)
<S> <C> <C>
<C> <C>
=================================================================
================================
Per Share Operating Data:
Net asset value, beginning of period $ 11.85 $
11.19 $ 10.49 $ 11.08
- - -----------------------------------------------------------------
- - --------------------------------
Income (loss) from investment operations:
Net investment income .14
.07 .03 .02
Net realized and unrealized
gain (loss) 1.17
1.69 1.75 (.14)
--------
- - -------- -------- --------
Total income (loss) from investment
operations 1.31
1.76 1.78 (.12)
- - -----------------------------------------------------------------
- - --------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13)
(.07) -- (.02)
Distributions from net realized gain (.96)
(.96) (1.08) (.45)
--------
- - -------- -------- --------
Total dividends and distributions
to shareholders (1.09)
(1.03) (1.08) (.47)
- - -----------------------------------------------------------------
- - --------------------------------
Net asset value, end of period $ 12.07 $
11.92 $ 11.19 $ 10.49
========
======== ======== ========
=================================================================
================================
Total Return, at Net Asset Value(3) 11.86%
16.51% 18.57% (1.24)%
=================================================================
================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 1,655 $
4,086 $ 2,154 $ 294
- - -----------------------------------------------------------------
- - --------------------------------
Average net assets (in thousands) $ 649 $
3,491 $ 1,100 $ 108
- - -----------------------------------------------------------------
- - --------------------------------
Ratios to average net assets:
Net investment income 0.74%(4)
0.75% 0.48% 0.05%(4)
Expenses 2.13%(4)
2.15% 2.20% 2.44%(4)
- - -----------------------------------------------------------------
- - --------------------------------
Portfolio turnover rate(5) 29.7%
29.7% 34.1% 41.6%
Average brokerage commission rate(6) $ 0.0324 $
0.0324 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering)
to June 30,
1994.
2. For the period from November 1, 1995 (inception of offering)
to June 30,
1996.
3. Assumes a hypothetical initial investment on the business day
before the
first day of the fiscal period (or inception of offering), with
all dividends
and distributions reinvested in additional shares on the
reinvestment date, and
redemption at the net asset value calculated on the last business
day of the
fiscal period. Sales charges are not reflected in the total
returns. Total
returns are not annualized for periods of less than one full
year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a
period,
divided by the monthly average of the market value of portfolio
securities owned
during the period. Securities with a maturity or expiration date
at the time of
acquisition of one year or less are excluded from the
calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the period
ended June 30, 1996 were $74,869,135 and $104,723,299,
respectively.
6. Total brokerage commissions paid on applicable purchases and
sales of
portfolio securities for the period divided by the total number
of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
16 Oppenheimer Fund
<PAGE>
Notes to Financial Statements
- - -----------------------------------------------------------------
- - ---------------
1. Significant Accounting Policies
Oppenheimer Fund (the Fund) is registered under the Investment
Company Act of
1940, as amended, as a diversified, open-end management
investment company. The
Fund's investment objective is to seek capital appreciation
through investment
in common stocks that offer growth potential. The Fund's
investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A,
Class B and Class
C shares. Class A shares are sold with a front-end sales charge.
Class B and
Class C shares may be subject to a contingent deferred sales
charge. All classes
of shares have identical rights to earnings, assets and voting
privileges,
except that each class has its own distribution and/or service
plan, expenses
directly attributable to a particular class and exclusive voting
rights with
respect to matters affecting a single class. The following is a
summary of
significant accounting policies consistently followed by the
Fund.
- - -----------------------------------------------------------------
- - ---------------
Investment Valuation. Portfolio securities are valued at the
close of the New
York Stock Exchange on each trading day. Listed and unlisted
securities for
which such information is regularly reported are valued at the
last sale price
of the day or, in the absence of sales, at values based on the
closing bid or
asked price or the last sale price on the prior trading day.
Long-term and
short-term "non-money market" debt securities are valued by a
portfolio pricing
service approved by the Board of Trustees. Such securities which
cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that
the firm
rendering the quotes is reliable and that the quotes reflect
current market
value, or are valued under consistently applied procedures
established by the
Board of Trustees to determine fair value in good faith.
Short-term "money
market type" debt securities having a remaining maturity of 60
days or less are
valued at cost (or last determined market value) adjusted for
amortization to
maturity of any premium or discount. Forward foreign currency
exchange contracts
are valued based on the closing prices of the forward currency
contract rates in
the London foreign exchange markets on a daily basis as provided
by a reliable
bank or dealer. Options are valued based upon the last sale price
on the
principal exchange on which the option is traded or, in the
absence of any
transactions that day, the value is based upon the last sale
price on the prior
trading date if it is within the spread between the closing bid
and asked
prices. If the last sale price is outside the spread, the closing
bid 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 rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates is
separately
identified from the fluctuations arising from changes in market
values of
securities held and reported with all other foreign currency
gains and losses in
the Fund's Statement of Operations.
- - -----------------------------------------------------------------
- - ---------------
Repurchase Agreements. The Fund requires the custodian to take
possession, to
have legally segregated in the Federal Reserve Book Entry System
or to have
segregated within the custodian's vault, all securities held as
collateral for
repurchase agreements. The market value of the underlying
securities is required
to be at least 102% of the resale price at the time of purchase.
If the seller
of the agreement defaults and the value of the collateral
declines, or if the
seller enters an insolvency proceeding, realization of the value
of the
collateral by the Fund may be delayed or limited.
- - -----------------------------------------------------------------
- - ---------------
Allocation of Income, Expenses, and Gains and Losses. Income,
expenses (other
than those attributable to a specific class) and gains and losses
are allocated
daily to each class of shares based upon the relative proportion
of net assets
represented by such class. Operating expenses directly
attributable to a
specific class are charged against the operations of that class.
- - -----------------------------------------------------------------
- - ---------------
Federal Taxes. The Fund intends to continue to comply with
provisions of the
Internal Revenue Code applicable to regulated investment
companies and to
distribute all of its taxable income, including any net realized
gain on
investments not offset by loss carryovers, to shareholders.
Therefore, no
federal income or excise tax provision is required.
- - -----------------------------------------------------------------
- - ---------------
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
June 30, 1996, a provision of $41,657 was made for the Fund's
projected benefit
obligations and payments of $2,831 were made to retired trustees,
resulting in
an accumulated liability of $102,810 at June 30, 1996.
17 Oppenheimer Fund
<PAGE>
Notes to Financial Statements (Continued)
- - -----------------------------------------------------------------
- - ---------------
1. Significant
Accounting
Policies
(continued)
Distributions to Shareholders. Dividends and distributions to
shareholders are
reported on the ex-dividend date.
- - -----------------------------------------------------------------
- - ---------------
Classification of Distributions to Shareholders. Net investment
income (loss)
and net realized gain (loss) may differ for financial statement
and tax purposes
primarily because of the recognition of certain foreign currency
gains (losses)
as ordinary income (loss) for tax purposes. The character of the
distributions
made during the year from net investment income or net realized
gains may differ
from their ultimate characterization for federal income tax
purposes. Also, due
to timing of dividend distributions, the fiscal year in which
amounts are
distributed may differ from the year that the income or realized
gain (loss) was
recorded by the Fund.
During the year ended June 30, 1996, the Fund changed the
classification of
distributions to shareholders to better disclose the differences
between
financial statement amounts and distributions determined in
accordance with
income tax regulations. Accordingly, during the year ended June
30, 1996,
amounts have been classified to reflect a decrease in paid in
capital of
$770,135, a decrease in undistributed net investment income of
$831,783, and an
increase in accumulated net realized gain on investments of
$1,601,918.
- - -----------------------------------------------------------------
- - ---------------
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 unrealized
appreciation and
depreciation are determined on an identified cost basis, which is
the same basis
used for federal income tax purposes.
The preparation of financial statements in conformity with
generally
accepted accounting principles requires management to make
estimates and
assumptions that affect the reported amounts of assets and
liabilities and
disclosure of contingent assets and liabilities at the date of
the financial
statements and the reported amounts of income and expenses during
the reporting
period. Actual results could differ from those estimates.
- - -----------------------------------------------------------------
- - ---------------
2. Shares of
Beneficial
Interest
The Fund has authorized an unlimited number of no par value
shares of beneficial
interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year
Ended June 30, 1996(1) Year Ended June 30, 1995
- - ------------------------------
- - -------------------------------
Shares Amount Shares
Amount
<S> <C>
<C> <C> <C>
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - --
Class A:
Sold
2,083,446 $ 24,678,546 6,673,759 $
71,435,301
Dividends and distributions reinvested
1,924,123 21,357,698 2,364,103
23,168,217
Redeemed
(5,349,170) (63,361,078) (7,685,964)
(82,174,818)
- - ---------- ------------ ---------
- - ------------
Net increase (decrease)
(1,341,601) $(17,324,834) 1,351,898 $
12,428,700
========== ============ =========
============
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - --
Class B:
Sold
215,151 $ 2,550,547 -- $
- - --
Dividends and distributions reinvested
1,026 11,365 -- --
Redeemed
(79,090) (922,170) --
- - --
- - ---------- ------------ ---------
- - ------------
Net increase
137,088 $ 1,639,742 -- $
- - --
========== ============ =========
============
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
- - --
Class C:
Sold
238,989 $ 2,774,056 183,982 $
1,948,887
Dividends and distributions reinvested
26,363 288,410 8,876
86,189
Redeemed
(115,207) (1,328,739) (28,381)
(292,770)
- - ---------- ------------ ---------
- - ------------
Net increase
150,145 $ 1,733,727 164,477 $
1,742,306
========== ============ =========
============
</TABLE>
1. For the year ended June 30, 1996 for Class A and Class C
shares, and for
the period from November 1, 1995 (inception of offering) to June
30, 1996 for
Class B shares.
18 Oppenheimer Fund
<PAGE>
- - -----------------------------------------------------------------
- - ---------------
3. Unrealized Gains and
Losses on Investments and
Options Written
At June 30, 1996, net unrealized appreciation on investments and
options written
of $78,091,102 was composed of gross appreciation of $84,234,203,
and gross
depreciation of $6,143,101.
- - -----------------------------------------------------------------
- - ---------------
4. Management Fees and
Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the
investment
advisory agreement with the Fund which provides for a fee of
0.75% on the first
$200 million of average annual net assets with a reduction of
0.03% on each $200
million thereafter to $800 million, and 0.60% 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 June 30, 1996, commissions (sales charges
paid by
investors) on sales of Class A shares totaled $581,891, of which
$146,293 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's
Class B and
Class C shares totaled $51,972 and $21,470, of which $1,625 was
paid to an
affiliated broker/dealer for Class C shares. During the year
ended June 30,
1996, OFDI received contingent deferred sales charges of $2,962
upon redemption
of Class C shares as reimbursement for sales commissions advanced
by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer
and shareholder servicing agent for the Fund, and for other
registered
investment companies. OFS's total costs of providing such
services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI
for a portion of its costs incurred in connection with the
personal service and
maintenance of accounts that hold Class A shares. Reimbursement
is made
quarterly at an annual rate that may not exceed 0.25% of the
average annual net
assets of Class A shares of the Fund. OFDI uses the service fee
to reimburse
brokers, dealers, banks and other financial institutions
quarterly for providing
personal service and maintenance of accounts of their customers
that hold Class
A shares. During the year ended June 30, 1996, OFDI paid $5,013
to an affiliated
broker/dealer as reimbursement for Class A personal service and
maintenance
expenses.
The Fund has adopted a compensation type Distribution and
Service Plan for
Class B shares to compensate OFDI for its services and costs in
distributing
Class B shares and servicing accounts. Under the Plan, the Fund
pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B
shares that are
outstanding for 6 years or less. OFDI also receives a service fee
of 0.25% per
year to compensate dealers for providing personal services for
accounts that
hold Class B shares. Both fees are computed on the average annual
net assets of
Class B shares, determined as of the close of each regular
business day. If the
Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to
continue payments of the asset-based sales charge to OFDI for
certain expenses
it incurred before the Plan was terminated. During the year ended
June 30, 1996,
OFDI retained $4,128 as compensation for Class B sales
commissions and service
fee advances, as well as financing costs. As of June 30, 1996,
OFDI had incurred
unreimbursed expenses of $58,024 for Class B.
The Fund has adopted a reimbursement type Distribution and
Service Plan for
Class C shares to reimburse OFDI for its services and costs in
distributing
Class C shares and servicing accounts. Under the Plan, the Fund
pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C
shares. OFDI also
receives a service fee of 0.25% per year to reimburse dealers for
providing
personal services for accounts that hold Class C shares. Both
fees are computed
on the average annual net assets of Class C shares, determined as
of the close
of each regular business day. If the Plan is terminated by the
Fund, the Board
of Trustees may allow the Fund to continue payments of the
asset-based sales
charge to OFDI for certain expenses it incurred before the Plan
was terminated.
During the year ended June 30, 1996, OFDI retained $21,763 as
reimbursement for
Class C sales commissions and service fee advances, as well as
financing costs.
As of June 30, 1996, OFDI had incurred unreimbursed expenses of
$67,156 for
Class C.
19 Oppenheimer Fund
<PAGE>
Notes to Financial Statements (Continued)
- - -----------------------------------------------------------------
- - ---------------
5. Option Activity
The Fund may buy and sell put and call options, or write put and
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.
Options are valued daily based upon the last sale price on
the principal
exchange on which the option is traded and unrealized
appreciation or
depreciation is recorded. The Fund will realize a gain or loss
upon the
expiration or closing of the option transaction. When an option
is exercised,
the proceeds on sales for a written call option, the purchase
cost for a written
put option, or the cost of the security for a purchased put or
call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are
noted in the
Statement of Investments where applicable. Shares subject to
call, expiration
date, exercise price, premium received and market value are
detailed in a
footnote to the Statement of Investments. Options written are
reported as a
liability in the Statement of Assets and Liabilities. Gains and
losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up
the opportunity
for profit if the market price of the security increases and the
option is
exercised. The risk in writing a put option is that the Fund may
incur a loss if
the market price of the security decreases and the option is
exercised. The risk
in buying an option is that the Fund pays a premium whether or
not the option is
exercised. The Fund also has the additional risk of not being
able to enter into
a closing transaction if a liquid secondary market does not
exist.
Written option activity for the year ended June 30, 1996 was as
follows:
Call
Options
- - ------------------------
Number of
Amount of
Options
Premiums
- - -----------------------------------------------------------------
- - ---------------
Options outstanding at June 30, 1995 5,992
$ 1,266,634
- - -----------------------------------------------------------------
- - ---------------
Options written 9,804
2,642,006
- - -----------------------------------------------------------------
- - ---------------
Options closed or expired (8,036)
(1,868,399)
- - -----------------------------------------------------------------
- - ---------------
Options exercised (3,182)
(805,660)
-----
-----------
Options outstanding at June 30, 1996 4,578
$ 1,234,581
=====
===========
20 Oppenheimer Fund
<PAGE>
Independent Auditors' Report
- - -----------------------------------------------------------------
- - ---------------
The Board of Trustees and Shareholders of Oppenheimer Fund:
We have audited the accompanying statements of investments and
assets and
liabilities of Oppenheimer Fund as of June 30, 1996, 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 five-year period then
ended. 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 June
30, 1996, 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 Fund as of June 30, 1996, 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
five-year period then ended, in conformity with generally
accepted accounting
principles.
KPMG Peat Marwick LLP
Denver, Colorado
July 22, 1996
21 Oppenheimer Fund
<PAGE>
Federal Income Tax Information (Unaudited)
- - -----------------------------------------------------------------
- - ---------------
In early 1997, shareholders will receive information regarding
all dividends and
distributions paid to them by the Fund during calendar year 1996.
Regulations of
the U.S. Treasury Department require the Fund to report this
information to the
Internal Revenue Service.
Distributions of $1.0892, $1.0887 and $1.0254 per share were
paid to Class
A, Class B and Class C shareholders, respectively, on December
27, 1995, of
which, for each class of shares, $.8963 was designated as a
"capital gain
distribution" for federal income tax purposes. Whether received
in stock or
cash, the capital gain distribution should be treated by
shareholders as a gain
from the sale of capital assets held for more than one year
(long-term capital
gains).
Dividends paid by the Fund during the fiscal year ended June
30, 1996 which
are not designated as capital gain distributions should be
multiplied by 44.06%
to arrive at the net amount eligible for the corporate
dividend-received
deduction.
The foregoing information is presented to assist
shareholders in reporting
distributions received from the Fund to the Internal Revenue
Service. Because of
the complexity of the federal regulations which may affect your
individual tax
return and the many variations in state and local tax
regulations, we recommend
that you consult your tax advisor for specific guidance.
22 Oppenheimer Fund
<PAGE>
Oppenheimer Fund
- - -----------------------------------------------------------------
- - ---------------
Officers and Trustees
Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board
of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Richard Rubinstein, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
- - -----------------------------------------------------------------
- - ---------------
Investment Advisor
OppenheimerFunds, Inc.
- - -----------------------------------------------------------------
- - ---------------
Distributor
OppenheimerFunds Distributor, Inc.
- - -----------------------------------------------------------------
- - ---------------
Transfer and Shareholder
Servicing Agent
OppenheimerFunds Services
- - -----------------------------------------------------------------
- - ---------------
Custodian of
Portfolio Securities
The Bank of New York
- - -----------------------------------------------------------------
- - ---------------
Independent Auditors
KPMG Peat Marwick LLP
- - -----------------------------------------------------------------
- - ---------------
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of Oppenheimer Fund.
This report must
be preceded or accompanied by a Prospectus of Oppenheimer Fund.
For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of
any bank, are not
guaranteed by any bank, and are not insured by the FDIC or any
other agency, and
involve investment risks, including possible loss of the
principal amount
invested.
23 Oppenheimer Fund
<PAGE>
[Back cover]
Information
General Information
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PhoneLink
24 hours a day, automated
information and transactions
1-800-533-3310
Telecommunications Device
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OppenheimerFunds
Information Hotline
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0400.001.0696 August 31, 1996
[Picture of Jennifer Leonard]
[Caption] Jennifer Leonard, Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
As an Oppenheimer fund shareholder, you have some special
privileges. Whether
it's automatic investment plans, informative newsletters and
hotlines, or ready
account access, you can benefit from services designed to make
investing simple.
And when you need help, our Customer Service Representatives
are only a
toll-free phone call away. They can provide information about
your account and
handle administrative requests. You can reach them at our General
Information
number.
When you want to make a transaction, you can do it easily by
calling our
toll-free Telephone Transactions number. And, by enrolling in
AccountLink, a
convenient service that "links" your Oppenheimer funds accounts
and your bank
checking or savings account, you can use the Telephone
Transactions number to
make investments.
For added convenience, you can get automated information
with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7
days a week.
PhoneLink gives you access to a variety of fund, account, and
market
information. Of course, you can always speak with a Customer
Service
Representative during the General Information hours shown at the
left.
You can count on us whenever you need assistance. That's why
the
International Customer Service Association, an independent,
nonprofit
organization made up of over 3,200 customer service management
professionals
from around the country, honored the Oppenheimer funds' transfer
agent,
OppenheimerFunds Services, with their Award of Excellence in
1993.
So call us today--we're here to help.
[LOGO-OPPENHEIMERFUNDS(R)]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
- - -----------------------
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
- - -----------------------
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Annual Report September 30, 1996
[PHOTO]
"We want
our money to
work hard,
but we're
concerned
about risk."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
YIELD
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/96:(3)
Class A
4.46%
Class B
3.91%
Class C
3.93%
BEAT THE AVERAGE
Cumulative Total Return for the
1-Year Period Ended 9/30/96:
Oppenheimer Strategic Income
& Growth Fund
Class A (at NAV)(1)
16.53%
Lipper Flexible Portfolio Funds Average for 178 Funds for the 1-Year Period
Ended 9/30/96(4)
12.33%
THIS FUND IS FOR PEOPLE WHO WANT HIGH INCOME WITH THE POTENTIAL FOR
GROWTH,
FROM AN INVESTMENT THAT'S STRATEGICALLY DESIGNED TO LOWER RISK.
HOW YOUR FUND IS MANAGED
Oppenheimer Strategic Income & Growth Fund seeks its objectives by
strategically allocating assets among four sectors: U.S. government issues,
foreign fixed-income securities, higher-yielding, lower-rated corporate bonds
and domestic stocks. Strategic investing gives the Fund's managers the
flexibility to shift assets among three fixed-income sectors to capitalize on
worldwide investment opportunities to seek high income. Investing in stocks can
help the Fund seek its growth objective. Combining strategically managed
fixed-income investments with stock investments may reduce the risk of
concentrating investments in any one sector, such as high yield bonds, which
are subject to greater risk that the issuer will default in principal or
interest payments. And the ability to move assets quickly and decisively among
a wide variety of investments and global financial markets is crucial to good
performance and reduced risk.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 were 16.53%
for Class A shares and 15.69% for Class B shares. Cumulative total return at
net asset value for Class C shares since inception on 10/2/95 was 15.18%.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-year period ended 9/30/96 and since inception on
6/1/92 were 11.00% and 8.51%, respectively. For Class B shares, average annual
total returns for the 1-year period ended 9/30/96 and since inception on
11/30/92 were 10.69% and 8.67%, respectively. For Class C shares, cumulative
total return since inception on 10/2/95 was 14.18%.(2)
OUTLOOK
"Our outlook is very positive. We will continue to monitor interest rates and
worldwide economic growth and adjust the Fund's portfolio as needed in
accordance to shifts we see in these areas."
Robert Doll, David Negri and Art Steinmetz,
Portfolio Managers
September 30, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware that past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost.
1. Based on the change in net asset value per share for the period shown,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
2. Class A returns show results of hypothetical investments on 9/30/95 and
6/1/92 (inception of class), after deducting the current maximum initial sales
charge of 4.75%. Class B returns show results of hypothetical investments on
9/30/95 and 11/30/92 (inception of class), after the deduction of the
applicable contingent deferred sales charge of 5% (1-year) and 2% (since
inception). Class C returns show results of a hypothetical investment on
10/2/95, after the deduction of the 1% contingent deferred sales charge. An
explanation of the different total returns is in the Fund's prospectus.
3. Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 9/30/96, divided by the
maximum offering price for Class A shares at the end of the period, compounded
semiannually and then annualized. Falling net asset values will tend to
artificially raise yields.
4. Source: Lipper Analytical Services, 9/30/96, an independent mutual fund
monitoring service. The average is shown for comparative purposes only.
Oppenheimer Strategic Income & Growth Fund is characterized by Lipper as a
flexible portfolio fund. Lipper performance does not take sales charges into
consideration.
2 Oppenheimer Strategic Income & Growth Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Strategic Income &
Growth Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Strategic Income &
Growth Fund
DEAR SHAREHOLDER,
While it's true that earlier this year was difficult for most bond investors,
mainly due to rising interest rates and concerns about inflation, we remain
confident that the general long-term trend is for moderate economic growth and
low inflation, which should help to stabilize and even lower interest rates
over time. Though we still anticipate that interest rates will fluctuate over
the near term, our outlook for the rest of the year remains positive.
During the first six months of this year, investors were concerned
that economic growth appeared to be accelerating. Unemployment was at a
six-year low, industrial production was up, and even retail sales showed
unexpected strength. In addition, because the stock market was performing so
well, many investors felt more prosperous, and sales of big-ticket items such
as homes and cars increased. While much of this data seems to indicate that
economic growth is picking up, we believe that in today's world, faster
economic growth may not necessarily mean higher inflation. In fact, we believe
that inflation is likely to remain under control for the following three
reasons: the Federal Reserve's conservative monetary policy over the last few
years; the declining federal government deficit; and higher corporate
productivity that has caused unit labor costs to grow more slowly than they
have in the past.
With the yield on today's 30-year Treasuries hovering just below 7%,
bonds clearly offer a significant value. Typically, the yield on a bond is
compared to the current inflation rate, which is now about 3%. This "spread" of
approximately four percentage points between bond yields and inflation is
considered very generous by historical standards. So, even if interest rates
stay where they are, bonds still would offer significant value for today's
investors. If, on the other hand, interest rates were to fall, as we expect
they will, bond values would appreciate.
Finally, the recent swings in the stock market have captured the
attention of many investors who had their assets invested primarily in stocks
and have given new life to the fixed-income market. The more volatile the stock
market is, the more attractive bonds appear in the portfolios of many
investors, particularly those who are nearing retirement. In addition, because
the prices of bonds are lower, we feel they are a good buy. Given the current
market circumstances, diversifying into other asset classes, rather than
relying solely on equities, may make more sense now than ever before.
Your portfolio managers discuss the outlook for your Fund in the light
of these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
- - -------------------------- ------------------------------
James C. Swain Bridget A. Macaskill
October 21, 1996
3 Oppenheimer Strategic Income & Growth Fund
<PAGE> 4
ROBERT DOLL
DAVID NEGRI
ART STEINMETZ
Portfolio Managers
Q + A
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW HAS THE FUND PERFORMED?
The Fund performed very well. By diversifying its assets among U.S. government
issues, foreign fixed-income securities, higher-yielding, lower-rated corporate
bonds and a blend of equity stocks, our aim is to capitalize on worldwide
investment opportunities in order to seek high income, while attempting to
reduce risk.
This strategy has been particularly beneficial during the past year as
gains in our credit-oriented investments outperformed our more interest
rate-sensitive holdings. For example, the Fund's strongest performers were the
emerging market bonds, followed by high yield corporate bonds and our equity
holdings. The gains realized in these areas helped to offset disappointments in
our U.S. government bond holdings, where increases in interest rates caused
mortgages and Treasuries to underperform.
WHAT INVESTMENTS OR MARKET CONDITIONS MADE POSITIVE CONTRIBUTIONS
TO
PERFORMANCE?
We've seen good performance out of some of the higher-yielding foreign
government bonds, particularly those issued by Italy and Australia. These two
countries were able to avoid the general trend toward lower bond prices that
occurred throughout the developed world this past year. Market gains in these
countries represent a very strong rebound from early 1995 when their economies
were experiencing recessions. Likewise, the Latin American economies have
managed to recover from their recent economic slump, producing strong economic
growth, and as a result we've been able to benefit from our investments there.
Of course, investors in high yield bonds are subject to greater risk that the
issuer will default on principal and interest payments. And foreign investments
entail greater risk and expenses, including adverse currency fluctuations. But
over time, we expect the long-term returns will more than compensate for
temporary risks.(1)
WERE THERE ANY AREAS THAT LIMITED PERFORMANCE DURING THE PAST
YEAR?
The rise in interest rates over the past year caused increased volatility in
the bond market and as a result, our mortgage and Treasury bond holdings did
not perform as well as expected. However, we continue to believe that the trend
is for moderate economic growth, both in the U.S. and abroad. In addition, we
have increased our holdings in short-term money market instruments in the local
currencies of several foreign countries. By investing in these short-term
instruments, we are able to earn a higher yield while maintaining the ability
to quickly move out of these investments should interest rate situations
deteriorate.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook is very positive. We will continue to monitor interest rates and
worldwide economic growth and adjust the Fund's portfolio as needed in
accordance with shifts we see in these areas. We feel our strategy of focusing
on yield while seeking lower risk through diversification will allow the Fund
to take advantage of the upcoming market environment.
1. The Fund's portfolio is subject to change.
4 Oppenheimer Strategic Income & Growth Fund
<PAGE> 5
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
=====================================================================
===========================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--18.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
GOVERNMENT AGENCY--15.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
FHLMC/FNMA/SPONSORED--8.2%
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ 59,951 $
60,139
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Federal National Mortgage Assn.:
7.50%, 10/15/26(2) 5,000,000
4,940,650
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Trust 1992-103, Cl. JB, 10.50%, 11/25/20 315,000
351,323
Interest-Only Stripped Mtg.-Backed Security, Trust 257, Cl. 2, 10.955%, 2/1/24(3)
1,712,531 593,766
Series 1994-83, Cl. Z, 7.50%, 6/25/24 378,624
337,801
----------
6,283,679
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
GNMA/GUARANTEED--7.5%
Government National Mortgage Assn.:
6%, 3/20/26 1,437,892 1,434,298
7%, 4/15/26 4,460,633 4,296,705
----------
5,731,003
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
PRIVATE--2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
COMMERCIAL--1.6%
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. F, 7.51%, 2/1/28(4)(5) 97,137
62,289
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 267,639
268,936
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980
259,621
Series 1994-C2, Cl. E, 8%, 4/25/25 449,792
436,721
Series 1994-C2, Cl. G, 8%, 4/25/25 209,655
180,337
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5) 27,688
22,566
----------
1,230,470
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
MULTI-FAMILY--0.5%
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) 400,000
302,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M6, Cl. B4, 7.103%, 6/25/21(4) 68,681
67,157
----------
369,782
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RESIDENTIAL--0.2%
Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26
299,020 174,927
----------
Total Mortgage-Backed Obligations (Cost $13,599,896)
13,789,861
=====================================================================
===========================================================
U.S. GOVERNMENT OBLIGATIONS--0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
U.S. Treasury Nts., 6%, 2/15/26 (Cost $447,860)(6) 500,000
439,844
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
=====================================================================
===========================================================
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS--20.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ARGENTINA--1.6%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(4)(7) $
559,749 $ 510,403
Past Due Interest Bonds, Series L, 6.312%, 3/31/05(4) 834,000
699,517
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Banco de Galicia y Buenos Aires SA Sr. Unsec. Nts., 9.387%, 4/15/99(4)
35,000 35,634
----------
1,245,554
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
AUSTRALIA--2.4%
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD 500,000
453,666
9.50%, 8/15/03 AUD 15,000
13,060
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 615,000
498,166
Gtd. Nts., 8%, 5/14/03 AUD 300,000
240,793
Gtd. Nts., 10.50%, 5/15/03 AUD 90,000
81,482
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Treasury Corp. of Victoria Gtd. Bonds, 10.25%, 11/15/06 AUD
425,000 390,210
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Western Australia Treasury Corp. Gtd. Bonds, 10%, 7/15/05 AUD
190,000 170,279
----------
1,847,656
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BRAZIL--0.9%
Brazil (Federal Republic of) Capitalization Bonds, 8%, 4/15/14
1,001,247 705,567
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Telecomunicacoes Brasileiras SA Medium-Term Nts., 11.30%, 12/9/99(4)
10,000 10,288
----------
715,855
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BULGARIA--0.6%
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24(4) 70,000
35,569
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(8)
755,000 248,442
Interest Arrears Bonds, 6.688%, 7/28/11(4) 325,000
149,500
----------
433,511
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CANADA--2.9%
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD 220,000
204,386
9.75%, 10/1/97 CAD 250,000
193,333
9.75%, 12/1/01 CAD 260,000
219,637
9.75%, 6/1/01(6) CAD 1,335,000
1,119,586
Series A-33, 11.50%, 9/1/00 CAD 140,000
122,410
Series A-76, 9%, 6/1/25 CAD 465,000
392,682
----------
2,252,034
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
DENMARK--0.7%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 1,670,000
312,070
8%, 3/15/06 DKK 1,130,000
206,646
----------
518,716
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
GERMANY--2.1%
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24(6) DEM
2,670,000 1,612,575
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
GREAT BRITAIN--1.4%
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP 355,000
633,054
Debs., 8.50%, 12/7/05 GBP 55,000
91,012
Nts., 12.50%, 11/21/05 GBP 62,000
123,738
Nts., 8%, 6/10/03 GBP 125,000
202,509
----------
1,050,313
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
IRELAND--0.1%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 60,000
110,024
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C>
ITALY--0.4%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
10.50%, 4/1/00ITL 285,000,000 $
201,403
10.50%, 7/15/00ITL 170,000,000
121,241
----------
322,644
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
JAPAN--0.4%
Japan (Government of) Bonds, Series 174, 4.60%, 9/20/04 JPY
27,500,000 279,877
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
MEXICO--0.7%
Banco Nacional de Comercio Exterior SNC:
International Finance BV Gtd. Bonds, 10.758%, 6/23/97(4)(5)
120,000 123,900
International Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06
135,000 141,581
Nts., 7.25%, 2/2/04 75,000 64,687
- - ------------------------------------------------------------------------------------------------------------------
- - ------
United Mexican States Bonds:
10.375%, 1/29/03 DEM 150,000
103,851
16.50%, 9/1/08 GBP 35,000
74,486
----------
508,505
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
NEW ZEALAND--1.3%
New Zealand Government Bonds, 10%, 7/15/97 NZD
1,040,000 733,982
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds:
8%, 2/15/01(5) NZD 165,000
113,525
8%, 3/15/02 NZD 165,000
113,459
----------
960,966
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
PANAMA--0.1%
Panama (Republic of) Interest Reduction Bonds, 3.50%, 7/17/14(8)
130,000 81,738
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
POLAND--1.1%
Poland (Republic of) Treasury Bills, Zero Coupon:
21.464%, 10/16/96(9) PLZ 2,000,000
706,837
21.656%, 10/2/96(9) PLZ 430,000
152,854
----------
859,691
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RUSSIA--0.2%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(2)(4)
260,000 167,294
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
SPAIN--1.2%
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado, 10.15%, 1/31/06 ESP
39,200,000 349,431
Gtd. Bonds, Bonos y Obligacion del Estado, 10.25%, 11/30/98 ESP
25,800,000 212,018
Gtd. Bonds, Bonos y Obligacion del Estado, 10.30%, 6/15/02 ESP
22,500,000 197,305
Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 ESP
17,700,000 157,405
----------
916,159
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
SWEDEN--1.2%
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK 2,200,000
414,114
Series 1033, 10.25%, 5/5/03 SEK 600,000
105,220
Series 1034, 9%, 4/20/09 SEK 1,400,000
233,811
Series 1035, 6%, 2/9/05 SEK 1,300,000
179,414
----------
932,559
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
VENEZUELA--0.7%
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 250,000
207,500
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4)
100,000 84,313
New Money Bonds, Series A, 6.75%, 12/18/05(4) 250,000
208,438
----------
500,251
----------
Total Foreign Government Obligations (Cost $14,828,341)
15,315,922
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE 1
=====================================================================
===========================================================
<S> <C> <C>
LOAN PARTICIPATIONS--1.3%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Colombia (Republic of) 1989-1990 Integrated Loan
Facility Bonds, 6.563%, 7/1/01(4)(5) $ 314,320 $
298,604
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4) 325,000
255,633
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Trinidad & Tobago Loan Participation Agreement,
Tranche A, 1.772%, 9/30/00(4)(5) JPY 44,836,363
358,288
- - ------------------------------------------------------------------------------------------------------------------
- - ------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 6.563%, 9/20/97(4)(5)
66,720 59,256
----------
Total Loan Participations (Cost $969,966)
971,781
=====================================================================
===========================================================
CORPORATE BONDS AND NOTES--17.6%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BASIC INDUSTRY--1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CHEMICALS--0.3%
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 200,000
211,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
METALS/MINING--0.2%
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05
100,000 114,750
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
PAPER--0.9%
Repap New Brunswick, Inc., 8.937% First Priority Sr. Sec. Nts., 7/15/00(4)
200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Riverwood International Corp., 10.25% Sr. Nts., 4/1/06 300,000
303,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02 200,000
210,500
----------
713,500
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CONSUMER RELATED--1.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CONSUMER PRODUCTS--0.1%
Fletcher Challenge Industries Ltd., 10% Cv. Sub. Unsec. Nts., 4/30/05 NZD
70,000 50,290
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HEALTHCARE--0.3%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 190,000
247,475
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HOTEL/GAMING--0.1%
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 100,000
99,250
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
LEISURE--0.2%
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(5)
160,431 167,450
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TEXTILE/APPAREL--1.0%
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.,
36.897%, 10/23/96(9) IDR 1,200,000,000
511,932
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 200,000
217,000
----------
728,932
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ENERGY--0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 10.394%, 11/1/97(9)
400,000 371,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
FINANCIAL SERVICES--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BANKS & THRIFTS--0.2%
Banco Bamerindus do Brasil SA, 10.50% Debs., 6/23/97
25,000 24,687
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99
50,000 46,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(2)(9) THB
2,000,000 77,981
----------
149,168
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
DIVERSIFIED FINANCIAL--0.1%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 50,000
48,875
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
INSURANCE--0.4%
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02(10)
300,000 328,125
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HOUSING RELATED--1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HOMEBUILDERS/
REAL ESTATE--1.0%
Blue Bell Funding, Inc., 11.85% Sec. Extendible Adjustable Rate Nts., 5/1/99
396,000 397,980
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5)
500,000 402,500
----------
800,480
</TABLE>
8 Oppenheimer Strategic Income & Growth Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C>
MANUFACTURING--0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
AUTOMOTIVE--0.2%
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 $ 150,000
$ 146,250
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
MEDIA--3.6%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CABLE TELEVISION--2.1%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(11)
100,316 75,488
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Australis Media Ltd., Units (each unit consists of $1,000
principal amount of 0%/14% sr. sub. disc. nts., 5/15/03 and
one warrant to purchase 57.721 ordinary shares)(11)(12) 200,000
121,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(11)
500,000 383,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Cablevision Systems Corp., 10.50% Sr. Sub. Debs., 5/15/16
250,000 255,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11)
200,000 158,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07
300,000 301,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000
333,264
----------
1,628,502
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
DIVERSIFIED MEDIA--0.9%
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(11)
750,000 682,500
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ENTERTAINMENT/FILM--0.4%
Imax Corp., 7% Sr. Nts., 3/1/01(8) 320,000
313,600
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
PUBLISHING/PRINTING--0.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(11)
250,000 176,250
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
OTHER--1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ENVIRONMENTAL--0.3%
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000
191,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
SERVICES--0.8%
Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(13)
500,000 525,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Protection One Alarm Monitoring, Inc., 6.75% Cv. Sr. Sub. Nts., 9/15/03
110,000 108,144
----------
633,144
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RETAIL--1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
SUPERMARKETS--1.1%
Grand Union Co., 12% Sr. Nts., 9/1/04 198,000
200,722
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(7)
564,400 567,222
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 50,000
44,625
----------
812,569
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TRANSPORTATION--0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
AIR TRANSPORTATION--0.1%
American International Group, Inc., 11.70% Unsec. Unsub. Bonds, 12/4/01 ITL
95,000,000 71,778
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RAILROADS--0.5%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(11) 500,000
378,125
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
UTILITIE--5.8%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ELECTRIC UTILITIES--2.3%
CalEnergy Co., Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04(11)
450,000 460,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11
250,000 258,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16
300,000 317,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD
330,000 245,092
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 431,034
431,573
9.50% Sr. Sec. Nts., 12/28/0813 86,206
86,315
----------
1,799,105
</TABLE>
9 Oppenheimer Strategic Income & Growth Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C>
TELECOMMUNICATIONS--3.5%
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(11) $
200,000 $ 156,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(5)(11) 350,000
282,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.323%, 8/15/00(9) 600,000
382,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(11)
300,000 186,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(11)(13)
400,000 246,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(11) 270,000
168,075
0%/13.50% Sr. Disc. Nts., 9/15/05(11) 100,000
67,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(13) 300,000
314,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------
ORBCOMM Global LP/ORBCOMM Global Capital Corp., 14% Sr. Nts., 8/15/04(13)
155,000 160,037
- - ------------------------------------------------------------------------------------------------------------------
- - ------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(11)
500,000 471,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(11)
400,000 258,000
----------
2,692,612
----------
Total Corporate Bonds and Notes (Cost $13,013,563)
13,555,730
SHARES
=====================================================================
===========================================================
COMMON STOCKS--41.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BASIC INDUSTRY--2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CHEMICALS--2.3%
Morton International, Inc. 24,000
954,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Union Carbide Corp. 18,000
821,250
----------
1,775,250
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CONTAINERS--0.0%
Equitable Bag, Inc.(5)(14) 1,861
4,653
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CONSUMER RELATED--6.4%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
FOOD/BEVERAGES/TOBACCO--3.4%
PepsiCo, Inc. 26,000 734,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Philip Morris Cos., Inc. 11,000
987,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------
UST, Inc. 31,000 918,375
----------
2,640,125
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HEALTHCARE--1.5%
Johnson & Johnson 22,000
1,127,500
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TEXTILE/APPAREL--1.5%
Russell Corp. 36,000 1,161,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
ENERGY--4.9%
Phillips Petroleum Co. 29,000
1,239,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Unocal Corp. 35,000 1,260,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
USX-Marathon Group 57,000
1,232,625
----------
3,732,375
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
FINANCIAL SERVICES--14.9%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
BANKS & THRIFTS--3.2%
BankAmerica Corp. 15,000
1,231,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------
NationsBank Corp. 14,000
1,216,250
----------
2,448,125
</TABLE>
10 Oppenheimer Strategic Income & Growth Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
<S> <C> <C>
DIVERSIFIED FINANCIAL--8.8%
Dean Witter, Discover & Co. 3,000 $
165,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Federal Home Loan Mortgage Corp. 13,000
1,272,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Federal National Mortgage Assn. 27,000
941,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Green Tree Financial Corp. 36,000
1,413,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Merrill Lynch & Co., Inc. 19,000
1,246,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Morgan Stanley Group, Inc. 10,000
497,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Salomon, Inc. 27,000 1,231,875
----------
6,768,250
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
INSURANCE--2.9%
Cigna Corp. 10,000 1,198,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Loews Corp. 13,000 1,005,875
----------
2,204,625
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HOUSING RELATED--1.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
HOMEBUILDERS/REAL ESTATE--1.7%
Capstone Capital Corp. 260 5,460
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Fleetwood Enterprises, Inc. 42,000
1,291,500
----------
1,296,960
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
MANUFACTURING--5.3%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
AEROSPACE/ELECTRONICS/
COMPUTERS--5.1%
Applied Materials, Inc.(14) 3,000
82,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Compaq Computer Corp.(14) 18,000
1,154,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Data General Corp.(14) 110,000
1,540,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
International Business Machines Corp. 9,000
1,120,500
----------
3,897,625
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CAPITAL GOODS--0.2%
Dover Corp. 4,000 191,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
MEDIA--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
CABLE TELEVISION--0.0%
EchoStar Communications Corp., Cl. A(14) 900
24,525
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TRANSPORTATION--5.4%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
AIR TRANSPORTATION--3.8%
AMR Corp.(14) 22,000
1,751,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Delta Air Lines, Inc. 16,000 1,152,000
----------
2,903,750
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
RAILROADS--1.6%
CSX Corp. 24,000 1,212,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
UTILITIES--0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TELECOMMUNICATIONS--0.1%
Celcaribe SA(5)(14) 65,040 94,308
----------
Total Common Stocks (Cost $27,693,470)
31,482,071
=====================================================================
===========================================================
PREFERRED STOCKS--0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
California Federal Bank, 10.625% Non-Cum., Series B 500
55,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------
First Nationwide Bank, 11.50% Non-Cum. 2,000
226,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Prime Retail, Inc., $19.00 Cv., Series B 12,000
240,000
----------
Total Preferred Stocks (Cost $551,813)
521,625
</TABLE>
11 Oppenheimer Strategic Income & Growth Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=====================================================================
===========================================================
<S> <C> <C>
OTHER SECURITIES--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Kaiser Aluminum Corp., 8.255% Cv. Preferred Redeemable
Increased Dividend Equity Securities (Cost $25,344) 2,400
$ 27,000
<CAPTION>
<S> <C>
UNITS
=====================================================================
===========================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
American Telecasting, Inc. Wts., Exp. 6/99 2,000
9,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Comunicacion Celular SA Wts., Exp. 11/03(5) 300
1,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5) 400
4,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 300
--
----------
Total Rights, Warrants and Certificates (Cost $0)
14,500
<CAPTION>
FACE
AMOUNT(1)
=====================================================================
===========================================================
<S> <C>
STRUCTURED INSTRUMENTS--2.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Bayerische Landesbank Girozentrale, New York Branch,
7.15% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97
$70,000 69,454
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) 550,000
543,070
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 100,000
99,400
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 200,000
199,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.486%, 4/28/97(9)CZK
4,600,000 160,735
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Czech Koruna Linked Nts., 11.60%, 12/23/96 70,000
69,165
Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(9)
130,000 126,386
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Salomon Brothers, Inc., Zero Coupon Chilean Peso Indexed
Enhanced Access Nts.:
12.145%, 12/11/96(9) 70,000
68,180
10.853%, 12/18/96(9) 70,000
67,914
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Swiss Bank Corp., New York Branch, 6.60% CD Linked Nts.,
1/30/97 (indexed to the closing Nikkei 225 Index on 1/23/97)NZD
256,720 186,629
- - ------------------------------------------------------------------------------------------------------------------
- - ------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96)
380,000 462,808
----------
Total Structured Instruments (Cost $2,010,133)
2,052,941
<CAPTION>
DATE STRIKE CONTRACTS
=====================================================================
===========================================================
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 $ 102.30 211
1,057
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Swiss Franc Put Opt. 10/96 1.22 CHF 885,245
23,628
----------
Total Put Options Purchased (Cost $12,370)
24,685
</TABLE>
12 Oppenheimer Strategic Income & Growth Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
=====================================================================
===========================================================
<S> <C> <C>
REPURCHASE AGREEMENT--2.7%
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
Repurchase agreement with PaineWebber, Inc., 5.62%, dated 9/30/96,
to be repurchased at $2,100,328 on 10/1/96, collateralized by
U.S. Treasury Bonds, 6.75%, 8/15/26, with a value of $2,067,056 and
U.S. Treasury Nts., 6.125%, 5/15/98, with a value of $77,236 (Cost $2,100,000)
$2,100,000 $ 2,100,000
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
TOTAL INVESTMENTS, AT VALUE (COST $75,252,756)
104.6% 80,295,960
- - ------------------------------------------------------------------------------------------------------------------
- - --------------
LIABILITIES IN EXCESS OF OTHER ASSETS
(4.6) (3,509,389)
---------- -----------
NET ASSETS 100.0%
$76,786,571
==========
===========
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
AUD -- Australian Dollar IDR -- Indonesian Rupiah
CAD -- Canadian Dollar IEP -- Irish Punt
CHF -- Swiss Franc ITL -- Italian Lira
CZK -- Czech Koruna JPY -- Japanese Yen
DEM -- German Deutsche Mark NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
ESP -- Spanish Peseta SEK -- Swedish Krona
GBP -- British Pound Sterling THB -- Thai Baht
2. When-issued security to be delivered and settled after
September 30, 1996.
3. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 8 of
Notes to Financial Statements.
6. A sufficient amount of securities has been designated to
cover outstanding written call options, as follows:
<TABLE>
<CAPTION>
CONTRACTS/FACE EXPIRATION EXERCISE
PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE
RECEIVED SEE NOTE 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 461,100 10/96 1.258 AUD $
3,074 $555
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
Call Option on New Zealand Dollar 191,675 10/96 1.435 NZD
930 1,131
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
Call Option on New Zealand Dollar 163,560 10/96 1.437 NZD
816 1,112
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
Call Option on Swiss Franc 939,130 10/96 1.15 CHF 2,047
94
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 500,000 10/96 $90.438
3,711 1,016
------- -----
$10,578 $3,908
======= ======
</TABLE>
7. Interest or dividend is paid in kind.
8. Represents the current interest rate for an increasing rate security.
9. For zero coupon bonds, the interest rate shown is the
effective yield on the date of purchase.
10. Securities with an aggregate market value of $328,125 are
held in collateralized accounts to cover initial margin requirements on
open futures sales contracts. See Note 6 of Notes to Financial
Statements.
11. Denotes a step bond: a zero coupon bond that converts to a
fixed rate of interest at a designated future date.
12. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the
future. For units which represent debt securities, face amount disclosed
represents total underlying principal.
13. Represents a security sold under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines established
by the Board of Trustees. These securities amount to $1,331,602 or 1.73%
of the Fund's net assets, at September 30, 1996.
14. Non-income producing security.
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
=====================================================================
===========================================================
<S> <C>
ASSETS
Investments, at value (cost $75,252,756)--see accompanying statement
$80,295,960
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Cash 611,472
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
43,919
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Receivables:
Investments sold 1,717,088
Interest, dividends and principal paydowns
926,291
Shares of beneficial interest sold 387,169
Closed forward foreign currency exchange contracts
59,215
Daily variation on futures contracts--Note 6
6,862
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Other 2,864
-----------
Total assets 84,050,840
=====================================================================
===========================================================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
4,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Options written, at value (premiums received $15,908)--
see accompanying statement--Note 7
5,777
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Payables and other liabilities:
Investments purchased (including $5,119,263 purchased on a when-issued basis)--Note 1
6,610,736
Dividends 313,878
Shares of beneficial interest redeemed
115,879
Daily variation on futures contracts--Note 6
1,500
Other 212,099
-----------
Total liabilities 7,264,269
=====================================================================
===========================================================
NET ASSETS $76,786,571
===========
=====================================================================
===========================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $66,681,618
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Overdistributed net investment income
(318,871)
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Accumulated net realized gain on investments and foreign currency transactions
5,349,088
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
5,074,736
-----------
Net assets $76,786,571
===========
=====================================================================
===========================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $46,746,928
and 7,956,397 shares of beneficial interest outstanding)
$5.88
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $6.17
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $28,933,298 and 4,932,725 shares of beneficial interest outstanding)
$5.87
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,106,345 and 188,933 shares of beneficial interest outstanding)
$5.86
See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Strategic Income & Growth Fund
<PAGE> 15
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
=====================================================================
===========================================================
<S> <C>
INVESTMENT INCOME
Interest $4,441,077
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Dividends (net of foreign withholding taxes of $5,550)
457,180
-----------
Total income 4,898,257
=====================================================================
===========================================================
EXPENSES
Management fees--Note 4
513,195
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Distribution and service plan fees--Note 4:
Class A 105,726
Class B 242,309
Class C 3,963
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Transfer and shareholder servicing agent fees--Note 4
128,032
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Shareholder reports 86,699
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Custodian fees and expenses 51,822
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Legal and auditing fees 14,158
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Insurance expenses 3,974
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Registration and filing fees:
Class A 837
Class B 2,469
Class C 393
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Trustees' fees and expenses 3,002
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Other 8,985
-----------
Total expenses 1,165,564
=====================================================================
===========================================================
NET INVESTMENT INCOME
3,732,693
=====================================================================
===========================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised)
8,028,979
Closing of futures contracts (14,626)
Closing and expiration of options written
(106,455)
Foreign currency transactions 44,109
-----------
Net realized gain 7,952,007
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Net change in unrealized appreciation or depreciation on:
Investments (1,417,530)
Translation of assets and liabilities denominated in foreign currencies
(45,705)
-----------
Net change (1,463,235)
-----------
Net realized and unrealized gain
6,488,772
=====================================================================
===========================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$10,221,465
===========
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Strategic Income & Growth Fund
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
1996 1995
=====================================================================
===========================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 3,732,693 $
3,570,349
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Net realized gain (loss) 7,952,007
(1,642,262)
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Net change in unrealized appreciation or depreciation (1,463,235)
6,666,394
------------ ------------
Net increase in net assets resulting from operations 10,221,465
8,594,481
=====================================================================
===========================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,671,884) (2,612,318)
Class B (1,293,779) (977,840)
Class C (20,396) --
=====================================================================
===========================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial
interest transactions--Note 2:
Class A 1,764,170 (5,203,387)
Class B 6,853,287 2,275,946
Class C 1,071,210 --
=====================================================================
===========================================================
NET ASSETS
Total increase 15,924,073 2,076,882
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Beginning of period 60,862,498
58,785,616
------------ ------------
End of period (including overdistributed net investment income
of $318,871 and $129,448, respectively) $ 76,786,571 $
60,862,498
============
============
See accompanying Notes to Financial Statements.
</TABLE>
16 Oppenheimer Strategic Income & Growth Fund
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992(3)
=====================================================================
==============
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.36 $4.92 $5.26 $5.03 $5.00
- - -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .32 .21 .22 .07(4)
Net realized and unrealized
gain (loss) .54 .44 (.23) .22 .02
----- ----- ----- ----- -----
Total income (loss) from
investment operations .86 .76 (.02) .44 .09
- - -----------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.34) (.32) (.21) (.20) (.06)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.34) (.32) (.32) (.21) (.06)
- - -----------------------------------------------------------------------------------
Net asset value, end of period $5.88 $5.36 $4.92 $5.26 $5.03
===== ===== ===== ===== =====
=====================================================================
==============
TOTAL RETURN, AT NET ASSET VALUE(5) 16.53% 16.09% (0.23)% 8.84%
1.74%
=====================================================================
==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $46,747 $40,977 $42,733 $55,291 $48,3973
- - -----------------------------------------------------------------------------------
Average net assets (in thousands) $43,764 $40,799 $48,360 $59,209 $30,2643
- - -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.75% 6.37% 4.56% 4.33% 4.59%(6)
Expenses 1.43% 1.35% 1.43% 1.36% 1.46%(4)(6)
- - -----------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3% 114.0% 80.0% 122.4% 25.8%
Average brokerage
commission rate(8) $0.0595 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993(2) 1996(1)
=====================================================================
===============================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.35 $4.91 $5.26 $5.10 $5.36
- - ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .28 .19 .14 .28
Net realized and unrealized
gain (loss) .53 .44 (.25) .16 .49
----- ----- ----- ----- -----
Total income (loss) from
investment operations .82 .72 (.06) .30 .77
- - ----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.30) (.28) (.18) (.13) (.27)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.30) (.28) (.29) (.14) (.27)
- - ----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.87 $5.35 $4.91 $5.26 $5.86
===== ===== ===== ===== =====
=====================================================================
===============================
TOTAL RETURN, AT NET ASSET VALUE(5) 15.69% 15.26% (1.17)%
5.86% 15.18%
=====================================================================
===============================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $28,93 $19,885 $16,053 $12,386 $1,106
- - ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,26 $17,316 $14,986 $ 7,541 $ 400
- - ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94% 5.61% 3.86% 3.32%(6) 4.58%(6)
Expenses 2.19% 2.10% 2.17% 2.21%(6) 2.28%(6)
- - ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3 114.0% 80.0% 122.4% 147.3%
Average brokerage
commission rate(8) $0.0595 -- -- -- $0.0595
</TABLE>
1. For the period from October 2, 1995 (inception of offering)
to September 30, 1996.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from June 1, 1992 (commencement of operations)
to September 30, 1992.
4. Net investment income would have been $.07 per share absent
the voluntary expense reimbursement, resulting in an expense ratio of
1.74%.
5. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering),
with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for
a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended
September 30, 1996 were $106,528,444 and $95,769,996, respectively.
8. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period divided by the total number
of related shares purchased and sold. See accompanying Notes to
Financial Statements.
17 Oppenheimer Strategic Income & Growth Fund
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
=====================================================================
=========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Strategic Income & Growth 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 primary investment
objective is to seek a high level of current income and capital
appreciation. The Fund's investment adviser is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge.
All three classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution
and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a
single class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Forward foreign currency exchange contracts are valued based
on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a
reliable bank or dealer. Options are valued based upon the last sale
price on the principal exchange on which the option is traded or, in
the absence of any transactions that day, the value is based upon the
last sale price on the prior trading date if it is within the spread
between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
----------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the
transaction date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or
decrease in value prior to their delivery. The Fund maintains, in a
segregated account with its custodian, assets with a market value equal
to the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes
such purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding when-issued
or forward commitments of $5,119,263.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into
mortgage "dollar-rolls" in which the Fund sells securities for delivery
in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type coupon and maturity) but
not identical securities on a specified future date. The Fund records
each dollar-roll as a sale and a new purchase transaction.
----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from
changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's Statement of
Operations.
----------------------------------------------------------------------
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.
18 Oppenheimer Strategic Income & Growth Fund
<PAGE> 19
=====================================================================
=========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses
(other than those attributable to a specific class) and gains and
losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating
expenses directly attributable to a specific class are charged against
the operations of that class.
----------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
----------------------------------------------------------------------
ORGANIZATION COSTS. The Manager advanced $20,590 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund
is withdrawn during the amortization period, the redemption proceeds
will be reduced to reimburse the Fund for any unamortized expenses, in
the same ratio as the number of shares redeemed bears to the number of
initial shares outstanding at the time of such redemption.
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and
pay such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $128,640, a
decrease in overdistributed net investment income of $37,503, and an
increase in accumulated net realized gain on investments of $91,137. In
addition, to properly reflect foreign currency gain in the components of
capital, $26,440 of foreign exchange gain determined according to U.S.
federal income tax rules has been reclassified from net realized gain to
net investment income.
----------------------------------------------------------------------
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. Dividends-in-kind are
recognized as income on the ex-dividend date, at the current market
value of the underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market
adjustment is made on the ex-date.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
19 Oppenheimer Strategic Income & Growth Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
=========
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR
ENDED SEPTEMBER 30, 1995
-------------------------------- ---------------------------
SHARES AMOUNT SHARES
AMOUNT
- - ------------------------------------------------------------------------------------------------------------------
- - -----
<S> <C> <C> <C> <C>
Class A:
Sold 2,387,772 $ 13,431,087 1,075,489 $
5,403,694
Dividends and distributions reinvested 402,412 2,264,550 452,310
2,248,812
Redeemed (2,477,164) (13,931,467) (2,567,818)
(12,855,893)
---------- ------------ ----------- ------------
Net increase (decrease) 313,020 $ 1,764,170 (1,040,019) $
(5,203,387)
========== ============ ===========
============
- - ------------------------------------------------------------------------------------------------------------------
- - -----
Class B:
Sold 2,134,954 $ 12,031,686 1,180,146 $
5,932,623
Dividends and distributions reinvested 179,351 1,009,405 162,515
808,194
Redeemed (1,096,517) (6,187,804) (894,830)
(4,464,871)
---------- ------------ ----------- ------------
Net increase 1,217,788 $ 6,853,287 447,831 $
2,275,946
========== ============ ===========
============
- - ------------------------------------------------------------------------------------------------------------------
- - -----
Class C:
Sold 253,236 $ 1,433,118 -- $ --
Dividends and distributions reinvested 2,268 12,899 --
--
Redeemed (66,571) (374,807) -- --
---------- ------------ ----------- ------------
Net increase 188,933 $ 1,071,210 -- $ --
========== ============ ===========
============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class B shares
and for the period from October 2, 1995 (inception of offering) to
September 30, 1996 for Class C shares.
=====================================================================
=========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $5,053,335 was composed of gross appreciation of
$5,766,008, and gross depreciation of $712,673.
=====================================================================
=========
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.75% on the first $200 million of average annual net assets, 0.72% on
the next $200 million, 0.69% on the next $200 million, 0.66% on the
next $200 million, 0.60% on the next $200 million, and 0.50% on net
assets in excess of $1 billion. 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 September 30, 1996, commissions (sales
charges paid by investors) on sales of Class A shares totaled $277,077,
of which $91,918 was retained by OppenheimerFunds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an
affiliated broker/dealer. Sales charges advanced to broker/dealers by
OFDI on sales of the Fund's Class B and Class C shares totaled $415,535
and $13,819, of which $12,807 and $208, respectively, was paid to an
affiliated broker/dealer. During the year ended September 30, 1996,
OFDI received contingent deferred sales charges of $79,826 and $929,
respectively, upon redemption of Class B and Class C shares, as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for
other registered investment companies. OFS's total costs of providing
such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse brokers, dealers, banks
and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class
A shares. During the year ended September 30, 1996, OFDI paid $13,004
to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
20 Oppenheimer Strategic Income & Growth Fund
<PAGE> 21
=====================================================================
=========
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a reimbursement type Distribution and Service Plan
for Class B shares to reimburse OFDI for its services and costs in
distributing Class B shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of 0.75% per year on
Class B shares. OFDI also receives a service fee of 0.25% per year to
reimburse dealers for providing personal services for accounts that
hold Class B shares. Both fees are computed on the average annual net
assets of Class B shares, determined as of the close of each regular
business day. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plan
was terminated. During the year ended September 30, 1996, OFDI paid
$3,237 to an affiliated broker/dealer as reimbursement for Class B
personal service and maintenance expenses and retained $200,117 as
reimbursement for Class B sales commissions and service fee advances,
as well as financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $1,292,158 for Class B.
The Fund has adopted a compensation type Distribution and
Service Plan for Class C shares to compensate OFDI for its services and
costs in distributing Class C shares and servicing accounts. Under the
Plan, the Fund pays OFDI an annual asset-based sales charge of 0.75%
per year on Class C shares. OFDI also receives a service fee of 0.25%
per year to compensate dealers for providing personal services for
accounts that hold Class C shares. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to OFDI for certain expenses it incurred
before the Plan was terminated. During the year ended September 30,
1996, OFDI retained $3,838 as compensation for Class C sales
commissions and service fee advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred unreimbursed expenses of $35,740
for Class C.
=====================================================================
=========
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at
a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio
currency risk. The Fund generally enters into forward contracts as a
hedge upon the purchase or sale of a security denominated in a foreign
currency. In addition, the Fund may enter into such contracts as a
hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets
on a daily basis as provided by a reliable bank or dealer. The Fund
will realize a gain or loss upon the closing or settlement of the
forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments
where applicable. Unrealized appreciation or depreciation on forward
contracts is reported in the Statement of Assets and Liabilities.
Realized gains and losses are reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to
meet the terms of the contract and unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
At September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT
AMOUNT VALUATION AS OF
UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPT. 30,
1996 APPRECIATION DEPRECIATION
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
<S> <C> <C> <C> <C> <C>
Japanese Yen (JPY) 11/5/96 29,536 JPY $ 266,144 $ 6,168
$ --
New Zealand Dollar (NZD) 11/6/96 900 NZD 626,118 --
4,395
Swedish Krona (SEK) 11/1/96 1,490 SEK 224,826 747
--
Swiss Franc (CHF) 10/21/96--11/4/96 870 CHF 695,969 30,902
--
---------- ------- -------
$1,813,057 37,817 4,395
========== ------- -------
CONTRACTS TO SELL
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Australian Dollar (AUD) 11/6/96 795 AUD $629,016 $ 6,102
$ 4
Danish Krone (DKK) 10/1/96 3 DKK 587 --
1
---------- ------- -------
$629,603 6,102 5
========== ------- -------
Net Unrealized Appreciation and Depreciation $43,919
$ 4,400
======= =======
</TABLE>
21 Oppenheimer Strategic Income & Growth Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
=========
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the
value of fixed rate portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin) equal
to a certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The
Fund recognizes a realized gain or loss when the contract is closed or
expires.
Securities held in collateralized accounts to cover initial
margin requirements on open futures contracts are noted in the
Statement of Investments. The Statement of Assets and Liabilities
reflects a receivable or payable for the daily mark to market for
variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with
changes in the value of the underlying securities.
At September 30, 1996, the Fund had outstanding futures contracts to
purchase and sell debt securities as follows:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
EXPIRATION FUTURES VALUATION AS OF
APPRECIATION
CONTRACTS TO PURCHASE DATE CONTRACTS SEPT. 30,
1996 (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 12/96 12 $ 1,267,125 $ 10,500
------------- ----------
CONTRACTS TO SELL
-----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 12/96 5 $ 545,937 $ (8,781)
French Government Bonds 12/96 10 1,209,203
(17,686)
------------- ----------
1,755,140 (26,467)
------------- ----------
$ 3,022,265 $ (15,967)
============= ==========
</TABLE>
=====================================================================
=========
7. OPTIONS ACTIVITY
The Fund may buy and sell put and call options, or write put and
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.
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.
22 Oppenheimer Strategic Income & Growth Fund
<PAGE> 23
=====================================================================
=========
7. OPTIONS ACTIVITY
(CONTINUED)
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments. Options written
are reported as a liability in the Statement of Assets and Liabilities.
Gains and losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases
and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security decreases
and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund
also has the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Written option activity for the year ended September 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
---------------------------- ------------------------
NUMBER OF AMOUNT OF NUMBER
OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS
PREMIUMS
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1995 -- $ -- --
$ --
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Options written 5,406,361 78,714 123,388
5,330
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Options canceled in closing transactions (943,840) (43,677) --
--
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Options expired prior to exercise (1,717,882) (18,500) --
--
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Options exercised (988,674) (5,959) --
- - --
----------- ---------- -------- --------
Options outstanding at September 30, 1996 1,755,965 $ 10,578
123,388 $ 5,330
=========== ========== ========
========
</TABLE>
=====================================================================
=========
8. ILLIQUID AND
RESTRICTED SECURITIES
At September 30, 1996, investments in securities included issues that
are illiquid or restricted. Restricted securities are often purchased
in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale,
and are valued under methods approved by the Board of Trustees as
reflecting fair value. A security may be considered illiquid if it
lacks a readily-available market or if its valuation has not changed
for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
from time to time) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this limitation at
September 30, 1996 was $2,298,088, which represents 2.99% of the Fund's
net assets. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER
UNIT SEPT. 30, 1996
- - ------------------------------------------------------------------------------------------------------------------
- - -------
<S> <C> <C> <C>
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds, 8%, 2/15/01 5/17/96
$66.10 $68.80
</TABLE>
23 Oppenheimer Strategic Income & Growth Fund
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
=====================================================================
=========
The Board of Trustees and Shareholders of Oppenheimer Strategic Income
& Growth Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Strategic Income
& Growth Fund as of September 30, 1996, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended September 30, 1996 and 1995 and the
financial highlights for the period June 1, 1992 (commencement of
operations) to September 30, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at September 30, 1996 by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights present fairly, in all material respects, the financial
position of Oppenheimer Strategic Income & Growth Fund at September 30,
1996, the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
24 Oppenheimer Strategic Income & Growth Fund
<PAGE> 25
FEDERAL INCOME TAX INFORMATION (Unaudited)
=====================================================================
=========
In early 1997, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar
year 1996. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends paid by the Fund during the fiscal year ended
September 30, 1996 which are not designated as capital gain
distributions should be multiplied by 11.72% to arrive at the net
amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders
in reporting distributions received from the Fund to the Internal
Revenue Service. Because of the complexity of the federal regulations
which may affect your individual tax return and the many variations in
state and local tax regulations, we recommend that you consult your tax
adviser for specific guidance.
25 Oppenheimer Strategic Income & Growth Fund
<PAGE> 26
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
=====================================================================
=========
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Robert C. Doll, Jr., Senior Vice President
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
=====================================================================
=========
INVESTMENT ADVISER
OppenheimerFunds, Inc.
=====================================================================
=========
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
=====================================================================
=========
TRANSFER AND SHAREHOLDER
SERVICING AGENT
OppenheimerFunds Services
=====================================================================
=========
CUSTODIAN OF
PORTFOLIO SECURITIES
The Bank of New York
=====================================================================
=========
INDEPENDENT AUDITORS
Deloitte & Touche LLP
=====================================================================
=========
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer Strategic
Income & Growth Fund. This report must be preceded or accompanied by a
Prospectus of Oppenheimer Strategic Income & Growth Fund. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any
bank, are not guaranteed by any bank, and are not insured by the FDIC
or any other agency, and involve investment risks, including possible
loss of the principal amount invested.
26 Oppenheimer Strategic Income & Growth Fund
<PAGE> 27
OPPENHEIMERFUNDS FAMILY
=====================================================================
=========
OppenheimerFunds offers over 50 funds designed to fit virtually every
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When you invest with OppenheimerFunds, you can feel comfortable
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with over 35 years of experience in helping people just like you reach
their financial goals. And you're investing with a leader in global,
growth stock and flexible fixed-income investments--with over 3 million
shareholder accounts and more than $55 billion under OppenheimerFunds'
management and that of our affiliates.
At OppenheimerFunds we don't charge a fee to exchange shares.
And you can exchange shares easily by mail or by telephone.1 For more
information on Oppenheimer funds, please contact your financial adviser
or call us at 1-800-525-7048 for a prospectus. You may also write us at
the address shown on the back cover. As always, please read the
prospectus carefully before you invest.
<TABLE>
=====================================================================
========================
<S> <C>
STOCK FUNDS
Global Emerging Growth Fund Growth Fund
Enterprise Fund(2) Global Fund
International Growth Fund Quest Global Value Fund
Discovery Fund Disciplined Value Fund
Quest Small Cap Value Fund Oppenheimer Fund
Gold & Special Minerals Fund Value Stock Fund
Target Fund Quest Value Fund
=====================================================================
========================
STOCK & BOND FUNDS
Main Street Income & Growth Fund Equity Income Fund
Quest Opportunity Value Fund Disciplined Allocation Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income & Growth Fund
Global Growth & Income Fund Bond Fund for Growth
=====================================================================
========================
BOND FUNDS
International Bond Fund Bond Fund
High Yield Fund U.S. Government Trust
Champion Income Fund Limited-Term Government Fund
Strategic Income Fund
=====================================================================
=======================
MUNICIPAL FUNDS
California Municipal Fund(3) Insured Municipal Fund
Florida Municipal Fund(3) Intermediate Municipal Fund
New Jersey Municipal Fund(3)
New York Municipal Fund(3) Rochester Division
Pennsylvania Municipal Fund(3) Rochester Fund Municipals
Municipal Bond Fund Limited Term New York Municipal Fund
=====================================================================
=======================
MONEY MARKET FUNDS(4)
Money Market Fund Cash Reserves
=====================================================================
=======================
LIFESPAN
Growth Fund Income Fund
Balanced Fund
</TABLE>
1. Exchange privileges are subject to change or termination.
Shares may be exchanged only for shares of the same class of eligible
funds.
2.Effective 4/1/96, the Fund is closed to new investors.
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed
by the U.S. government and there can be no assurance that a money
market fund will be able to maintain a stable net asset value of $1.00
per share. Oppenheimer funds are distributed by OppenheimerFunds
Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C)
Copyright 1996 OppenheimerFunds, Inc. All rights reserved.
27 Oppenheimer Strategic Income & Growth Fund
<PAGE> 28
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
Information Hotline
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0275.001.0996 November 30, 1996
[PHOTO]
Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling
our toll-free Telephone Transactions number. And, by enrolling in AccountLink,
a convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
[OPPENHEIMERFUNDS LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Fund
Oppenheimer Combined
Multiple Oppenheimer
Strategies Oppenheimer ProForma Multiple
Fund (1) Fund (2) Adjustments Strategies
Fund
-----------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C>
Investments, at value (cost * ) (including
repurchase agreements **) $291,465,285 $286,243,139
$577,708,424
Cash 397,482 174,735 572,217
Unrealized appreciation of forward foreign
urrency exchange contracts 974 - 974
Receivables:
Interest, dividends and principal paydowns 2,638,803 414,680
3,053,483
Shares of beneficial interest sold 286,715 35,621
322,336
Investments sold 679,786 1,232,407 1,912,193
Other 19,537 7,074 26,611
-----------------------------------------------------------------------------
Total assets 295,488,582 288,107,656 -
583,596,238
-----------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received
$552,194 and $759,339) 896,088 1,274,413
2,170,501
Payables and other liabilities:
Investments purchased 1,918,420 2,652,010
4,570,430
Shares of beneficial interest redeemed 629,197 719,941
1,349,138
Trustees' fees 182,123 - 182,123
Distributions and service plan fees 144,390 89,634
234,024
Shareholder reports 56,678 - 56,678
Transfer and shareholder servicing agent fees 26,623 39,783
66,406
Deferred Trustee fees - 128,506 128,506
Other 193,316 126,711 320,027
-----------------------------------------------------------------------------
Total liabilities 4,046,835 5,030,998 - 9,077,833
-----------------------------------------------------------------------------
NET ASSETS $291,441,747 $283,076,658 $ 0
$574,518,405
=====================================================================
========
COMPOSITION OF NET ASSETS:
Paid-in capital $225,707,312 $175,019,654
$400,726,966
Undistributed net investment income 615,057 4,720,092
5,335,149
Accumulated net realized gain from investments
and foreign currency transactions 15,672,173 27,842,531
43,514,704
Net unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies 49,447,205 75,494,381
124,941,586
-----------------------------------------------------------------------------
NET ASSETS $291,441,747 $283,076,658 $ 0
$574,518,405
=====================================================================
========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Fund
Oppenheimer Combined
Multiple Oppenheimer
Strategies Oppenheimer ProForma Multiple
Fund (1) Fund (2) Adjustments Strategies
Fund
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value and Redemption Price Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $264,358,580, $276,725,396
and $541,083,976 and 18,756,434, 22,168,406 and
38,396,278 shares of beneficial interest
outstanding for Oppenheimer Multiple Strategies
Fund, Oppenheimer Fund, and Combined Oppenheimer
Multiple Strategies Fund, respectively) $14.09 $12.48 $14.09
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $14.95 $13.24
$14.95
Class B Shares:
Net asset value and redemption price per share
(based on net assets of $5,996,160, $2,039,515
and $8,035,675 and 428,130, 164,776 and 573,706
shares of beneficial interest outstanding for
Oppenheimer Multiple Strategies Fund, Oppenheimer
Fund, and Combined Oppenheimer Multiple Strategies
Fund, respectively) $14.01 $12.38 $14.01
Class C Shares:
Net asset value and redemption price er share
(based on net assets of $21,087,007, $4,311,747
and $25,398,754 and 1,503,813, 352,590 and
1,811,356 shares of beneficial interest
outstanding for Oppenheimer Multiple Strategies
Fund, Oppenheimer Fund, and Combined Oppenheimer
Multiple Strategies Fund, respectively) $14.02 $12.23 $14.02
*Cost $241,674,276 $210,233,490
$451,907,766
**Repurchase agreements $24,000,000 $29,000,000
$53,000,000
</TABLE>
(1) On March 6, 1997, the name of Oppenheimer Asset Allocation Fund changed
to Oppenheimer Multiple Strategies Fund.
(2) Oppenheimer Fund Class A shares will be exchanged for Oppenheimer
Multiple Strategies Fund Class A shares. Oppenheimer Fund Class B shares will be
exchanged for Oppenheimer Multiple Strategies Fund Class B shares. Oppenheimer
Fund Class C shares will be exchanged for Oppenheimer Multiple Strategies Fund
Class C shares.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Operations For Period Ended September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Fund
Oppenheimer Combined
Multiple Oppenheimer
Strategies Oppenheimer ProForma Multiple
Fund (1) Fund (2) Adjustments Strategies
Fund
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes
of $12,214) $12,320,040 $1,865,166 $14,185,206
Dividends (net of foreign withholding of
$86,080 and $109,320) 3,327,666 5,710,916
9,038,582
-----------------------------------------------------------------------------
Total income 15,647,706 7,576,082 - 23,223,788
-----------------------------------------------------------------------------
EXPENSES:
Management fees 2,040,804 2,027,333 (105,902)(1)
3,962,235
Distribution and service plan fees:
Class A 457,920 340,155 798,075
Class B 28,131 8,822 36,953
Class C 170,994 38,503 209,497
Transfer and shareholder servicing agent fees 347,905 529,143
877,048
Custodian fees and expenses 92,078 66,427 158,505
Legal and auditing fees 59,356 66,881 126,237
Insurance expenses 15,980 21,689 37,669
Shareholder reports 144,915 135,395 280,310
Trustees' fees and expenses 108,139 104,384 212,523
Registration and filing fees:
Class A 654 667 1,321
Class B 2,810 677 3,487
Class C 4,971 228 5,199
Other 28,540 70,185 98,725
-----------------------------------------------------------------------------
Total expenses 3,503,197 3,410,489 (105,902)
6,807,784
-----------------------------------------------------------------------------
NET INVESTMENT INCOME 12,144,509 4,165,593 105,902
16,416,004
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain from investments and
options written 18,280,560 23,938,675 42,219,235
Closing and expiration of options written 797,616 1,490,071
2,287,687
Foreign currency transactions 666,351 278,759
945,110
-----------------------------------------------------------------------------
Net realized gain 19,744,527 25,707,505 - 45,452,032
-----------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments 4,995,947 6,856,858
11,852,805
Translation of assets and liabilities
denominated in foreign currencies (1,495,680) (1,384,524)
(2,880,204)
-----------------------------------------------------------------------------
Net change 3,500,267 5,472,334 - 8,972,601
-----------------------------------------------------------------------------
Net realized and unrealized gain 23,244,794 31,179,839 -
54,424,633
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $35,389,303 $35,345,432
$105,902 $70,840,637
=====================================================================
========
</TABLE>
(1) Calculated in accordance with the investment advisory agreement of
Oppenheimer Multiple Strategies Fund (.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). This assumes that the
management fee structure had been in place for the entire period.
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
Pro Forma Combining Statement of Investments September 30, 1996
(Unaudited)
Oppenheimer Multiple Strategies Fund (formerly Oppenheimer Asset Allocation Fund) and
Oppenheimer Fund
Face Amount (1)
- - ---------------------------------------------------------------------------------------------
Opp. Multiple Opp. Multiple
Strategies Opp. Fund Pro Forma Strategies Opp. Fund
Pro Forma
Fund Combined Fund Combined
=====================================================================
===============================================================
Mortgage-Backed Obligations - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Federal National Mortgage Assn.:
<S> <C> <C> <C> <C> <C> <C>
11.50%, 7/1/11 $ 146,907 $ -- $ 146,907 $ 162,530 $ --
$ 162,530
11.75%, 1/1/16 175,012 -- 175,012 196,833 --
196,833
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Government National Mortgage
Assn., 9%, 11/15/08-5/15/09 524,930 -- 524,930 558,216 --
558,216
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 375,127 -- 375,127 364,225
- - -- 364,225
---------------------------------------------
Total Mortgage-Backed Obligations
(Cost $1,162,963) 1,281,804 -- 1,281,804
=====================================================================
===============================================================
U.S. Government Obligations - 6.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U.S. Treasury Bonds, STRIPS,
Zero Coupon:
7.10%, 11/15/18(2) 17,000,000 -- 17,000,000 3,502,476 --
3,502,476
7.313%, 8/15/19(2) 18,700,000 -- 18,700,000 3,651,736 --
3,651,736
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,000,000 -- 16,000,000 16,590,000 --
16,590,000
8.875%, 11/15/98 950,000 -- 950,000 1,001,062 --
1,001,062
9.25%, 8/15/98 9,450,000 -- 9,450,000 9,972,697 --
9,972,697
---------------------------------------------
Total U.S. Government Obligations
(Cost $34,052,281) 34,717,971 --
34,717,971
=====================================================================
===============================================================
Foreign Government Obligations - 8.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de
Deudas, Series I, 5.461%,
4/1/01(3)(4) 1,544,136 -- 1,544,136 1,408,007 --
1,408,007
Par Bonds, 5.25%, 3/31/23(5) 10,000,000 -- 10,000,000 5,850,000
-- 5,850,000
Past Due Interest Bonds, Series L,
6.625%, 3/31/05(3) 5,880,000 -- 5,880,000 4,931,850 --
4,931,850
Past Due Interest Bonds, Series L,
6.312%, 3/31/05(3) -- 3,920,000 3,920,000 -- 3,287,900
3,287,900
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Bonos de la Tesoreria de la
Federacion, Zero Coupon, 48.252%,
10/3/96(2) MXP 4,384,900 -- 4,384,900 579,822 --
579,822
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Brazil (Federal Republic of) Par
Bonds, 5%, 4/15/24(5) 7,500,000 -- 7,500,000 4,476,563 --
4,476,563
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Canada (Government of) Bonds:
9.75%, 12/1/01 CAD 6,000,000 -- 6,000,000 5,068,535 --
5,068,535
9.75%, 6/1/01 CAD 2,000,000 -- 2,000,000 1,677,282 --
1,677,282
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Denmark (Kingdom of) Bonds,
8%, 3/15/06 DKK 21,900,000 -- 21,900,000 4,004,914 --
4,004,914
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Eskom Depositary Receipts,
Series E168, 11%, 6/1/08 ZAR 6,430,000 -- 6,430,000 1,093,837
-- 1,093,837
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Italy (Republic of) Treasury
Bonds, Buoni del Tesoro Poliennali,
8.50%, 8/1/99 ITL 1,800,000,000 -- 1,800,000,000 1,204,257
- - -- 1,204,257
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
New Zealand Government Bonds,
8%, 2/15/01 NZD 7,460,000 -- 7,460,000 5,203,616 --
5,203,616
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Poland (Republic of) Treasury
Bills, Zero Coupon:
20.70%, 1/8/97(2) PLZ 2,360,000 -- 2,360,000 799,056 --
799,056
24.131%, 11/13/96(2) PLZ 2,300,000 -- 2,300,000 801,216
- - -- 801,216
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Queensland Treasury Corp.
Exchangeable Gtd. Nts., 10.50%,
5/15/03 AUD 2,500,000 -- 2,500,000 2,263,395 --
2,263,395
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Treasury Corp. of Victoria Gtd.
Bonds, 8.25%, 10/15/03 AUD 1,500,000 -- 1,500,000 1,219,490
-- 1,219,490
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
United Kingdom Treasury Nts.,
13%, 7/14/00 GBP 1,050,000 -- 1,050,000 1,967,831 --
1,967,831
---------------------------------------------
Total Foreign Government
Obligations (Cost $39,944,054,
Cost $2,290,334,
Combined $42,234,388) 42,549,671 3,287,900
45,837,571
=====================================================================
===============================================================
Non-Convertible Corporate Bonds
and Notes - 6.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Basic Materials - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chemicals - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Quantum Chemical Corp., 10.375%
First Mtg. Nts., 6/1/03 500,000 -- 500,000 546,146 --
546,146
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Viridian, Inc., 9.75% Nts., 4/1/03 750,000 -- 750,000 780,000 --
780,000
---------------------------------------------
1,326,146 -- 1,326,146
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Metals - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Kaiser Aluminum & Chemical Corp.,
12.75% Sr. Sub. Nts., 2/1/03 500,000 -- 500,000 545,000 --
545,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Paper - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Gaylord Container Corp., 12.75%
Sr. Sub. Disc. Debs., 5/15/05 750,000 -- 750,000 826,875 --
826,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Repap Wisconsin, Inc., 9.875%
Second Priority Sr. Nts., 5/1/06 1,000,000 -- 1,000,000 985,000 --
985,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Riverwood International Corp.,
10.875% Sr. Sub. Nts., 4/1/08 1,000,000 -- 1,000,000 990,000 --
990,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 1,000,000 -- 1,000,000 1,083,750 --
1,083,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Tembec Finance Corp., 9.875% Gtd.
Sr. Nts., 9/30/05 500,000 -- 500,000 485,000 --
485,000
---------------------------------------------
4,370,625 -- 4,370,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Cyclicals - 2.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Autos & Housing - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hovnanian K. Enterprises, Inc.,
11.25% Sub. Gtd. Nts., 4/15/02 725,000 -- 725,000 712,312 --
712,312
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Lear Corp., 9.50% Sub. Nts.,
7/15/06 1,000,000 -- 1,000,000 1,047,500 --
1,047,500
---------------------------------------------
1,759,812 -- 1,759,812
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Leisure & Entertainment - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Apple South, Inc., 9.75% Sr. Nts.,
6/1/06 500,000 -- 500,000 495,000 --
495,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Gillett Holdings, Inc., 12.25% Sr.
Sub. Nts., Series A, 6/30/02(6) 213,908 -- 213,908 223,266 --
223,266
---------------------------------------------
718,266 -- 718,266
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Media - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Bell Cablemedia PLC, 0%/11.95% Sr.
Disc. Nts., 7/15/04(7) 200,000 -- 200,000 153,500 --
153,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cablevision Industries Corp., 9.25%
Sr. Debs., Series B, 4/1/08 1,000,000 -- 1,000,000 1,030,000 --
1,030,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cablevision Systems Corp., 10.75%
Sr. Sub. Debs., 4/1/04 500,000 -- 500,000 518,125 --
518,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
News America Holdings, Inc., 8.50%
Sr. Nts., 2/15/05 1,000,000 -- 1,000,000 1,061,373 --
1,061,373
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Panamsat LP/Panamsat Capital
Corp., 0%/11.375% Sr. Sub. Disc.
Nts., 8/1/03(7) 1,250,000 -- 1,250,000 1,137,500 --
1,137,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Rogers Cablesystems Ltd., 10%
Sr. Sec. Second Priority Debs.,
12/1/07 1,000,000 -- 1,000,000 1,005,000 --
1,005,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
SCI Television, Inc., 11% Sr. Nts.,
6/30/05 500,000 -- 500,000 535,625 --
535,625
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Time Warner, Inc., 7.95% Nts.,
2/1/00 1,000,000 -- 1,000,000 1,028,109 --
1,028,109
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
TKR Cable I, Inc., 10.50% Sr.
Debs., 10/30/07 1,100,000 -- 1,100,000 1,221,967 --
1,221,967
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
United International Holdings,
Inc., Zero Coupon Sr. Sec. Disc.
Nts., 12.819%, 11/15/99(2) 550,000 -- 550,000 385,000 --
385,000
---------------------------------------------
8,076,199 -- 8,076,199
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: General - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Synthetic Industries, Inc.,
12.75% Sr. Sub. Debs., 12/1/02 900,000 -- 900,000 976,500 --
976,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: Specialty - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cole National Group, Inc., 11.25%
Sr. Nts., 10/1/01 500,000 -- 500,000 534,375 --
534,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Non-Cyclicals - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Food - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Grand Union Co., 12% Sr. Nts.,
9/1/04 1,137,000 -- 1,137,000 1,152,634 --
1,152,634
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 500,000 -- 500,000 511,250 --
511,250
11% Sr. Sub. Nts., 6/15/05 500,000 -- 500,000 505,625 --
505,625
---------------------------------------------
2,169,509 -- 2,169,509
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Supplies & Services
- - - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Magellan Health Services, Inc.,
11.25% Sr. Sub. Nts., Series A,
4/15/04 1,000,000 -- 1,000,000 1,095,000 --
1,095,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Multicare Cos., Inc. (The), 12.50%
Sr. Sub. Nts., 7/1/02 345,000 -- 345,000 383,813 --
383,813
---------------------------------------------
1,478,813 -- 1,478,813
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Household Goods - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Coleman Holdings, Inc., Zero
Coupon Sr. Sec. Disc. Nts., Series
B, 12.09%, 5/27/98(2) 1,000,000 -- 1,000,000 855,000 --
855,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy Services & Producers - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Global Marine, Inc., 12.75% Sr.
Sec. Nts., 12/15/99 400,000 -- 400,000 434,000 --
434,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
J. Ray McDermott SA, 9.375% Sr.
Sub. Bonds, 7/15/06 1,000,000 -- 1,000,000 1,022,500 --
1,022,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Maxus Energy Corp., 11.50% Debs.,
11/15/15 1,000,000 -- 1,000,000 1,045,000 --
1,045,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Mesa Operating Co., 10.625% Gtd.
Sr. Sub. Nts., 7/1/06 1,000,000 -- 1,000,000 1,056,250 --
1,056,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
TransTexas Gas Corp., 11.50% Sr.
Sec. Gtd. Nts., 6/15/02 1,000,000 -- 1,000,000 1,065,000 --
1,065,000
---------------------------------------------
4,622,750 -- 4,622,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Financial - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Diversified Financial - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
GPA Delaware, Inc., 8.75% Gtd.
Nts., 12/15/98 1,250,000 -- 1,250,000 1,262,500 --
1,262,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Insurance - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Conseco, Inc., 8.125% Sr. Nts.,
2/15/03 1,000,000 -- 1,000,000 1,023,948 --
1,023,948
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Materials - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 500,000 -- 500,000 521,250 --
521,250
11% Sr. Debs., 12/1/03 650,000 -- 650,000 713,375 --
713,375
---------------------------------------------
1,234,625 -- 1,234,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Services - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
EnviroSource, Inc., 9.75% Sr.
Nts., 6/15/03 1,000,000 -- 1,000,000 955,000 --
955,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Technology - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Aerospace/Defense - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Communications & Power Industries,
Inc., 12% Sr. Sub. Nts., Series B,
8/1/05 1,000,000 -- 1,000,000 1,092,500 --
1,092,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Unisys Corp., 15% Credit Sensitive
Nts., 7/1/97(3) 200,000 -- 200,000 212,000 --
212,000
---------------------------------------------
1,304,500 -- 1,304,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telecommunications-Technology
- - - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hyperion Telecommunications,
Inc., 0%/13% Sr. Disc. Nts.,
Series B, 4/15/03(7)(8) 500,000 -- 500,000 307,500 --
307,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
PriCellular Wireless Corp.,
0%/12.25% Sr. Sub. Disc. Nts.,
10/1/03(7) 1,000,000 -- 1,000,000 815,000 --
815,000
---------------------------------------------
1,122,500 -- 1,122,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Utilities - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electric Utilities - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
First PV Funding Corp., 10.15%
Lease Obligation Bonds, Series
1986B, 1/15/16 1,000,000 -- 1,000,000 1,057,500 --
1,057,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telephone Utilities - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Western Wireless Corp., 10.50% Sr.
Sub. Nts., 6/1/06 750,000 -- 750,000 770,625 --
770,625
---------------------------------------------
Total Non-Convertible Corporate
Bonds and Notes (Cost $35,105,263) 36,164,193 --
36,164,193
=====================================================================
===============================================================
Convertible Corporate Bonds and
Notes - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
MEDIQ, Inc., 7.50% Exchangeable
Sub. Debs., 7/15/03 (Cost
$1,552,096, Cost $1,752,096,
Combined $3,304,192) 1,650,000 1,850,000 3,500,000 1,476,750
1,655,750 3,132,500
Shares
=====================================================================
===============================================================
Common Stocks - 69.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Basic Materials - 3.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chemicals - 2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Agrium, Inc. 80,000 87,100 167,100 1,086,250 1,182,655
2,268,905
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Bayer AG, Sponsored ADR 90,000 170,000 260,000 3,304,341
6,241,533 9,545,874
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Georgia Gulf Corp. -- 22,100 22,100 -- 660,237
660,237
---------------------------------------------
4,390,591 8,084,425 12,475,016
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Metals - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Brush Wellman, Inc. 72,300 151,400 223,700 1,391,775
2,914,450 4,306,225
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Paper - 0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Aracruz Celulose SA, Sponsored
ADR, Cl. B 99,000 165,000 264,000 866,250 1,443,750
2,310,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
MacMillan Bloedel Ltd. -- 90,323 90,323 -- 1,223,280
1,223,280
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
MacMillan Bloedel Ltd. -- 4,900 4,900 -- 65,537
65,537
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Stone Container Corp. 54,200 84,800 139,000 846,875 1,325,000
2,171,875
---------------------------------------------
1,713,125 4,057,567 5,770,692
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Cyclicals - 12.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Autos & Housing - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Chromcraft Revington, Inc.(9_ -- 18,500 18,500 -- 464,812
464,812
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Duracell International, Inc. 16,000 22,000 38,000 1,026,000 1,410,750
2,436,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
General Motors Corp. 18,000 26,000 44,000 864,000 1,248,000
2,112,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
IRSA Inversiones y
Representaciones, SA 193,056 214,506 407,562 563,796
626,438 1,190,234
---------------------------------------------
2,453,796 3,750,000 6,203,796
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Leisure & Entertainment - 6.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Alaska Air Group, Inc.(9) 77,000 97,000 174,000 1,645,875
2,073,375 3,719,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
AMR Corp.(9)(10)(11) 17,600 25,400 43,000 1,401,400
2,022,475 3,423,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Carnival Corp., Cl. A 43,800 30,800 74,600 1,357,800 954,800
2,312,600
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Circus Circus Enterprises,
Inc.(9) 18,000 35,000 53,000 636,750 1,238,125
1,874,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cracker Barrel Old Country Store,
Inc. 55,300 90,800 146,100 1,251,162 2,054,350
3,305,512
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Disney (Walt) Co. -- 13,000 13,000 -- 823,875
823,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Eastman Kodak Co. 22,000 28,000 50,000 1,727,000 2,198,000
3,925,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
International Game Technology 68,000 61,700 129,700 1,394,000
1,264,850 2,658,850
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
King World Productions, Inc.(9) 27,000 56,500 83,500 995,625
2,083,437 3,079,062
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Mattel, Inc. 39,437 76,093 115,530 1,020,432 1,968,906
2,989,338
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Nintendo Co. Ltd. -- 45,000 45,000 -- 2,888,888
2,888,888
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Outback Steakhouse, Inc.(9) 2,400 -- 2,400 57,900 --
57,900
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Shangri-La Asia Ltd. 550,000 725,000 1,275,000 732,573
965,664 1,698,237
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Shimano, Inc. 54,000 82,000 136,000 1,003,636 1,524,040
2,527,676
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
U S West Media Group(9) 47,000 -- 47,000 793,125 --
793,125
---------------------------------------------
14,017,278 22,060,785 36,078,063
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Media - 2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Comcast Corp., Cl. A Special 112,800 171,600 284,400 1,734,300
2,638,350 4,372,650
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Dow Jones & Co., Inc. 21,000 30,000 51,000 777,000 1,110,000
1,887,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
South China Morning Post
Holdings Ltd. 1,440,000 2,400,000 3,840,000 1,070,733 1,784,556
2,855,289
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Time Warner, Inc. 30,000 45,000 75,000 1,158,750 1,738,125
2,896,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
U S West Media Group -- 65,000 65,000 -- 1,096,875
1,096,875
---------------------------------------------
4,740,783 8,367,906 13,108,689
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: General - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cone Mills Corp.(9) 161,500 268,000 429,500 1,271,812
2,110,500 3,382,312
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Donna Karan International, Inc.(9) 44,500 54,500 99,000 1,017,937
1,246,687 2,264,624
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Price/Costco, Inc.(9) 54,300 73,100 127,400 1,113,150 1,498,550
2,611,700
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Wal-Mart Stores, Inc. -- 32,900 32,900 -- 867,737
867,737
---------------------------------------------
3,402,899 5,723,474 9,126,373
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: Specialty - 1.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
General Nutrition Cos., Inc. -- 70,000 70,000 -- 1,229,375
1,229,375
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Gymboree Corp.(9)(10)(11) 33,000 60,000 93,000 1,002,375
1,822,500 2,824,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Toys 'R' Us, Inc.(9)(10)(11) 32,600 69,200 101,800 949,475
2,015,450 2,964,925
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Tractor Supply Co. -- 25,000 25,000 -- 534,375
534,375
---------------------------------------------
1,951,850 5,601,700 7,553,550
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Non-Cyclicals - 11.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Beverages - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Guinness PLC 144,000 182,000 326,000 1,029,967 1,301,764
2,331,731
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Whitman Corp. 11,500 11,300 22,800 265,938 261,312
527,250
---------------------------------------------
1,295,905 1,563,076 2,858,981
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Food - 1.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Chiquita Brands International,
Inc. 45,000 38,249 83,249 551,250 468,550
1,019,800
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Groupe Danone 3,707 6,841 10,548 541,550 999,392
1,540,942
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
IBP, Inc.(10)(11) 27,000 31,500 58,500 627,750 732,375
1,360,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Nestle SA, Sponsored ADR 20,000 40,000 60,000 1,115,232
2,230,464 3,345,696
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Sara Lee Corp. 30,000 58,000 88,000 1,072,500 2,073,500
3,146,000
---------------------------------------------
3,908,282 6,504,281 10,412,563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Drugs - 5.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Abbott Laboratories 20,000 27,000 47,000 985,000 1,329,750
2,314,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
American Home Products Corp. 15,400 22,800 38,200 981,750
1,453,500 2,435,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Astra AB Free, Series A 23,000 32,000 55,000 971,240 1,351,290
2,322,530
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Bristol-Myers Squibb Co.(10)(11) 21,400 45,600 67,000 2,062,425
4,394,700 6,457,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Ciba-Geigy AG 2,275 2,825 5,100 2,911,013 3,614,774
6,525,787
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Genzyme Corp.(9) 42,000 65,500 107,500 1,071,000 1,670,250
2,741,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Johnson & Johnson 36,800 38,600 75,400 1,886,000 1,978,250
3,864,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Mylan Laboratories, Inc. 45,800 66,600 112,400 784,325
1,140,525 1,924,850
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
SmithKline Beecham PLC, ADR 16,000 25,600 41,600 974,000
1,558,400 2,532,400
---------------------------------------------
12,626,753 18,491,439 31,118,192
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Supplies & Services - 1.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Biomet, Inc.(9) -- 45,000 45,000 -- 736,875
736,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Manor Care, Inc.(10)(11) 21,600 30,770 52,370 828,900
1,180,799 2,009,699
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Medtronic, Inc.(10)(11) 19,800 20,000 39,800 1,269,675 1,282,500
2,552,175
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Nellcor Puritan Bennett, Inc.(9) 36,000 50,000 86,000 792,000
1,100,000 1,892,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Sofamor Danek Group, Inc.(9)(11) -- 22,000 22,000 -- 679,250
679,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
WellPoint Health Networks,
Inc.(9) 30,009 40,000 70,009 975,293 1,300,000
2,275,293
---------------------------------------------
3,865,868 6,279,424 10,145,292
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Household Goods - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Kimberly-Clark Corp. 9,800 13,100 22,900 863,625 1,154,437
2,018,062
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Procter & Gamble Co. 12,000 15,400 27,400 1,170,000
1,501,500 2,671,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Wella AG 1,350 1,750 3,100 812,515 1,053,260
1,865,775
---------------------------------------------
2,846,140 3,709,197 6,555,337
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tobacco - 1.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Philip Morris Cos., Inc. 20,600 54,300 74,900 1,848,850 4,873,425
6,722,275
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy - 5.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy Services & Producers - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Kerr-McGee Corp. 9,000 13,000 22,000 547,875 791,375
1,339,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Landmark Graphics Corp.(9) 28,600 35,500 64,100 840,125
1,042,812 1,882,937
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Weatherford Enterra, Inc.(9) 27,000 34,000 61,000 739,125
930,750 1,669,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Western Atlas, Inc.(9) -- 20,000 20,000 -- 1,245,000
1,245,000
---------------------------------------------
2,127,125 4,009,937 6,137,062
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Oil-Integrated - 3.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Atlantic Richfield Co. 13,500 19,500 33,000 1,721,250 2,486,250
4,207,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Enterprise Oil PLC 90,000 118,000 208,000 768,254 1,007,267
1,775,521
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Louisiana Land & Exploration Co. 12,000 20,000 32,000 631,500
1,052,500 1,684,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Royal Dutch Petroleum Co. 6,300 9,500 15,800 983,588
1,483,188 2,466,776
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Saga Petroleum AS, Cl. B 63,000 82,000 145,000 925,397
1,204,485 2,129,882
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Total SA, Sponsored ADR 17,800 52,680 70,480 696,425
2,061,105 2,757,530
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Unocal Corp. 50,000 95,000 145,000 1,800,000 3,420,000
5,220,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
YPF SA, Cl. D, ADR 35,000 43,500 78,500 800,625 995,063
1,795,688
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Yukong Ltd., GDR(8) -- 39,500 39,500 -- 259,219
259,219
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Yukong Ltd., GDR -- 1,438 1,438 -- 9,437
9,437
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Yukong Ltd., GDR -- 3,294 3,294 -- 21,617
21,617
---------------------------------------------
8,327,039 14,000,131 22,327,170
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Financial - 9.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banks - 6.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Akbank T.A.S. 1,995,500 2,661,250 4,656,750 204,215
272,347 476,562
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Banco Frances del Rio de la
Plata SA 81,675 109,900 191,575 710,663 956,252
1,666,915
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Chase Manhattan Corp.
(New)(10)(11) 90,000 100,000 190,000 7,211,250 8,012,500
15,223,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Citicorp(10)(11) 9,900 16,000 25,900 897,188 1,450,000
2,347,188
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Deutsche Bank, Sponsored ADR 22,500 60,000 82,500 1,060,634
2,828,358 3,888,992
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
NationsBank Corp.(10)(11) 65,200 72,200 137,400 5,664,250
6,272,375 11,936,625
---------------------------------------------
15,748,200 19,791,832 35,540,032
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Diversified Financial - 1.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
American Express Co. 29,000 48,000 77,000 1,341,250
2,220,000 3,561,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Dean Witter, Discover & Co. 14,000 20,000 34,000 770,000
1,100,000 1,870,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Federal Home Loan Mortgage Corp. 8,600 9,700 18,300 841,725
949,388 1,791,113
---------------------------------------------
2,952,975 4,269,388 7,222,363
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Insurance - 2.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
ACE Ltd. 20,000 27,000 47,000 1,057,500 1,427,625
2,485,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
American International Group,
Inc.(10)(11) 8,100 13,700 21,800 816,075 1,380,275
2,196,350
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
American Re Corp.(10)(11) 36,000 48,800 84,800 2,286,000
3,098,800 5,384,800
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Skandia Forsakrings AB 27,000 40,000 67,000 747,206
1,106,972 1,854,178
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
UNUM Corp. 12,000 17,000 29,000 769,500 1,090,125
1,859,625
---------------------------------------------
5,676,281 8,103,797 13,780,078
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial - 7.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electrical Equipment - 0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
General Electric Co. 13,400 31,600 45,000 1,219,400 2,875,600
4,095,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Materials - 1.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Insituform Technologies, Cl. A(9) -- 82,300 82,300 -- 658,400
658,400
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Interpool, Inc. -- 27,900 27,900 -- 585,900
585,900
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Owens Corning 54,000 77,000 131,000 1,991,250 2,839,375
4,830,625
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Rubbermaid, Inc. 25,300 33,000 58,300 619,850 808,500
1,428,350
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Wolverine Tube, Inc.(9) 23,500 41,700 65,200 1,010,500
1,793,100 2,803,600
---------------------------------------------
3,621,600 6,685,275 10,306,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Services - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Ecolab, Inc. -- 35,400 35,400 -- 1,194,750
1,194,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manufacturing - 2.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
AGCO Corp. 32,400 42,000 74,400 826,200 1,071,000
1,897,200
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Citic Pacific Ltd. -- 214,000 214,000 -- 968,574
968,574
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hutchison Whampoa Ltd. -- 132,000 132,000 -- 887,622
887,622
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Mannesmann AG 3,500 6,000 9,500 1,312,100 2,249,314
3,561,414
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Pacific Dunlop Ltd. 333,000 476,000 809,000 690,320 986,764
1,677,084
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Tenneco, Inc. 38,000 83,000 121,000 1,904,750 4,160,375
6,065,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Westinghouse Air Brake Co. 42,600 60,200 102,800 479,250
677,250 1,156,500
---------------------------------------------
5,212,620 11,000,899 16,213,519
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Transportation - 2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Airborne Freight Corp. -- 44,000 44,000 -- 940,500
940,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Burlington Northern Santa Fe Corp. 24,500 57,400 81,900 2,067,188
4,843,125 6,910,313
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Canadian National Railway Co. 27,000 38,000 65,000 554,949
781,040 1,335,989
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Stolt-Nielsen SA 58,200 116,000 174,200 909,375 1,812,500
2,721,875
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Stolt-Nielsen SA, Sponsored ADR 25,650 58,000 83,650 400,781
906,250 1,307,031
---------------------------------------------
3,932,293 9,283,415 13,215,708
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Technology - 15.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Aerospace/Defense - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Rockwell International Corp. 15,000 35,000 50,000 845,625
1,973,125 2,818,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Hardware - 2.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Digital Equipment Corp.(9)(10)(11) 17,000 24,000 41,000 607,750
858,000 1,465,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
International Business Machines
Corp. 12,300 17,400 29,700 1,531,350 2,166,300
3,697,650
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Moore Corp. Ltd. 40,000 69,400 109,400 735,000 1,275,225
2,010,225
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Optical Data Systems, Inc. -- 44,000 44,000 -- 748,000
748,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Xerox Corp.(10)(11) 30,000 111,000 141,000 1,608,750
5,952,375 7,561,125
---------------------------------------------
4,482,850 10,999,900 15,482,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Software - 4.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
America Online, Inc.(9) 23,600 33,200 56,800 840,750 1,182,750
2,023,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
American Software, Inc. -- 50,000 50,000 -- 331,250
331,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Business Objects SA, Sponsored
ADR(9) 50,000 50,000 100,000 962,500 962,500
1,925,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Computer Associates International,
Inc.(10)(11) 54,300 66,150 120,450 3,244,425 3,952,463
7,196,888
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Electronic Arts, Inc.(9)(10)(11) 38,500 43,800 82,300 1,438,938
1,637,025 3,075,963
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Inference Corp., Cl. A -- 55,000 55,000 -- 976,250
976,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Microsoft Corp.(9)(10)(11) 6,700 9,800 16,500 883,563 1,292,375
2,175,938
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Nintendo Co. Ltd. 31,500 -- 31,500 2,022,222 --
2,022,222
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Novell, Inc.(9) 97,000 261,000 358,000 1,067,000 2,871,000
3,938,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Sybase, Inc.(9) 32,000 60,000 92,000 476,000 892,500
1,368,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Symantec Corp.(9) 90,502 151,340 241,842 984,209 1,645,823
2,630,032
---------------------------------------------
11,919,607 15,743,936 27,663,543
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronics - 5.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hewlett-Packard Co. 31,500 71,500 103,000 1,535,625
3,485,625 5,021,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Intel Corp.(10)(11) 54,000 119,800 173,800 5,153,625 11,433,413
16,587,038
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Kyocera Corp. 12,000 17,000 29,000 856,566 1,213,468
2,070,034
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
LSI Logic Corp.(9) 36,500 50,700 87,200 848,625 1,178,775
2,027,400
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Nokia Corp., Sponsored ADR,
A Shares(10)(11) 20,500 25,000 45,500 907,125 1,106,250
2,013,375
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Proxima Corp. -- 70,000 70,000 -- 813,750
813,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Samsung Electronics
(First New)(9) -- 79 79 -- 5,949 5,949
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Samsung Electronics Co. -- 265 265 -- 20,789
20,789
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
VLSI Technology, Inc.(9) 51,200 85,800 137,000 832,000
1,394,250 2,226,250
---------------------------------------------
10,133,566 20,652,269 30,785,835
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telecommunications-Technology
- - - 2.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Airtouch Communications,
Inc.(9) 32,900 45,500 78,400 908,863 1,256,938
2,165,801
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Bay Networks, Inc.(9) 19,180 26,870 46,050 522,655 732,208
1,254,863
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cisco Systems, Inc.(9) 13,700 18,300 32,000 850,256 1,135,744
1,986,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
ECI Telecommunications
Ltd.(10)(11) 45,000 57,500 102,500 945,000 1,207,500
2,152,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Kinnevik Investments AB Free,
Series B -- 31,500 31,500 -- 821,859
821,859
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
MCI Communications Corp. 89,000 110,000 199,000 2,280,625
2,818,750 5,099,375
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
NetCom Systems AB, B Shares -- 31,500 31,500 -- 353,922
353,922
---------------------------------------------
5,507,399 8,326,921 13,834,320
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Utilities - 2.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electric Utilities - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Korea Electric Power Corp. 15,800 20,000 35,800 522,203
661,017 1,183,220
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Public Service Enterprise Group,
Inc. 42,000 30,000 72,000 1,123,500 802,500
1,926,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Verbund Oest Electriz 17,100 25,200 42,300 1,182,642 1,742,840
2,925,482
---------------------------------------------
2,828,345 3,206,357 6,034,702
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gas Utilities - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hong Kong & China Gas Co. Ltd. 374,488 471,648 846,136 636,817
802,038 1,438,855
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Southwestern Energy Co. -- 80,000 80,000 -- 1,190,000
1,190,000
---------------------------------------------
636,817 1,992,038 2,628,855
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telephone Utilities - 1.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
BCE, Inc. 30,600 34,000 64,600 1,308,150 1,453,500
2,761,650
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Portugal Telecom SA(9) 10,500 15,900 26,400 270,107
409,020 679,127
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
U S West Communications Group 50,000 80,000 130,000 1,487,500
2,380,000 3,867,500
---------------------------------------------
3,065,757 4,242,520 7,308,277
---------------------------------------------
Total Common Stocks (Cost
$103,868,767, Cost $175,755,182,
Combined $279,623,949) 148,691,394 250,333,239
399,024,633
=====================================================================
===============================================================
Preferred Stocks - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Alumax, Inc., $4.00 Cv., Series A 6,333 6,333 12,666 861,288
861,288 1,722,576
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Cyprus Amax Minerals Co., $4.00
Cv., Series A 17,666 20,666 38,332 925,257 1,082,382
2,007,639
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Series K, Exchangeable Preferred
Stock(4)(6) 734 -- 734 774,370 -- 774,370
---------------------------------------------
Total Preferred Stocks (Cost
$1,973,515, Cost $1,416,188,
Combined $3,389,703) 2,560,915 1,943,670
4,504,585
Units
=====================================================================
===============================================================
Rights, Warrants and Certificates
- - - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hong Kong & China Gas Co. Ltd.
Wts., Exp. 9/97 57,874 74,304 132,178 17,587 22,580
40,167
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Hyperion Telecommunications, Inc.
Wts., Exp. 4/01(6) 500 -- 500 5,000 --
5,000
---------------------------------------------
Total Rights, Warrants and
Certificates (Cost $15,337,
Cost $19,690, Combined $35,027) 22,587 22,580
45,167
Face Amount (1)
=====================================================================
===============================================================
Repurchase Agreements - 9.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repurchase agreement with Zion
First National Bank, 5.62%, dated
9/30/96, to be repurchased at
$24,003,747 on 10/1/96,
collateralized by U.S. Treasury
Nts., 5.75%-8.875%, 5/15/97-
8/15/04, with a value of
$24,493,438 $ 24,000,000 $ -- $ 24,000,000 24,000,000 --
24,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Repurchase agreement with Zion
First National Bank, 5.62%, dated
9/30/96, to be repurchased at
$29,004,527 on 10/1/96,
collateralized by U.S. Treasury
Nts., 5.75%-8.875%, 5/15/97-
8/15/04, with a value of
$29,596,238 -- 29,000,000 29,000,000 -- 29,000,000
29,000,000
---------------------------------------------
Total Repurchase Agreements
(Cost $24,000,000, Cost
$29,000,000, Combined $53,000,000) 24,000,000 29,000,000
53,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Total Investments, at Value (Cost
$241,674,276, Cost $210,233,490,
Combined $451,907,766) 100.0% 100.6% 101.0% 291,465,285
286,243,139 577,708,424
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
Liabilities in Excess of
Other Assets (0.0) (0.6) (1.0) (23,538) (3,166,481)
(3,190,019)
------ ------ ------ ---------------------------------------------
Net Assets 100.0% 100.0% 100.0% $291,441,747
$283,076,658 $574,518,405
====== ====== ======
=============================================
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
AUD - Australian Dollar MXP - Mexican Peso
CAD - Canadian Dollar NZD - New Zealand Dollar
DKK - Danish Krone PLZ - Polish Zloty
GBP - British Pound Sterling ZAR - South African Rand
ITL - Italian Lira
2. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
3. Represents the current interest rate for a variable rate security.
4. Interest or dividend is paid in kind.
5. Represents the current interest rate for an increasing rate security.
6. Identifies issues considered to be illiquid.
7. Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
8. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $566,719 or 0.10% the combined net assets,
at September 30, 1996.
9. Non-income producing security.
<TABLE>
<CAPTION>
10. A sufficient amount of securities has been designated to cover outstanding call options, as
follows:
Shares
Subject Expiration Exercise Premium Market
Value
to Call Date Price Received See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 3,200 1/97 $ 95 $ 8,300 $
3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American International Group, Inc. 1,600 2/97 100 5,752
9,400
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American Re Corp. 7,200 1/97 50 25,175
106,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American Re Corp. 4,500 10/96 65 4,927
563
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Bristol-Myers Squibb Co. 4,400 12/96 95 7,568
18,700
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Chase Manhattan Corp. (New) 19,000 3/97 80 73,053
114,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Citicorp 2,000 1/97 90 9,440 11,750
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Computer Associates International, Inc. 10,800 1/97 55 34,775
87,750
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Computer Associates International, Inc. 10,800 1/97 60 50,974
67,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Digital Equipment Corp. 3,400 1/97 45 7,123
4,250
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ECI Telecommunications Ltd. 9,000 2/97 25 16,604
12,375
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Electronic Arts, Inc. 8,400 3/97 30 30,197
87,150
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Gymboree Corp. 6,600 1/97 35 8,877
14,438
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
IBP, Inc. 27,000 11/96 25 59,938 10,125
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Intel Corp. 10,800 1/97 90 33,425 113,400
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Manor Care, Inc. 4,200 4/97 40 5,649 9,713
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Medtronic, Inc. 3,800 2/97 55 12,236 40,850
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Microsoft Corp. 6,700 1/97 125 60,097
97,150
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
NationsBank Corp. 13,000 2/97 90 67,858
47,124
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Nokia Corp., Sponsored ADR, A Shares 4,000 4/97 45 10,880
18,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Toys 'R' Us, Inc. 6,400 3/97 35 6,608 3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Xerox Corp. 6,000 1/97 55 12,738 18,750
----------------------------
$552,194 $896,088
============================
</TABLE>
<TABLE>
<CAPTION>
11. A sufficient amount of securities have been designated to cover outstanding written call options,
as follows:
Shares
Subject Expiration Exercise Premium Market
Value
to Call Date Price Received See Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C> <C> <C>
AMR, Corp. 4,800 1/97 $ 95 $ 12,456 $
4,800
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American International Group, Inc. 2,600 2/97 100 9,347
15,275
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American Re, Corp 9,600 11/96 50 33,566
141,600
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
American Re, Corp 6,100 10/96 65 6,679
763
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Bristol-Myers Squibb, Co. 9,600 12/96 95 16,511
40,800
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Chase Manhattan, Corp. (New) 18,500 3/97 80 71,130
111,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Citicorp 3,200 1/97 90 15,103 18,800
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Comupter Associates International, Inc. 13,200 1/97 55 42,503
107,250
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Comupter Associates International, Inc. 13,200 1/97 60 62,302
82,500
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Digital Equipment, Corp. 4,800 1/97 45 10,056
6,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ECI Telecommunications Ltd. 11,500 2/97 25 21,217
15,813
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Electronic Arts, Inc. 9,600 3/97 30 34,511
99,600
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Gymboree, Corp. 12,000 1/97 35 16,139
26,250
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
IBP, Inc. 31,500 11/96 25 69,928 11,813
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Intel, Corp. 22,000 1/97 90 68,088 231,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Manor Care, Inc. 6,000 4/97 40 8,070
13,875
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Medtronic, Inc. 4,000 2/97 55 12,880 43,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Microsoft, Corp. 9,800 1/97 63 87,903
142,100
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Nationsbank, Corp. 14,400 2/97 90 75,165
52,200
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Nokia Corp., A Shares, Sponsored ADR 5,000 4/97 45 13,600
23,125
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Sofamor Danek Group, Inc. 2,400 3/97 30 11,028
11,100
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Toys 'R' Us, Inc. 14,000 3/97 35 14,454 7,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Xerox, Corp. 22,000 1/97 55 46,704 68,750
----------------------------
$759,339 $1,274,413
============================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Strategic Income
& Growth Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & ProForma Multiple
Fund (1) Growth Fund(2) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C>
Investments, at value (cost * ) (including
repurchase agreements **) $291,465,285 $80,295,960
$371,761,245
Cash 397,482 611,472 1,008,954
Unrealized appreciation of forward foreign
currency exchange contracts 974 43,919
44,893
Receivables:
Interest, dividends and principal paydowns 2,638,803 926,291
3,565,094
Shares of beneficial interest sold 286,715 387,169
673,884
Investments sold 679,786 1,717,088
2,396,874
Closed forward foreign currency exchange contracts - 59,215
59,215
Daily variation on futures contracts - 6,862 6,862
Other 19,537 2,864 22,401
- - ------------------------------------------------------------------------------
Total assets 295,488,582 84,050,840 -
379,539,422
- - ------------------------------------------------------------------------------
LIABILITIES:
Unrealized depreciation on forward foreign
currency exchange contracts - 4,400 4,400
Options written, at value (premiums received
$552,194 and $15,908) 896,088 5,777
901,865
Payables and other liabilities:
Investments purchased 1,918,420 6,610,736
8,529,156
Dividends - 313,878 313,878
Shares of beneficial interest redeemed 629,197 115,879
745,076
Daily variation on futures contracts - 1,500 1,500
Trustees' fees 182,123 - 182,123
Distributions and service plan fees 144,390 -
144,390
Shareholder reports 56,678 - 56,678
Transfer and shareholder servicing agent fees 26,623 -
26,623
Other 193,316 212,099 405,415
- - ------------------------------------------------------------------------------
Total liabilities 4,046,835 7,264,269 -
11,311,104
- - ------------------------------------------------------------------------------
NET ASSETS $291,441,747 $76,786,571 $ 0
$368,228,318
=====================================================================
=========
COMPOSITION OF NET ASSETS:
Paid-in capital $225,707,312 $66,681,618
$292,388,930
Undistributed net investment income 615,057 (318,871)
296,186
Accumulated net realized gain from investments
and foreign currency transactions 15,672,173 5,349,088
21,021,261
Net unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies 49,447,205 5,074,736
54,521,941
- - ------------------------------------------------------------------------------
NET ASSETS $291,441,747 $76,786,571 $ 0
$368,228,318
=====================================================================
=========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Strategic Income
& Growth Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & ProForma Multiple
Fund (1) Growth Fund(2) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value and Redemption Price Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $264,358,580, $46,746,928,
and $311,105,508 and 18,756,434, 7,956,397, and
22,074,172 shares of beneficial interest outstanding
for Oppenheimer Multiple Strategies Fund,
Oppenheimer Strategic Income & Growth Fund and
Combined Oppenheimer Multiple Strategies Fund,
respectively) $14.09 $5.88 $14.09
Maximum offering price per share (net asset value
plus sales charge of 5.75%, 4.75% and 5.75%,
respectively, offering price) $14.95 $6.17 $14.95
Class B Shares:
Net asset value and redemption price per hare
(based on net assets of $5,996,160, $28,933,298,
and $34,929,458 and 428,130, 4,932,725, and
2,493,319 shares of beneficial interest outstanding
for Oppenheimer Multiple Strategies Fund,
Oppenheimer Strategic Income & Growth Fund and
Combined Oppenheimer Multiple Strategies Fund,
respectively) $14.01 $5.87 $14.01
Class C Shares:
Net asset value and redemption price per share
(based on net assets of $21,087,007, $1,106,345,
and $22,193,352 and 1,503,813, 188,933, and
1,582,725 shares of beneficial interest outstanding
for Oppenheimer Multiple Strategies Fund,
Oppenheimer Strategic Income & Growth Fund and
Combined Oppenheimer Multiple Strategies Fund,
respectively) $14.02 $5.86 $14.02
*Cost $241,674,276 $75,252,756
$316,927,032
**Repurchase agreements $24,000,000 $2,100,000
$26,100,000
</TABLE>
(1) On March 6, 1997, the name of Oppenheimer Asset Allocation Fund changed
to Oppenheimer Multiple Strategies Fund.
(2) Oppenheimer Strategic Income & Growth Fund Class A shares will be
exchanged for Oppenheimer Multiple Strategies Fund Class A shares. Oppenheimer
Strategic Income & Growth Fund Class B shares will be exchanged for Oppenheimer
Multiple Strategies Fund Class B shares. Oppenheimer Strategic Income & Growth
Fund Class C shares will be exchanged for Oppenheimer Multiple Strategies Fund
Class C shares.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Operations For Period Ended September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund and Oppenheimer Strategic Income
& Growth Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & ProForma Multiple
Fund (1) Growth Fund(2) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes
of $12,214) $12,320,040 $ 4,441,077
$16,761,117
Dividends (net of foreign withholding of
$86,080 and $5,550) 3,327,666 457,180
3,784,846
- - ------------------------------------------------------------------------------
Total income 15,647,706 4,898,257 -
20,545,963
- - ------------------------------------------------------------------------------
EXPENSES:
Management fees 2,040,804 513,195 (21,089)(1)
2,532,910
Distribution and service plan fees:
Class A 457,920 105,726 563,646
Class B 28,131 242,309 270,440
Class C 170,994 3,963 174,957
Transfer and shareholder servicing agent fees 347,905 128,032
475,937
Custodian fees and expenses 92,078 51,822
143,900
Legal and auditing fees 59,356 14,158 73,514
Insurance expenses 15,980 3,974 19,954
Shareholder reports 144,915 86,699 231,614
Trustees' fees and expenses 108,139 3,002
111,141
Registration and filing fees:
Class A 654 837 1,491
Class B 2,810 2,469 5,279
Class C 4,971 393 5,364
Other 28,540 8,985 37,525
- - ------------------------------------------------------------------------------
Total expenses 3,503,197 1,165,564 (21,089)
4,647,672
- - ------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,144,509 3,732,693 21,089
15,898,291
- - ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain from investments and options
written 18,280,560 8,028,979 26,309,539
Closing and expiration of options written 797,616 (106,455)
691,161
Closing of futures contracts - (14,626) (14,626)
Foreign currency transactions 666,351 44,109
710,460
- - ------------------------------------------------------------------------------
Net realized gain 19,744,527 7,952,007 -
27,696,534
- - ------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments 4,995,947 (1,417,530)
3,578,417
Translation of assets and liabilities denominated
in foreign currencies (1,495,680) (45,705)
(1,541,385)
- - ------------------------------------------------------------------------------
Net change 3,500,267 (1,463,235) - 2,037,032
- - ------------------------------------------------------------------------------
Net realized and unrealized gain 23,244,794 6,488,772 -
29,733,566
- - ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $35,389,303 $10,221,465
$21,089 $45,631,857
=====================================================================
=========
</TABLE>
(1) Calculated in accordance with the investment advisory agreement of
Oppenheimer Multiple Strategies Fund (.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). This assumes that the
management fee structure had been in place for the entire period.
<PAGE>
<TABLE>
<S> <C>
PRO FORMA COMBINING STATEMENT OF INVESTMENTS September 30,
1996 (Unaudited)
Oppenheimer Multiple Strategies Fund (formerly Oppenheimer Asset Allocation Fund) and
Oppenheimer Strategic Income & Growth Fund
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - --
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 4.1%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GOVERNMENT AGENCY - 3.5%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
FHLMC/FNMA/SPONSORED - 1.8%
- - ---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations, Gtd
Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ -- $ 59,951 $ 59,951
- - ---------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11.50%, 7/1/11 146,907 -- 146,907
11.75%, 1/1/16 175,012 -- 175,012
7.50%, 10/15/26 (2) -- 5,000,000 5,000,000
Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1992-103,
Cl. JB, 10.50%, 11/25/20 -- 315,000 315,000
Interest-Only Stripped Mtg.-Backed Security,
Trust 257, Cl. 2, 10.955%, 2/1/24 (3) -- 1,712,531
1,712,531
Series 1994-83, Cl. Z, 7.50%, 6/25/24 -- 378,624
378,624
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GNMA/GUARANTEED - 1.7%
- - ---------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
9%, 11/15/08-5/15/09 524,930 -- 524,930
6%, 3/20/26 -- 1,437,892 1,437,892
7%, 4/15/26 -- 4,460,633 4,460,633
- - ----------------------------------------------------------------------------------------------------------------------
- - --
PRIVATE - 0.6%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
COMMERCIAL - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial
Mtg. Pass-Through Certificates, Series 1996-
C1, Cl. F, 7.51%, 2/1/28 (4)(5) -- 97,137 97,137
- - ---------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg
Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 -- 267,639
267,639
Series 1993-C1, Cl. D, 9.45%, 5/25/24 -- 252,980
252,980
Series 1994-C2, Cl. E, 8%, 4/25/25 375,127 449,792
824,919
Series 1994-C2, Cl. G, 8%, 4/25/25 -- 209,655 209,655
- - ---------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass
Pass-Through Certificates, Series 1995-C4,
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - --
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 4.1%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GOVERNMENT AGENCY - 3.5%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
FHLMC/FNMA/SPONSORED - 1.8%
- - ---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations, Gtd
Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ -- $ 60,139 $ 60,139
- - ---------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11.50%, 7/1/11 162,530 -- 162,530
11.75%, 1/1/16 196,833 -- 196,833
7.50%, 10/15/26 (2) -- 4,940,650 4,940,650
Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1992-103,
Cl. JB, 10.50%, 11/25/20 -- 351,323 351,323
Interest-Only Stripped Mtg.-Backed Security,
Trust 257, Cl. 2, 10.955%, 2/1/24 (3) -- 593,766 593,766
Series 1994-83, Cl. Z, 7.50%, 6/25/24 -- 337,801
337,801
- - ----------------------------------------------------------------------------------------------------------------------
- - --
359,363 6,283,679 6,643,042
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GNMA/GUARANTEED - 1.7%
- - ---------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
9%, 11/15/08-5/15/09 558,216 -- 558,216
6%, 3/20/26 -- 1,434,298 1,434,298
7%, 4/15/26 -- 4,296,705 4,296,705
- - ----------------------------------------------------------------------------------------------------------------------
- - --
558,216 5,731,003 6,289,219
- - ----------------------------------------------------------------------------------------------------------------------
- - --
<PAGE>
PRIVATE - 0.6%
- - ----------------------------------------------------------------------------------------------------------------------
- - --
COMMERCIAL - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial
Mtg. Pass-Through Certificates, Series 1996-
C1, Cl. F, 7.51%, 2/1/28 (4)(5) -- 62,289 62,289
- - ---------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg
Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 -- 268,936
268,936
Series 1993-C1, Cl. D, 9.45%, 5/25/24 -- 259,621
259,621
Series 1994-C2, Cl. E, 8%, 4/25/25 364,225 436,721
800,946
Series 1994-C2, Cl. G, 8%, 4/25/25 -- 180,337 180,337
- - ---------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass
Pass-Through Certificates, Series 1995-C4,
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
-----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
<S> <C> <C> <C>
Cl. E, 8.849%, 6/25/26 (4)(5) -- 27,688 27,688
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
MULTI-FAMILY - 0.1%
- - ----------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily
Mortgage Pass-Through Certificates, Series
1996-MC1, Cl. G, 7.15%, 6/15/06 (5) -- 400,000
<PAGE>
400,000
- - ----------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg
Pass-Through Certificates, Series 1991-M6,
Cl. B4, 7.103%, 6/25/21 (4) -- 68,681 68,681
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
RESIDENTIAL - 0.1%
- - ----------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII,
Series 1996-B, Cl. 1, 7.136%, 4/25/26 -- 299,020
299,020
Total Mortgage-Backed Obligations (Cost $1,162,963,
Cost $13,599,896, Combined $14,762,859)
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
U.S. GOVERNMENT OBLIGATIONS - 9.6%
- - ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.10%, 11/15/18 (6) 17,000,000 -- 17,000,000
7.313%, 8/15/19 (6) 18,700,000 -- 18,700,000
- - ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,000,000 -- 16,000,000
8.875%, 11/15/98 950,000 -- 950,000
9.25%, 8/15/98 9,450,000 -- 9,450,000
6%, 2/15/26 (15) -- 500,000 500,000
Total U.S. Government Obligations (Cost $34,052,281,
Cost $447,860, Combined $34,500,141)
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
FOREIGN GOVERNMENT OBLIGATIONS - 15.7%
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
ARGENTINA - 3.7%
- - ----------------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de
<PAGE>
Deudas, Series I, 5.461%, 4/1/01 (4)(7) 1,544,136 559,749
2,103,885
Par Bonds, 5.25%, 3/31/23 (8) 10,000,000 --
10,000,000
Past Due Interest Bonds, Series L, 6.625%,
3/31/05 (4) 5,880,000 -- 5,880,000
Past Due Interest Bonds, Series L, 6.312%,
3/31/05 (4) -- 834,000 834,000
- - ----------------------------------------------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA Sr
Unsec. Nts., 9.387%, 4/15/99 (4) -- 35,000 35,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
AUSTRALIA - 1.5%
- - ----------------------------------------------------------------------------------------------------------------------
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD -- 500,000 500,000
9.50%, 8/15/03 AUD -- 15,000 15,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
-----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
<S> <C> <C> <C>
Cl. E, 8.849%, 6/25/26 (4)(5) -- 22,566 22,566
364,225 1,230,470 1,594,695
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
MULTI-FAMILY - 0.1%
- - ----------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily
Mortgage Pass-Through Certificates, Series
1996-MC1, Cl. G, 7.15%, 6/15/06 (5) -- 302,625
302,625
- - ----------------------------------------------------------------------------------------------------------------------
<PAGE>
Resolution Trust Corp., Commercial Mtg
Pass-Through Certificates, Series 1991-M6,
Cl. B4, 7.103%, 6/25/21 (4) -- 67,157 67,157
- - ----------------------------------------------------------------------------------------------------------------------
-- 369,782 369,782
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
RESIDENTIAL - 0.1%
- - ----------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII,
Series 1996-B, Cl. 1, 7.136%, 4/25/26 -- 174,927
174,927
- - ----------------------------------------------------------------------------------------------------------------------
Total Mortgage-Backed Obligations (Cost $1,162,963,
Cost $13,599,896, Combined $14,762,859) 1,281,804 13,789,861
15,071,665
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
U.S. GOVERNMENT OBLIGATIONS - 9.6%
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.10%, 11/15/18 (6) 3,502,476 -- 3,502,476
7.313%, 8/15/19 (6) 3,651,736 -- 3,651,736
- - ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,590,000 -- 16,590,000
8.875%, 11/15/98 1,001,062 -- 1,001,062
9.25%, 8/15/98 9,972,697 -- 9,972,697
6%, 2/15/26 (15) -- 439,844 439,844
Total U.S. Government Obligations (Cost $34,052,281,
Cost $447,860, Combined $34,500,141) 34,717,971 439,844
35,157,815
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
FOREIGN GOVERNMENT OBLIGATIONS - 15.7%
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
<PAGE>
ARGENTINA - 3.7%
- - ----------------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de
Deudas, Series I, 5.461%, 4/1/01 (4)(7) 1,408,007 510,403
1,918,410
Par Bonds, 5.25%, 3/31/23 (8) 5,850,000 -- 5,850,000
Past Due Interest Bonds, Series L, 6.625%,
3/31/05 (4) 4,931,850 -- 4,931,850
Past Due Interest Bonds, Series L, 6.312%,
3/31/05 (4) -- 699,517 669,517
- - ----------------------------------------------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA Sr
Unsec. Nts., 9.387%, 4/15/99 (4) -- 35,634 35,634
- - ----------------------------------------------------------------------------------------------------------------------
12,189,857 1,245,554 13,435,411
- - ----------------------------------------------------------------------------------------------------------------------
- - ---
AUSTRALIA - 1.5%
- - ----------------------------------------------------------------------------------------------------------------------
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD -- 453,666 453,666
9.50%, 8/15/03 AUD -- 13,060 13,060
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - --
<S> <C> <C> <C>
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD -- 615,000
615,000
Exchangeable Gtd. Nts., 10.50%, 5/15/03 AUD 2,500,000 --
<PAGE>
2,500,000
Gtd. Nts., 8%, 5/14/03 AUD -- 300,000 300,000
Gtd. Nts., 10.50%, 5/15/03 AUD -- 90,000 90,000
- - ---------------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds:
8.25%, 10/15/03 AUD 1,500,000 -- 1,500,000
10.25%, 11/15/06 AUD -- 425,000 425,000
- - ---------------------------------------------------------------------------------------------------------------------
Western Australia Treasury Corp. Gtd
Bonds, 10%, 7/15/05 AUD -- 190,000 190,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
BRAZIL - 1.4%
- - ---------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Capitalization Bonds, 8%, 4/15/14 -- 1,001,247 1,001,247
Par Bonds, 5%, 4/15/24 (8) 7,500,000 -- 7,500,000
- - ---------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA Medium-
Term Nts., 11.30%, 12/9/99 (4) -- 10,000 10,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
BULGARIA - 0.1%
- - ---------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24 (4) -- 70,000
70,000
Front-Loaded Interest Reduction Bearer
Bonds, Tranche A, 2.25%, 7/28/12 (8) -- 755,000 755,000
Interest Arrears Bonds, 6.688%, 7/28/11 (4) -- 325,000
325,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
CANADA - 2.4%
- - ---------------------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD -- 220,000 220,000
9.75%, 10/1/97 CAD -- 250,000 250,000
9.75%, 12/1/01 CAD 6,000,000 260,000 6,260,000
<PAGE>
9.75%, 6/1/01 (15)CAD 2,000,000 -- 2,000,000
9.75%, 6/1/01 (15) CAD -- 1,335,000 1,335,000
Series A-33, 11.50%, 9/1/00 CAD -- 140,000 140,000
Series A-76, 9%, 6/1/25 CAD -- 465,000 465,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
DENMARK - 1.2%
- - ---------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK -- 1,670,000 1,670,000
8%, 3/15/06 DKK 21,900,000 1,130,000 23,030,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GERMANY - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Germany (Republic of) Bonds, Series 94,
6.25%, 1/4/24 (15) (15)DEM -- 2,670,000 2,670,000
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GREAT BRITAIN - 0.8%
- - ---------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP -- 355,000 355,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - --
<S> <C> <C> <C>
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD -- 498,166
498,166
Exchangeable Gtd. Nts., 10.50%, 5/15/03 AUD 2,263,395 --
2,263,395
Gtd. Nts., 8%, 5/14/03 AUD -- 240,793 240,793
Gtd. Nts., 10.50%, 5/15/03 AUD -- 81,482 81,482
<PAGE>
- - ---------------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds:
8.25%, 10/15/03 AUD 1,219,490 -- 1,219,490
10.25%, 11/15/06 AUD -- 390,210 390,210
- - ---------------------------------------------------------------------------------------------------------------------
Western Australia Treasury Corp. Gtd
Bonds, 10%, 7/15/05 AUD -- 170,279 170,279
3,482,885 1,847,656 5,330,541
- - ----------------------------------------------------------------------------------------------------------------------
- - --
BRAZIL - 1.4%
- - ---------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Capitalization Bonds, 8%, 4/15/14 -- 705,567 705,567
Par Bonds, 5%, 4/15/24 (8) 4,476,563 -- 4,476,563
- - ---------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA Medium-
Term Nts., 11.30%, 12/9/99 (4) -- 10,288 10,288
--------------------------------------------------------------------
4,476,563 715,855 5,192,418
- - ----------------------------------------------------------------------------------------------------------------------
- - --
BULGARIA - 0.1%
- - ---------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24 (4) -- 35,569
35,569
Front-Loaded Interest Reduction Bearer
Bonds, Tranche A, 2.25%, 7/28/12 (8) -- 248,442 248,442
Interest Arrears Bonds, 6.688%, 7/28/11 (4) -- 149,500
149,500
--------------------------------------------------------------------
-- 433,511 433,511
- - ----------------------------------------------------------------------------------------------------------------------
- - --
CANADA - 2.4%
- - ---------------------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD -- 204,386 204,386
<PAGE>
9.75%, 10/1/97 CAD -- 193,333 193,333
9.75%, 12/1/01 CAD 5,068,535 219,637 5,288,172
9.75%, 6/1/01 CAD 1,677,282 -- 1,677,282
9.75%, 6/1/01 (15) CAD -- 1,119,586 1,119,586
Series A-33, 11.50%, 9/1/00 CAD -- 122,410 122,410
Series A-76, 9%, 6/1/25 CAD -- 392,682 392,682
--------------------------------------------------------------------
6,745,817 2,252,034 8,997,851
- - ----------------------------------------------------------------------------------------------------------------------
- - --
DENMARK - 1.2%
- - ---------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK -- 312,070 312,070
8%, 3/15/06 DKK 4,004,914 206,646 4,211,560
--------------------------------------------------------------------
4,004,914 518,716 4,523,630
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GERMANY - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Germany (Republic of) Bonds, Series 94,
6.25%, 1/4/24 (15) DEM -- 1,612,575 1,612,575
- - ----------------------------------------------------------------------------------------------------------------------
- - --
GREAT BRITAIN - 0.8%
- - ---------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP -- 633,054 633,054
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
-----------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
<PAGE>
<S> <C> <C> <C>
Debs., 8.50%, 12/7/05 GBP -- 55,000
55,000
Nts., 13%, 7/14/00 GBP 1,050,000 --
1,050,000
Nts., 12.50%, 11/21/05 GBP -- 62,000
62,000
Nts., 8%, 6/10/03 GBP -- 125,000 125,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
IRELAND - 0.0%
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Ireland (Government of) Bonds, 9.25%,
7/11/03 IEP -- 60,000 60,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
ITALY - 0.4%
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Italy (Republic of) Treasury Bonds, Buoni del
Tesoro Poliennali:
8.50%, 8/1/99 ITL 1,800,000,000 --
1,800,000,000
10.50%, 4/1/00 ITL -- 285,000,000
285,000,000
10.50%, 7/15/00 ITL -- 170,000,000
170,000,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
JAPAN - 0.1%
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Japan (Government of) Bonds, Series 174,
4.60%, 9/20/04 JPY -- 27,500,000
27,500,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
MEXICO - 0.3%
<PAGE>
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Banco Nacional de Comercio Exterior SNC:
International Finance BV Gtd. Bonds,
10.758%, 6/23/97 (4)(5) -- 120,000 120,000
International Finance BV Gtd. Registered
Bonds, 11.25%, 5/30/06 -- 135,000
135,000
Nts., 7.25%, 2/2/04 -- 75,000 75,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 48.252%, 10/3/96 (6)MXP 4,384,900 --
4,384,900
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
United Mexican States Bonds:
10.375%, 1/29/03 DEM -- 150,000
150,000
16.50%, 9/1/08 GBP -- 35,000 35,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
NEW ZEALAND - 1.7%
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
New Zealand Government Bonds:
8%, 2/15/01 NZD 7,460,000 -- 7,460,000
10%, 7/15/97 NZD -- 1,040,000
1,040,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Transpower Finance Ltd. Gtd. Unsec
Unsub. Bonds:
8%, 2/15/01 (5)NZD -- 165,000 165,000
8%, 3/15/02 NZD -- 165,000 165,000
- - ----------------------------------------------------------------------------------------------------------------------
- - ---------
PANAMA - 0.0%
<PAGE>
- - ----------------------------------------------------------------------------------------------------------------------
- - ------
Panama (Republic of) Interest Reduction
Bonds, 3.50%, 7/17/14 (8) -- 130,000 130,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
POLAND - 0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------
Poland (Republic of) Treasury Bills, Zero
Coupon:
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
-------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
<S> <C> <C> <C>
Debs., 8.50%, 12/7/05 GBP -- 91,012
91,012
Nts., 13%, 7/14/00 GBP 1,967,831 --
1,967,831
Nts., 12.50%, 11/21/05 GBP -- 123,738
123,738
Nts., 8%, 6/10/03 GBP -- 202,509 202,509
-------------------------------------------------------------------------------
1,967,831 1,050,313 3,018,144
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
IRELAND - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Ireland (Government of) Bonds, 9.25%,
7/11/03 IEP -- 110,024 110,024
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
ITALY - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Italy (Republic of) Treasury Bonds, Buoni del
Tesoro Poliennali:
8.50%, 8/1/99 ITL 1,204,257 -- 1,204,257
10.50%, 4/1/00 ITL -- 201,403 201,403
10.50%, 7/15/00 ITL -- 121,241 121,241
-------------------------------------------------------------------------------
1,204,257 322,644 1,526,901
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
JAPAN - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Japan (Government of) Bonds, Series 174,
4.60%, 9/20/04 JPY -- 279,877 279,877
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
MEXICO - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Banco Nacional de Comercio Exterior SNC:
International Finance BV Gtd. Bonds,
10.758%, 6/23/97 (4)(5) -- 123,900 123,900
International Finance BV Gtd. Registered
Bonds, 11.25%, 5/30/06 -- 141,581
141,581
Nts., 7.25%, 2/2/04 -- 64,687 64,687
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 48.252%, 10/3/96 (6)MXP 579,822 --
579,822
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
United Mexican States Bonds:
10.375%, 1/29/03 DEM -- 103,851
103,851
16.50%, 9/1/08 GBP -- 74,486 74,486
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
579,822 508,505 1,088,327
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
NEW ZEALAND - 1.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
New Zealand Government Bonds:
8%, 2/15/01 NZD 5,203,616 -- 5,203,616
10%, 7/15/97 NZD -- 733,982 733,982
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Transpower Finance Ltd. Gtd. Unsec
Unsub. Bonds:
8%, 2/15/01 (5)NZD -- 113,525 113,525
8%, 3/15/02 NZD -- 113,459 113,459
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
5,203,616 960,966 6,164,582
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
PANAMA - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Panama (Republic of) Interest Reduction
Bonds, 3.50%, 7/17/14 (8) -- 81,738 81,738
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
POLAND - 0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Poland (Republic of) Treasury Bills, Zero
Coupon:
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
20.70%, 1/8/97 (6)PLZ 2,360,000 --
2,360,000
24.131%, 11/13/96 (6)PLZ 2,300,000 --
2,300,000
21.464%, 10/16/96 (6)PLZ -- 2,000,000
2,000,000
21.656%, 10/2/96 (6)PLZ -- 430,000
430,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RUSSIA - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Russia (Government of) Interest Nts.,
6.547%, 12/29/49 (2)(4) -- 260,000
260,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SOUTH AFRICA - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Eskom Depositary Receipts, Series E168, 11%,
6/1/08 ZAR 6,430,000 -- 6,430,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SPAIN - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado,
10.15%, 1/31/06 ESP -- 39,200,000
39,200,000
Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP -- 25,800,000
25,800,000
Gtd. Bonds, Bonos y Obligacion del Estado,
10.30%, 6/15/02 ESP -- 22,500,000
22,500,000
Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00 ESP -- 17,700,000
17,700,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SWEDEN - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK -- 2,200,000
2,200,000
Series 1033, 10.25%, 5/5/03 SEK -- 600,000
600,000
Series 1034, 9%, 4/20/09 SEK -- 1,400,000
1,400,000
Series 1035, 6%, 2/9/05 SEK -- 1,300,000
1,300,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
VENEZUELA - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07 (4) -- 250,000
250,000
Front-Loaded Interest Reduction Bonds,
Series A, 6.375%, 3/31/07 (4) -- 100,000
100,000
New Money Bonds, Series A, 6.75%,
12/18/05 (4) -- 250,000 250,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
20.70%, 1/8/97 (6)PLZ 799,056 --
799,056
24.131%, 11/13/96 (6)PLZ 801,216 --
801,216
21.464%, 10/16/96 (6)PLZ -- 706,837
706,837
21.656%, 10/2/96 (6)PLZ -- 152,854
152,854
1,600,272 859,691 2,459,963
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RUSSIA - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Russia (Government of) Interest Nts.,
6.547%, 12/29/49 (2)(4) -- 167,294
167,294
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SOUTH AFRICA - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Eskom Depositary Receipts, Series E168, 11%,
6/1/08 ZAR 1,093,837 -- 1,093,837
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SPAIN - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado,
10.15%, 1/31/06 ESP -- 349,431
349,431
Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP -- 212,018
212,018
Gtd. Bonds, Bonos y Obligacion del Estado,
10.30%, 6/15/02 ESP -- 197,305
197,305
Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00 ESP -- 157,405
157,405
-- 916,159 916,159
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
SWEDEN - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK -- 414,114
414,114
Series 1033, 10.25%, 5/5/03 SEK -- 105,220
105,220
Series 1034, 9%, 4/20/09 SEK -- 233,811
233,811
Series 1035, 6%, 2/9/05 SEK -- 179,414
179,414
-- 932,559 932,559
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
VENEZUELA - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07 (4) -- 207,500
207,500
Front-Loaded Interest Reduction Bonds,
Series A, 6.375%, 3/31/07 (4) -- 84,313
84,313
New Money Bonds, Series A, 6.75%,
12/18/05 (4) -- 208,438 208,438
-- 500,251 500,251
Total Foreign Government Obligations (Cost $39,944,054,
Cost $14,828,341, Combined $54,772,395) 42,549,671 15,315,922
57,865,593
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
LOAN PARTICIPATIONS - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Colombia (Republic of) 1989-1990
Integrated Loan Facility Bonds, 6.563%,
7/1/01 (4)(5) -- 314,320 314,320
- - ---------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreement, Tranche A, 6.437%, 1/1/09 (4) -- 325,000
325,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
LOAN PARTICIPATIONS - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Colombia (Republic of) 1989-1990
Integrated Loan Facility Bonds, 6.563%,
7/1/01 (4)(5) -- 298,604 298,604
- - ---------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreement, Tranche A, 6.437%, 1/1/09 (4) -- 255,633
255,633
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
-------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
<S> <C> <C> <C>
Trinidad & Tobago Loan Participation
Agreement, Tranche A, 1.772%, 9/30/00 (4)(5)JPY -- 44,836,363
44,836,363
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A,
6.563%, 9/20/97 (4)(5) -- 66,720 66,720
Total Loan Participations (Cost $969,966)
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES - 13.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
BASIC MATERIALS - 2.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
CHEMICALS - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
NL Industries, Inc., 11.75% Sr. Sec. Nts.,
10/15/03 -- 200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Quantum Chemical Corp., 10.375% First
Mtg. Nts., 6/1/03 500,000 -- 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Viridian, Inc., 9.75% Nts., 4/1/03 750,000 -- 750,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
METALS - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Kaiser Aluminum & Chemical Corp.,
12.75% Sr. Sub. Nts., 2/1/03 500,000 -- 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
UCAR Global Enterprises, Inc., 12% Sr
Sub. Nts., 1/15/05 -- 100,000 100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
PAPER - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Gaylord Container Corp., 12.75% Sr. Sub.
Disc. Debs., 5/15/05 750,000 -- 750,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Repap New Brunswick, Inc., 8.937% First
Priority Sr. Sec. Nts., 7/15/00 (4) -- 200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Repap Wisconsin, Inc., 9.875% Second
Priority Sr. Nts., 5/1/06 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Riverwood International Corp.:
10.875% Sr. Sub. Nts., 4/1/08 1,000,000 -- 1,000,000
10.25% Sr. Nts., 4/1/06 -- 300,000 300,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Stone Container Corp., 10.75% First Mtg
Nts., 10/1/02 -- 200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Tembec Finance Corp., 9.875% Gtd. Sr
Nts., 9/30/05 500,000 -- 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
CONSUMER CYCLICALS - 4.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
AUTOS & HOUSING - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Blue Bell Funding, Inc., 11.85% Sec
Extendible Adjustable Rate Nts., 5/1/99 -- 396,000
396,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Hovnanian K. Enterprises, Inc., 11.25%
Sub. Gtd. Nts., 4/15/02 725,000 -- 725,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
-------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
<S> <C> <C> <C>
Trinidad & Tobago Loan Participation
Agreement, Tranche A, 1.772%, 9/30/00 (4)(5)JPY -- 358,288
358,288
- - ------------------------------------------------------------------------------------------------------------------
- - ------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A,
6.563%, 9/20/97 (4)(5) -- 59,256 59,256
Total Loan Participations (Cost $969,966) -- 971,781
971,781
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES - 13.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
BASIC MATERIALS - 2.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
CHEMICALS - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
NL Industries, Inc., 11.75% Sr. Sec. Nts.,
10/15/03 -- 211,000 211,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Quantum Chemical Corp., 10.375% First
Mtg. Nts., 6/1/03 546,146 -- 546,146
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Viridian, Inc., 9.75% Nts., 4/1/03 780,000 -- 780,000
1,326,146 211,000 1,537,146
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
METALS - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Kaiser Aluminum & Chemical Corp.,
12.75% Sr. Sub. Nts., 2/1/03 545,000 -- 545,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
UCAR Global Enterprises, Inc., 12% Sr
Sub. Nts., 1/15/05 -- 114,750 114,750
545,000 114,750 659,750
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
PAPER - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Gaylord Container Corp., 12.75% Sr. Sub.
Disc. Debs., 5/15/05 826,875 -- 826,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Repap New Brunswick, Inc., 8.937% First
Priority Sr. Sec. Nts., 7/15/00 (4) -- 200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Repap Wisconsin, Inc., 9.875% Second
Priority Sr. Nts., 5/1/06 985,000 -- 985,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Riverwood International Corp.:
10.875% Sr. Sub. Nts., 4/1/08 990,000 -- 990,000
10.25% Sr. Nts., 4/1/06 -- 303,000 303,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 1,083,750 -- 1,083,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Stone Container Corp., 10.75% First Mtg
Nts., 10/1/02 -- 210,500 210,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Tembec Finance Corp., 9.875% Gtd. Sr
Nts., 9/30/05 485,000 -- 485,000
4,370,625 713,500 5,084,125
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
CONSUMER CYCLICALS - 4.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
AUTOS & HOUSING - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Blue Bell Funding, Inc., 11.85% Sec
Extendible Adjustable Rate Nts., 5/1/99 -- 397,980
397,980
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Hovnanian K. Enterprises, Inc., 11.25%
Sub. Gtd. Nts., 4/15/02 712,312 -- 712,312
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
Lear Corp., 9.50% Sub. Nts., 7/15/06 1,000,000 --
1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Penda Corp., 10.75% Sr. Nts., Series B,
3/1/04 -- 150,000 150,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
LEISURE & ENTERTAINMENT - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
American International Group, Inc., 11.70%
Unsec. Unsub. Bonds, 12/4/01 ITL -- 95,000,000
95,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Apple South, Inc., 9.75% Sr. Nts., 6/1/06 500,000 --
500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts.,
Series A, 6/30/02 (5) 213,908 160,431 374,339
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Imax Corp., 7% Sr. Nts., 3/1/01 (8) -- 320,000
320,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Trump Atlantic City Associates/Trump
Atlantic City Funding, Inc., 11.25% First Mtg.
Nts., 5/1/06 -- 100,000 100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
MEDIA - 2.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
American Telecasting, Inc., 0%/14.50%
Sr. Disc. Nts., 6/15/04 (9) -- 100,316 100,316
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Australis Media Ltd., Units (each unit
consists of $1,000 principal amount of
0%/14% sr. sub. disc. nts., 5/15/03 and one
warrant to purchase 57.721 ordinary shares) (9)(10) -- 200,000
200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Bell & Howell Co. (New), 0%/11.50% Sr.
Disc. Debs., Series B, 3/1/05 (9) -- 250,000 250,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Bell Cablemedia PLC, 0%/11.95% Sr.
Disc. Nts., 7/15/04 (9) 200,000 500,000 700,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Cablevision Industries Corp., 9.25% Sr.
Debs., Series B, 4/1/08 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04 500,000 -- 500,000
10.50% Sr. Sub. Debs., 5/15/16 -- 250,000
250,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts., 6/1/04 (9) -- 200,000
200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
News America Holdings, Inc., 8.50% Sr.
Nts., 2/15/05 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Panamsat LP/Panamsat Capital Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03 (9) 1,250,000 750,000
2,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Rogers Cablesystems Ltd., 10% Sr. Sec.
Second Priority Debs., 12/1/07 1,000,000 300,000
1,300,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
SCI Television, Inc., 11% Sr. Nts., 6/30/05 500,000 --
500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Time Warner, Inc., 7.95% Nts., 2/1/00 1,000,000 --
1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
TKR Cable I, Inc., 10.50% Sr. Debs.,
10/30/07 1,100,000 300,000 1,400,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
United International Holdings, Inc., Zero
Coupon Sr. Sec. Disc. Nts., 12.819%,
11/15/99 (6) 550,000 -- 550,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
----------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C>
Lear Corp., 9.50% Sub. Nts., 7/15/06 1,047,500 --
1,047,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Penda Corp., 10.75% Sr. Nts., Series B,
3/1/04 -- 146,250 146,250
---------------------------------------------------------
1,759,812 544,230 2,304,042
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
LEISURE & ENTERTAINMENT - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
American International Group, Inc., 11.70%
Unsec. Unsub. Bonds, 12/4/01 ITL -- 71,778
71,778
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Apple South, Inc., 9.75% Sr. Nts., 6/1/06 495,000 --
495,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts.,
Series A, 6/30/02 (5) 223,266 167,450 390,716
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Imax Corp., 7% Sr. Nts., 3/1/01 (8) -- 313,600
313,600
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Trump Atlantic City Associates/Trump
Atlantic City Funding, Inc., 11.25% First Mtg.
Nts., 5/1/06 -- 99,250 99,250
---------------------------------------------------------
718,266 652,078 1,370,344
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
MEDIA - 2.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
American Telecasting, Inc., 0%/14.50%
Sr. Disc. Nts., 6/15/04 (9) -- 75,488 75,488
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Australis Media Ltd., Units (each unit
consists of $1,000 principal amount of
0%/14% sr. sub. disc. nts., 5/15/03 and one
warrant to purchase 57.721 ordinary shares) (9)(10) -- 121,000
121,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Bell & Howell Co. (New), 0%/11.50% Sr.
Disc. Debs., Series B, 3/1/05 (9) -- 176,250 176,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Bell Cablemedia PLC, 0%/11.95% Sr.
Disc. Nts., 7/15/04 (9) 153,500 383,750 537,250
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Cablevision Industries Corp., 9.25% Sr.
Debs., Series B, 4/1/08 1,030,000 -- 1,030,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04 518,125 -- 518,125
10.50% Sr. Sub. Debs., 5/15/16 -- 255,000
255,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts., 6/1/04 (9) -- 158,500
158,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
News America Holdings, Inc., 8.50% Sr.
Nts., 2/15/05 1,061,373 -- 1,061,373
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Panamsat LP/Panamsat Capital Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03 (9) 1,137,500 682,500
1,820,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Rogers Cablesystems Ltd., 10% Sr. Sec.
Second Priority Debs., 12/1/07 1,005,000 301,500
1,306,500
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
SCI Television, Inc., 11% Sr. Nts., 6/30/05 535,625 --
535,625
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
Time Warner, Inc., 7.95% Nts., 2/1/00 1,028,109 --
1,028,109
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
TKR Cable I, Inc., 10.50% Sr. Debs.,
10/30/07 1,221,967 333,264 1,555,231
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
United International Holdings, Inc., Zero
Coupon Sr. Sec. Disc. Nts., 12.819%,
11/15/99 (6) 385,000 -- 385,000
- - ------------------------------------------------------------------------------------------------------------------
- - ---------
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
RETAIL: GENERAL - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PT Polysindo Eka Perkasa, Zero Coupon
Promissory Nts., 36.897%, 10/23/96 (6)IDR -- 1,200,000,000
1,200,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Synthetic Industries, Inc., 12.75% Sr. Sub.
Debs., 12/1/02 900,000 200,000
1,100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Cole National Group, Inc., 11.25% Sr.
Nts., 10/1/01 500,000 -- 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER NON-CYCLICALS - 1.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Grand Union Co., 12% Sr. Nts., 9/1/04 1,137,000 198,000
1,335,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Kash 'N Karry Food Stores, Inc., 11.50%
Sr. Nts., 2/1/03 (7) -- 564,400 564,400
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 -- 50,000
50,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 500,000 --
500,000
11% Sr. Sub. Nts., 6/15/05 500,000 --
500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES & SERVICES - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Magellan Health Services, Inc., 11.25%
Sr. Sub. Nts., Series A, 4/15/04 1,000,000 --
1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub.
Nts., 7/1/02 345,000 -- 345,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Coleman Holdings, Inc., Zero Coupon Sr.
Sec. Disc. Nts., Series B, 12.09%, 5/27/98 (6) 1,000,000 --
1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Fletcher Challenge Industries Ltd., 10%
Cv. Sub. Unsec. Nts., 4/30/05 NZD -- 70,000
70,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY SERVICES & PRODUCERS - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Global Marine, Inc., 12.75% Sr. Sec. Nts.,
12/15/99 400,000 -- 400,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
J. Ray McDermott SA, 9.375% Sr. Sub.
Bonds, 7/15/06 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Maxus Energy Corp., 11.50% Debs.,
11/15/15 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Mesa Operating Co., 10.625% Gtd. Sr.
Sub. Nts., 7/1/06 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
TransTexas Gas Corp., 11.50% Sr. Sec.
Gtd. Nts., 6/15/02 1,000,000 -- 1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Triton Energy Corp., Zero Coupon Sr. Sub.
Disc. Nts., 10.394%, 11/1/97 (6) -- 400,000
400,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
8,076,199 2,487,252 10,563,451
----------------------------------------------------------------
RETAIL: GENERAL - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PT Polysindo Eka Perkasa, Zero Coupon
Promissory Nts., 36.897%, 10/23/96 (6)IDR -- 511,932
511,932
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Synthetic Industries, Inc., 12.75% Sr. Sub.
Debs., 12/1/02 976,500 217,000 1,193,500
----------------------------------------------------------------
976,500 728,932 1,705,432
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
RETAIL: SPECIALTY - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Cole National Group, Inc., 11.25% Sr.
Nts., 10/1/01 534,375 -- 534,375
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONSUMER NON-CYCLICALS - 1.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
FOOD - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Grand Union Co., 12% Sr. Nts., 9/1/04 1,152,634 200,722
1,353,356
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Kash 'N Karry Food Stores, Inc., 11.50%
Sr. Nts., 2/1/03 (7) -- 567,222 567,222
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 -- 44,625
44,625
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 511,250 -- 511,250
11% Sr. Sub. Nts., 6/15/05 505,625 --
505,625
----------------------------------------------------------------
2,169,509 812,569 2,982,078
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HEALTHCARE/SUPPLIES & SERVICES - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Magellan Health Services, Inc., 11.25%
Sr. Sub. Nts., Series A, 4/15/04 1,095,000 --
1,095,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub.
Nts., 7/1/02 383,813 -- 383,813
----------------------------------------------------------------
1,478,813 -- 1,478,813
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
HOUSEHOLD GOODS - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Coleman Holdings, Inc., Zero Coupon Sr.
Sec. Disc. Nts., Series B, 12.09%, 5/27/98 (6) 855,000 --
855,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Fletcher Challenge Industries Ltd., 10%
Cv. Sub. Unsec. Nts., 4/30/05 NZD -- 50,290
50,290
----------------------------------------------------------------
855,000 50,290 905,290
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ENERGY SERVICES & PRODUCERS - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Global Marine, Inc., 12.75% Sr. Sec. Nts.,
12/15/99 434,000 -- 434,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
J. Ray McDermott SA, 9.375% Sr. Sub.
Bonds, 7/15/06 1,022,500 -- 1,022,500
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Maxus Energy Corp., 11.50% Debs.,
11/15/15 1,045,000 -- 1,045,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Mesa Operating Co., 10.625% Gtd. Sr.
Sub. Nts., 7/1/06 1,056,250 -- 1,056,250
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
TransTexas Gas Corp., 11.50% Sr. Sec.
Gtd. Nts., 6/15/02 1,065,000 -- 1,065,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Triton Energy Corp., Zero Coupon Sr. Sub.
Disc. Nts., 10.394%, 11/1/97 (6) -- 371,000
371,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
FINANCIAL - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
BANKS - 0.0%
- - ---------------------------------------------------------------------------------------------------------------------
Banco Bamerindus do Brasil SA,
10.50% Debs., 6/23/97 -- 25,000 25,000
- - ---------------------------------------------------------------------------------------------------------------------
Siam City Bank Co. Ltd., Zero Coupon
Debs., 11.084%, 10/31/96 (2)(6)THB -- 2,000,000 2,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
DIVERSIFIED FINANCIAL - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Banco del Atlantico SA, 7.875%
Eurobonds, 11/5/98 -- 50,000 50,000
- - ---------------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts.,
12/15/98 1,250,000 -- 1,250,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INSURANCE - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 8.125% Sr. Nts., 2/15/03 1,000,000 -- 1,000,000
- - ---------------------------------------------------------------------------------------------------------------------
Life Partners Group, Inc., 12.75% Sr.
Sub. Nts., 7/15/02 (11) -- 300,000 300,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL MATERIALS - 0.3%
- - ---------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 500,000 -- 500,000
11% Sr. Debs., 12/1/03 650,000 -- 650,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL SERVICES - 0.5%
- - ---------------------------------------------------------------------------------------------------------------------
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 1,000,000 200,000
1,200,000
- - ---------------------------------------------------------------------------------------------------------------------
Grupo Elektra SA de CV, 12.75% Sr.
Nts., 5/15/01 (12) -- 500,000 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TRANSPORTATION - 0.2%
- - ---------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital
Corp., 0%/13.375% Sr. Disc. Nts.,
Series B, 12/15/03 (9) -- 500,000 500,000
- - ---------------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts.,
Series 1993-A, 12/1/11 (5) -- 500,000 500,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TECHNOLOGY - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
AEROSPACE/DEFENSE - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc.,
12% Sr. Sub. Nts., Series B, 8/1/05 1,000,000 -- 1,000,000
- - ---------------------------------------------------------------------------------------------------------------------
Unisys Corp., 15% Credit Sensitive Nts.,
7/1/97 (4) 200,000 -- 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TELECOMMUNICATIONS-TECHNOLOGY - 1.0%
- - ---------------------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25%
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
--------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
4,622,750 371,000 4,993,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
FINANCIAL - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
BANKS - 0.0%
- - ---------------------------------------------------------------------------------------------------------------------
Banco Bamerindus do Brasil SA,
10.50% Debs., 6/23/97 -- 24,687 24,687
- - ---------------------------------------------------------------------------------------------------------------------
Siam City Bank Co. Ltd., Zero Coupon
Debs., 11.084%, 10/31/96 (2)(6)THB -- 77,981 77,981
--------------------------------------------------------------
-- 102,668 102,668
- - ------------------------------------------------------------------------------------------------------------------
- - ------
DIVERSIFIED FINANCIAL - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Banco del Atlantico SA, 7.875%
Eurobonds, 11/5/98 -- 48,875 48,875
- - ---------------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts.,
12/15/98 1,262,500 -- 1,262,500
-------------------------------------------------------------
1,262,500 48,875 1,311,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INSURANCE - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 8.125% Sr. Nts., 2/15/03 1,023,948 -- 1,023,948
- - ---------------------------------------------------------------------------------------------------------------------
Life Partners Group, Inc., 12.75% Sr.
Sub. Nts., 7/15/02 (11) -- 328,125 328,125
------------------------------------------------------------
1,023,948 328,125 1,352,073
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL MATERIALS - 0.3%
- - ---------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 521,250 -- 521,250
11% Sr. Debs., 12/1/03 713,375 -- 713,375
------------------------------------------------------------
1,234,625 -- 1,234,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------
INDUSTRIAL SERVICES - 0.5%
- - ---------------------------------------------------------------------------------------------------------------------
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 955,000 191,000
1,146,000
- - ---------------------------------------------------------------------------------------------------------------------
Grupo Elektra SA de CV, 12.75% Sr.
Nts., 5/15/01 (12) -- 525,000 525,000
------------------------------------------------------------
955,000 716,000 1,671,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TRANSPORTATION - 0.2%
- - ---------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital
Corp., 0%/13.375% Sr. Disc. Nts.,
Series B, 12/15/03 (9) (a) -- 378,125 378,125
- - ---------------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts.,
Series 1993-A, 12/1/11 (5) -- 402,500 402,500
------------------------------------------------------------
-- 780,625 780,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TECHNOLOGY - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------
AEROSPACE/DEFENSE - 0.4%
- - ---------------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc.,
12% Sr. Sub. Nts., Series B, 8/1/05 1,092,500 -- 1,092,500
- - ---------------------------------------------------------------------------------------------------------------------
Unisys Corp., 15% Credit Sensitive Nts.
7/1/97 (4) 212,000 -- 212,000
------------------------------------------------------------
1,304,500 -- 1,304,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
TELECOMMUNICATIONS-TECHNOLOGY - 1.0%
- - ---------------------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25%
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
MARKET VALUE
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
Sr. Disc. Nts., 12/1/04 (9) -- 200,000 200,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts.,
3/15/04 (5)(9) -- 350,000 350,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Cellular Communications International,
Inc., Zero Coupon Sr. Disc. Nts., 12.323%,
8/15/00 (6) -- 600,000 600,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Comunicacion Celular SA, 0%/13.125%
Sr. Deferred Coupon Bonds, 11/15/03 (9) -- 300,000
300,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Hyperion Telecommunications, Inc.:
0%/13% Sr. Disc. Nts., Series B, 4/15/03 (9)(12) 500,000 --
500,000
0%/13% Sr. Disc. Nts., 4/15/03 (9)(12) -- 400,000
400,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06 (9) -- 270,000
270,000
0%/13.50% Sr. Disc. Nts., 9/15/05 (9) -- 100,000
100,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 (12) -- 300,000
300,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
ORBCOMM Global LP/ORBCOMM Global
Capital Corp., 14% Sr. Nts., 8/15/04 (12) -- 155,000
155,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PriCellular Wireless Corp., 0%/12.25%
Sr. Sub. Disc. Nts., 10/1/03 (9) 1,000,000 --
1,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PriCellular Wireless Corp., 0%/14% Sr.
Sub. Disc. Nts., 11/15/01 (9) -- 500,000
500,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Teleport Communications Group, Inc.,
0%/11.125% Sr. Disc. Nts., 7/1/07 (9) -- 400,000
400,000
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
CalEnergy Co., Inc., 0%/10.25% Sr. Disc.
Nts., 1/15/04 (9) -- 450,000 450,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
El Paso Electric Co., 9.40% First Mtg.
Bonds, Series E, 5/1/11 -- 250,000 250,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
First PV Funding Corp., 10.15% Lease
Obligation Bonds, Series 1986B, 1/15/16 1,000,000 300,000
1,300,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
New Zealand Electric Corp., 10% Debs.,
10/15/01 NZD -- 330,000 330,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 -- 431,034
431,034
9.50% Sr. Sec. Nts., 12/28/08 (12) -- 86,206
86,206
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Western Wireless Corp., 10.50% Sr.
Sub. Nts., 6/1/06 750,000 -- 750,000
Total Non-Convertible Corporate Bonds and Notes (Cost
$35,105,263, Cost $12,668,769, Combined $47,774,032)
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONVERTIBLE CORPORATE BONDS AND NOTES - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Banco de Colombia, 5.20% Cv. Jr.
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
--------------------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
<S> <C> <C> <C>
Sr. Disc. Nts., 12/1/04 (9) -- 156,500 156,500
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts.,
3/15/04 (5)(9) -- 282,625 282,625
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Cellular Communications International,
Inc., Zero Coupon Sr. Disc. Nts., 12.323%,
8/15/00 (6) -- 382,500 382,500
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Comunicacion Celular SA, 0%/13.125%
Sr. Deferred Coupon Bonds, 11/15/03 (9) -- 186,000
186,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Hyperion Telecommunications, Inc.:
0%/13% Sr. Disc. Nts., Series B, 4/15/03 (9)(12) 307,500 --
307,500
0%/13% Sr. Disc. Nts., 4/15/03 (9)(12) -- 246,000
246,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06 (9) -- 168,075
168,075
0%/13.50% Sr. Disc. Nts., 9/15/05 (9) -- 67,375
67,375
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 (12) -- 314,250
314,250
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
ORBCOMM Global LP/ORBCOMM Global
Capital Corp., 14% Sr. Nts., 8/15/04 (12) -- 160,037
160,037
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PriCellular Wireless Corp., 0%/12.25%
Sr. Sub. Disc. Nts., 10/1/03 (9) 815,000 --
815,000
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
PriCellular Wireless Corp., 0%/14% Sr.
Sub. Disc. Nts., 11/15/01 (9) -- 471,250
471,250
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Teleport Communications Group, Inc.,
0%/11.125% Sr. Disc. Nts., 7/1/07 (9) -- 258,000
258,000
----------------------------------------------------------
1,122,500 2,692,612 3,815,112
----------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
UTILITIES - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
ELECTRIC UTILITIES - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
CalEnergy Co., Inc., 0%/10.25% Sr. Disc.
Nts., 1/15/04 (9) -- 460,125 460,125
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
El Paso Electric Co., 9.40% First Mtg.
Bonds, Series E, 5/1/11 -- 258,750 258,750
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
First PV Funding Corp., 10.15% Lease
Obligation Bonds, Series 1986B, 1/15/16 1,057,500 317,250
1,374,750
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
New Zealand Electric Corp., 10% Debs.,
10/15/01 NZD -- 245,092 245,092
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 -- 431,573
431,573
9.50% Sr. Sec. Nts., 12/28/08 (12) -- 86,315
86,315
----------------------------------------------------------
1,057,500 1,799,105 2,856,605
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
TELEPHONE UTILITIES - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - -------------
Western Wireless Corp., 10.50% Sr.
Sub. Nts., 6/1/06 770,625 -- 770,625
----------------------------------------------------------
Total Non-Convertible Corporate Bonds and Notes (Cost
$35,105,263, Cost $12,668,769, Combined $47,774,032) 36,164,193
13,153,611 49,317,804
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
CONVERTIBLE CORPORATE BONDS AND NOTES - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ----------------
Banco de Colombia, 5.20% Cv. Jr
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
FACE AMOUNT (1)
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
Sub. Unsec. Nts., 2/1/99 -- 50,000 50,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Capstone Capital Corp., 10.50% Cv.
Sub. Debs., 4/1/02 -- 190,000 190,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
MEDIQ, Inc., 7.50% Exchangeable Sub.
Debs., 7/15/03 1,650,000 -- 1,650,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Protection One Alarm Monitoring, Inc.,
6.75% Cv. Sr. Sub. Nts., 9/15/03 -- 110,000 110,000
Total Convertible Corporate Bonds and Notes (Cost
$1,552,096, Cost, $344,794, Combined $1,896,890)
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
----------------------------------------------------------
Opp. Multiple Opp. Stategic Income Pro Forma
Strategies Fund & Growth Fund Combined
- - ------------------------------------------------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
Sub. Unsec. Nts., 2/1/99 -- 46,500 46,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Capstone Capital Corp., 10.50% Cv.
Sub. Debs., 4/1/02 -- 247,475 247,475
- - ------------------------------------------------------------------------------------------------------------------
- - ------
MEDIQ, Inc., 7.50% Exchangeable Sub.
Debs., 7/15/03 1,476,750 -- 1,476,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------
Protection One Alarm Monitoring, Inc.,
6.75% Cv. Sr. Sub. Nts., 9/15/03 -- 108,144 108,144
Total Convertible Corporate Bonds and Notes (Cost
$1,552,096, Cost, $344,794, Combined $1,896,890) 1,476,750 402,119
1,878,869
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - 48.9%
- - -----------------------------------------------------------------------------------------
BASIC MATERIALS - 2.5%
- - -----------------------------------------------------------------------------------------
CHEMICALS - 1.6%
--------------------------------------------------------------------------------------
Agrium, Inc. 80,000 -- 80,000
--------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 90,000 -- 90,000
--------------------------------------------------------------------------------------
Morton International, Inc. -- 24,000 24,000
--------------------------------------------------------------------------------------
Union Carbide Corp. -- 18,000 18,000
- - -----------------------------------------------------------------------------------------
METALS - 0.4%
--------------------------------------------------------------------------------------
Brush Wellman, Inc. 72,300 -- 72,300
- - -----------------------------------------------------------------------------------------
PAPER - 0.5%
--------------------------------------------------------------------------------------
Aracruz Celulose SA, Sponsored ADR, Cl. B 99,000 -- 99,000
--------------------------------------------------------------------------------------
Stone Container Corp. 54,200 -- 54,200
- - -----------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 8.7%
- - -----------------------------------------------------------------------------------------
AUTOS & HOUSING - 1.0%
--------------------------------------------------------------------------------------
Capstone Capital Corp. -- 260 260
--------------------------------------------------------------------------------------
Duracell International, Inc. 16,000 -- 16,000
--------------------------------------------------------------------------------------
Fleetwood Enterprises, Inc. -- 42,000 42,000
--------------------------------------------------------------------------------------
General Motors Corp. 18,000 -- 18,000
--------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones, SA 193,056 -- 193,056
- - -----------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.6%
--------------------------------------------------------------------------------------
Alaska Air Group, Inc. (13) 77,000 -- 77,000
--------------------------------------------------------------------------------------
AMR Corp. (13)(14) 17,600 22,000 39,600
--------------------------------------------------------------------------------------
Carnival Corp., Cl. A 43,800 -- 43,800
--------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc. (13) 18,000 -- 18,000
--------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 55,300 -- 55,300
--------------------------------------------------------------------------------------
Delta Air Lines, Inc. -- 16,000 16,000
--------------------------------------------------------------------------------------
Eastman Kodak Co. 22,000 -- 22,000
--------------------------------------------------------------------------------------
International Game Technology 68,000 -- 68,000
--------------------------------------------------------------------------------------
King World Productions, Inc. (13) 27,000 -- 27,000
--------------------------------------------------------------------------------------
Mattel, Inc. 39,437 -- 39,437
--------------------------------------------------------------------------------------
Outback Steakhouse, Inc. (13) 2,400 -- 2,400
--------------------------------------------------------------------------------------
Shangri-La Asia Ltd. 550,000 -- 550,000
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - 48.9%
- - ---------------------------------------------------------------------------------------------
BASIC MATERIALS - 2.5%
- - ---------------------------------------------------------------------------------------------
CHEMICALS - 1.6%
------------------------------------------------------------------------------------------
Agrium, Inc. 1,086,250 -- 1,086,250
------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 3,304,341 -- 3,304,341
------------------------------------------------------------------------------------------
Morton International, Inc. -- 954,000 954,000
------------------------------------------------------------------------------------------
Union Carbide Corp. -- 821,250 821,250
----------------------------------------
4,390,591 1,775,250 6,165,841
- - ---------------------------------------------------------------------------------------------
METALS - 0.4%
------------------------------------------------------------------------------------------
Brush Wellman, Inc. 1,391,775 -- 1,391,775
- - ---------------------------------------------------------------------------------------------
PAPER - 0.5%
------------------------------------------------------------------------------------------
Aracruz Celulose SA, Sponsored ADR, Cl. B 866,250 -- 866,250
------------------------------------------------------------------------------------------
Stone Container Corp. 846,875 -- 846,875
----------------------------------------
1,713,125 -- 1,713,125
- - ---------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 8.7%
- - ---------------------------------------------------------------------------------------------
AUTOS & HOUSING - 1.0%
------------------------------------------------------------------------------------------
Capstone Capital Corp. -- 5,460 5,460
------------------------------------------------------------------------------------------
Duracell International, Inc. 1,026,000 -- 1,026,000
------------------------------------------------------------------------------------------
Fleetwood Enterprises, Inc. -- 1,291,500 1,291,500
------------------------------------------------------------------------------------------
General Motors Corp. 864,000 -- 864,000
------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones, SA 563,796 -- 563,796
----------------------------------------
2,453,796 1,296,960 3,750,756
- - ---------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.6%
------------------------------------------------------------------------------------------
Alaska Air Group, Inc. (13) 1,645,875 -- 1,645,875
------------------------------------------------------------------------------------------
AMR Corp. (13)(14) 1,401,400 1,751,750 3,153,150
------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 1,357,800 -- 1,357,800
------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc. (13) 636,750 -- 636,750
------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 1,251,162 -- 1,251,162
------------------------------------------------------------------------------------------
Delta Air Lines, Inc. -- 1,152,000 1,152,000
------------------------------------------------------------------------------------------
Eastman Kodak Co. 1,727,000 -- 1,727,000
------------------------------------------------------------------------------------------
International Game Technology 1,394,000 -- 1,394,000
------------------------------------------------------------------------------------------
King World Productions, Inc. (13) 995,625 -- 995,625
------------------------------------------------------------------------------------------
Mattel, Inc. 1,020,432 -- 1,020,432
------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. (13) 57,900 -- 57,900
------------------------------------------------------------------------------------------
Shangri-La Asia Ltd. 732,573 -- 732,573
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
SHARES
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shimano, Inc. 54,000 -- 54,000
---------------------------------------------------------------------------------------
U S West Media Group (13) 47,000 -- 47,000
- - ------------------------------------------------------------------------------------------
MEDIA - 1.3%
---------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 112,800 -- 112,800
---------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 21,000 -- 21,000
---------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A (13) -- 900 900
---------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 1,440,000 -- 1,440,000
---------------------------------------------------------------------------------------
Time Warner, Inc. 30,000 -- 30,000
- - ------------------------------------------------------------------------------------------
RETAIL: GENERAL - 1.3%
---------------------------------------------------------------------------------------
Cone Mills Corp. (13) 161,500 -- 161,500
---------------------------------------------------------------------------------------
Donna Karan International, Inc. (13) 44,500 -- 44,500
---------------------------------------------------------------------------------------
Price/Costco, Inc. (13) 54,300 -- 54,300
---------------------------------------------------------------------------------------
Russell Corp. -- 36,000 36,000
- - ------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 0.5%
---------------------------------------------------------------------------------------
Gymboree Corp. (13)(14) 33,000 -- 33,000
---------------------------------------------------------------------------------------
Toys 'R' Us, Inc. (13)(14) 32,600 -- 32,600
- - ------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 8.2%
- - ------------------------------------------------------------------------------------------
BEVERAGES - 0.5%
---------------------------------------------------------------------------------------
Guinness PLC 144,000 -- 144,000
---------------------------------------------------------------------------------------
PepsiCo, Inc. -- 26,000 26,000
---------------------------------------------------------------------------------------
Whitman Corp. 11,500 -- 11,500
- - ------------------------------------------------------------------------------------------
FOOD - 1.1%
---------------------------------------------------------------------------------------
Chiquita Brands International, Inc. 45,000 -- 45,000
---------------------------------------------------------------------------------------
Groupe Danone 3,707 -- 3,707
---------------------------------------------------------------------------------------
IBP, Inc. (14) 27,000 -- 27,000
---------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 20,000 -- 20,000
---------------------------------------------------------------------------------------
Sara Lee Corp. 30,000 -- 30,000
- - ------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 3.7%
---------------------------------------------------------------------------------------
Abbott Laboratories 20,000 -- 20,000
---------------------------------------------------------------------------------------
American Home Products Corp. 15,400 -- 15,400
---------------------------------------------------------------------------------------
Astra AB Free, Series A 23,000 -- 23,000
---------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. (14) 21,400 -- 21,400
---------------------------------------------------------------------------------------
Ciba-Geigy AG 2,275 -- 2,275
---------------------------------------------------------------------------------------
Genzyme Corp. (13) 42,000 -- 42,000
---------------------------------------------------------------------------------------
Johnson & Johnson 36,800 22,000 58,800
---------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 45,800 -- 45,800
---------------------------------------------------------------------------------------
SmithKline Beecham PLC, ADR 16,000 -- 16,000
- - ------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 1.1%
---------------------------------------------------------------------------------------
Manor Care, Inc. (14) 21,600 -- 21,600
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shimano, Inc. 1,003,636 -- 1,003,636
----------------------------------------------------------------------------------------
U S West Media Group (13) 793,125 -- 793,125
----------------------------------------
14,017,278 2,903,750 16,921,028
- - -------------------------------------------------------------------------------------------
MEDIA - 1.3%
----------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 1,734,300 -- 1,734,300
----------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 777,000 -- 777,000
----------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A (13) -- 24,525 24,525
----------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 1,070,733 -- 1,070,733
----------------------------------------------------------------------------------------
Time Warner, Inc. 1,158,750 -- 1,158,750
----------------------------------------
4,740,783 24,525 4,765,308
- - -------------------------------------------------------------------------------------------
RETAIL: GENERAL - 1.3%
----------------------------------------------------------------------------------------
Cone Mills Corp. (13) 1,271,812 -- 1,271,812
----------------------------------------------------------------------------------------
Donna Karan International, Inc. (13) 1,017,937 -- 1,017,937
----------------------------------------------------------------------------------------
Price/Costco, Inc. (13) 1,113,150 -- 1,113,150
----------------------------------------------------------------------------------------
Russell Corp. -- 1,161,000 1,161,000
----------------------------------------
3,402,899 1,161,000 4,563,899
- - -------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 0.5%
----------------------------------------------------------------------------------------
Gymboree Corp. (13)(14) 1,002,375 -- 1,002,375
----------------------------------------------------------------------------------------
Toys 'R' Us, Inc. (13)(14) 949,475 -- 949,475
----------------------------------------
1,951,850 -- 1,951,850
- - -------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 8.2%
- - -------------------------------------------------------------------------------------------
BEVERAGES - 0.5%
----------------------------------------------------------------------------------------
Guinness PLC 1,029,967 -- 1,029,967
----------------------------------------------------------------------------------------
PepsiCo, Inc. -- 734,500 734,500
----------------------------------------------------------------------------------------
Whitman Corp. 265,938 -- 265,938
----------------------------------------
1,295,905 734,500 2,030,405
- - -------------------------------------------------------------------------------------------
FOOD - 1.1%
----------------------------------------------------------------------------------------
Chiquita Brands International, Inc. 551,250 -- 551,250
----------------------------------------------------------------------------------------
Groupe Danone 541,550 -- 541,550
----------------------------------------------------------------------------------------
IBP, Inc. (14) 627,750 -- 627,750
----------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 1,115,232 -- 1,115,232
----------------------------------------------------------------------------------------
Sara Lee Corp. 1,072,500 -- 1,072,500
----------------------------------------
3,908,282 -- 3,908,282
- - -------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 3.7%
----------------------------------------------------------------------------------------
Abbott Laboratories 985,000 -- 985,000
----------------------------------------------------------------------------------------
American Home Products Corp. 981,750 -- 981,750
----------------------------------------------------------------------------------------
Astra AB Free, Series A 971,240 -- 971,240
----------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. (14) 2,062,425 -- 2,062,425
----------------------------------------------------------------------------------------
Ciba-Geigy AG 2,911,013 -- 2,911,013
----------------------------------------------------------------------------------------
Genzyme Corp. (13) 1,071,000 -- 1,071,000
----------------------------------------------------------------------------------------
Johnson & Johnson 1,886,000 1,127,500 3,013,500
----------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 784,325 -- 784,325
----------------------------------------------------------------------------------------
SmithKline Beecham PLC, ADR 974,000 -- 974,000
----------------------------------------
12,626,753 1,127,500 13,754,253
- - -------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 1.1%
----------------------------------------------------------------------------------------
Manor Care, Inc. (14) 828,900 -- 828,900
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
SHARES
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Medtronic, Inc. (14) 19,800 -- 19,800
--------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc. (13) 36,000 -- 36,000
--------------------------------------------------------------------------------------
WellPoint Health Networks, Inc. (13) 30,009 -- 30,009
- - -----------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.8%
--------------------------------------------------------------------------------------
Kimberly-Clark Corp. 9,800 -- 9,800
--------------------------------------------------------------------------------------
Procter & Gamble Co. 12,000 -- 12,000
--------------------------------------------------------------------------------------
Wella AG 1,350 -- 1,350
- - -----------------------------------------------------------------------------------------
TOBACCO - 1.0%
--------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 20,600 11,000 31,600
--------------------------------------------------------------------------------------
UST, Inc. -- 31,000 31,000
- - -----------------------------------------------------------------------------------------
ENERGY - 3.8%
- - -----------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.6%
--------------------------------------------------------------------------------------
Kerr-McGee Corp. 9,000 -- 9,000
--------------------------------------------------------------------------------------
Landmark Graphics Corp. (13) 28,600 -- 28,600
--------------------------------------------------------------------------------------
Weatherford Enterra, Inc. (13) 27,000 -- 27,000
- - -----------------------------------------------------------------------------------------
OIL-INTEGRATED - 3.2%
--------------------------------------------------------------------------------------
Atlantic Richfield Co. 13,500 -- 13,500
--------------------------------------------------------------------------------------
Enterprise Oil PLC 90,000 -- 90,000
--------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 12,000 -- 12,000
--------------------------------------------------------------------------------------
Phillips Petroleum Co. -- 29,000 29,000
--------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 6,300 -- 6,300
--------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 63,000 -- 63,000
--------------------------------------------------------------------------------------
Total SA, Sponsored ADR 17,800 -- 17,800
--------------------------------------------------------------------------------------
Unocal Corp. 50,000 35,000 85,000
--------------------------------------------------------------------------------------
USX-Marathon Group -- 57,000 57,000
--------------------------------------------------------------------------------------
YPF SA, Cl. D, ADR 35,000 -- 35,000
- - -----------------------------------------------------------------------------------------
FINANCIAL - 9.7%
- - -----------------------------------------------------------------------------------------
BANKS - 4.9%
--------------------------------------------------------------------------------------
Akbank T.A.S 1,995,500 -- 1,995,500
--------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 81,675 -- 81,675
--------------------------------------------------------------------------------------
BankAmerica Corp. -- 15,000 15,000
--------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) (14) 90,000 -- 90,000
--------------------------------------------------------------------------------------
Citicorp (14) 9,900 -- 9,900
--------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 22,500 -- 22,500
--------------------------------------------------------------------------------------
NationsBank Corp. (14) 65,200 14,000 79,200
- - -----------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.7%
--------------------------------------------------------------------------------------
American Express Co. 29,000 -- 29,000
--------------------------------------------------------------------------------------
Dean Witter, Discover & Co. 14,000 3,000 17,000
--------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 8,600 13,000 21,600
--------------------------------------------------------------------------------------
Federal National Mortgage Assn -- 27,000 27,000
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Medtronic, Inc. (14) 1,269,675 -- 1,269,675
--------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc. (13) 792,000 -- 792,000
--------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc. (13) 975,293 -- 975,293
------------------------------------------
3,865,868 -- 3,865,868
- - -----------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.8%
--------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 863,625 -- 863,625
--------------------------------------------------------------------------------------------
Procter & Gamble Co. 1,170,000 -- 1,170,000
--------------------------------------------------------------------------------------------
Wella AG 812,515 -- 812,515
------------------------------------------
2,846,140 -- 2,846,140
- - -----------------------------------------------------------------------------------------------
TOBACCO - 1.0%
--------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 1,848,850 987,250 2,836,100
--------------------------------------------------------------------------------------------
UST, Inc. -- 918,375 918,375
------------------------------------------
1,848,850 1,905,625 3,754,475
- - -----------------------------------------------------------------------------------------------
ENERGY - 3.8%
- - -----------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.6%
--------------------------------------------------------------------------------------------
Kerr-McGee Corp. 547,875 -- 547,875
--------------------------------------------------------------------------------------------
Landmark Graphics Corp. (13) 840,125 -- 840,125
--------------------------------------------------------------------------------------------
Weatherford Enterra, Inc. (13) 739,125 -- 739,125
------------------------------------------
2,127,125 -- 2,127,125
- - -----------------------------------------------------------------------------------------------
OIL-INTEGRATED - 3.2%
--------------------------------------------------------------------------------------------
Atlantic Richfield Co. 1,721,250 -- 1,721,250
--------------------------------------------------------------------------------------------
Enterprise Oil PLC 768,254 -- 768,254
--------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 631,500 -- 631,500
--------------------------------------------------------------------------------------------
Phillips Petroleum Co. -- 1,239,750 1,239,750
--------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 983,588 -- 983,588
--------------------------------------------------------------------------------------------
Saga Petroleum AS, Cl. B 925,397 -- 925,397
--------------------------------------------------------------------------------------------
Total SA, Sponsored ADR 696,425 -- 696,425
--------------------------------------------------------------------------------------------
Unocal Corp. 1,800,000 1,260,000 3,060,000
--------------------------------------------------------------------------------------------
USX-Marathon Group -- 1,232,625 1,232,625
--------------------------------------------------------------------------------------------
YPF SA, Cl. D, ADR 800,625 -- 800,625
------------------------------------------
8,327,039 3,732,375 12,059,414
- - -----------------------------------------------------------------------------------------------
FINANCIAL - 9.7%
- - -----------------------------------------------------------------------------------------------
BANKS - 4.9%
--------------------------------------------------------------------------------------------
Akbank T.A.S 1,9 204,215 -- 204,215
--------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 710,663 -- 710,663
--------------------------------------------------------------------------------------------
BankAmerica Corp. -- 1,231,875 1,231,875
--------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) (14) 7,211,250 -- 7,211,250
--------------------------------------------------------------------------------------------
Citicorp (14) 897,188 -- 897,188
--------------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 1,060,634 -- 1,060,634
--------------------------------------------------------------------------------------------
NationsBank Corp. (14) 5,664,250 1,216,250 6,880,500
------------------------------------------
15,748,200 2,448,125 18,196,325
- - -----------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.7%
--------------------------------------------------------------------------------------------
American Express Co. 1,341,250 -- 1,341,250
--------------------------------------------------------------------------------------------
Dean Witter, Discover & Co. 770,000 165,000 935,000
--------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 841,725 1,272,375 2,114,100
--------------------------------------------------------------------------------------------
Federal National Mortgage Assn -- 941,625 941,625
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
SHARES
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Green Tree Financial Corp. -- 36,000 36,000
----------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. -- 19,000 19,000
----------------------------------------------------------------------------------------
Morgan Stanley Group, Inc. -- 10,000 10,000
----------------------------------------------------------------------------------------
Salomon, Inc. -- 27,000 27,000
- - -------------------------------------------------------------------------------------------
INSURANCE - 2.1%
----------------------------------------------------------------------------------------
ACE Ltd. 20,000 -- 20,000
----------------------------------------------------------------------------------------
American International Group, Inc. (14) 8,100 -- 8,100
----------------------------------------------------------------------------------------
American Re Corp. (14) 36,000 -- 36,000
----------------------------------------------------------------------------------------
Cigna Corp. -- 10,000 10,000
----------------------------------------------------------------------------------------
Loews Corp. -- 13,000 13,000
----------------------------------------------------------------------------------------
Skandia Forsakrings AB 27,000 -- 27,000
----------------------------------------------------------------------------------------
UNUM Corp. 12,000 -- 12,000
- - -------------------------------------------------------------------------------------------
INDUSTRIAL - 4.2%
- - -------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.3%
----------------------------------------------------------------------------------------
General Electric Co. 13,400 -- 13,400
- - -------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 1.0%
----------------------------------------------------------------------------------------
Equitable Bag, Inc. (5)(13) -- 1,861 1,861
----------------------------------------------------------------------------------------
Owens Corning 54,000 -- 54,000
----------------------------------------------------------------------------------------
Rubbermaid, Inc. 25,300 -- 25,300
----------------------------------------------------------------------------------------
Wolverine Tube, Inc. (13) 23,500 -- 23,500
- - -------------------------------------------------------------------------------------------
MANUFACTURING - 1.5%
----------------------------------------------------------------------------------------
AGCO Corp. 32,400 -- 32,400
----------------------------------------------------------------------------------------
Dover Corp. -- 4,000 4,000
----------------------------------------------------------------------------------------
Mannesmann AG 3,500 -- 3,500
----------------------------------------------------------------------------------------
Pacific Dunlop Ltd. 333,000 -- 333,000
----------------------------------------------------------------------------------------
Tenneco, Inc. 38,000 -- 38,000
----------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 42,600 -- 42,600
- - -------------------------------------------------------------------------------------------
TRANSPORTATION - 1.4%
----------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 24,500 -- 24,500
----------------------------------------------------------------------------------------
Canadian National Railway Co. 27,000 -- 27,000
----------------------------------------------------------------------------------------
CSX Corp. -- 24,000 24,000
----------------------------------------------------------------------------------------
Stolt-Nielsen SA 58,200 -- 58,200
----------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 25,650 -- 25,650
- - -------------------------------------------------------------------------------------------
TECHNOLOGY - 10.0%
- - -------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.2%
----------------------------------------------------------------------------------------
Rockwell International Corp. 15,000 -- 15,000
- - -------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.3%
----------------------------------------------------------------------------------------
Compaq Computer Corp. (13) -- 18,000 18,000
----------------------------------------------------------------------------------------
Data General Corp. (13) -- 110,000 110,000
----------------------------------------------------------------------------------------
Digital Equipment Corp. (13)(14) 17,000 -- 17,000
----------------------------------------------------------------------------------------
International Business Machines Corp. 12,300 9,000 21,300
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Green Tree Financial Corp. -- 1,413,000 1,413,000
--------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. -- 1,246,875 1,246,875
--------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc. -- 497,500 497,500
--------------------------------------------------------------------------------------------
Salomon, Inc. -- 1,231,875 1,231,875
----------------------------------------
2,952,975 6,768,250 9,721,225
- - -----------------------------------------------------------------------------------------------
INSURANCE - 2.1%
--------------------------------------------------------------------------------------------
ACE Ltd. 1,057,500 -- 1,057,500
--------------------------------------------------------------------------------------------
American International Group, Inc. (14) 816,075 -- 816,075
--------------------------------------------------------------------------------------------
American Re Corp. (14) 2,286,000 -- 2,286,000
--------------------------------------------------------------------------------------------
Cigna Corp. -- 1,198,750 1,198,750
--------------------------------------------------------------------------------------------
Loews Corp. -- 1,005,875 1,005,875
--------------------------------------------------------------------------------------------
Skandia Forsakrings AB 747,206 -- 747,206
--------------------------------------------------------------------------------------------
UNUM Corp. 769,500 -- 769,500
----------------------------------------
5,676,281 2,204,625 7,880,906
- - -----------------------------------------------------------------------------------------------
INDUSTRIAL - 4.2%
- - -----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.3%
--------------------------------------------------------------------------------------------
General Electric Co. 1,219,400 -- 1,219,400
- - -----------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 1.0%
--------------------------------------------------------------------------------------------
Equitable Bag, Inc. (5)(13) -- 4,653 4,653
--------------------------------------------------------------------------------------------
Owens Corning 1,991,250 -- 1,991,250
--------------------------------------------------------------------------------------------
Rubbermaid, Inc. 619,850 -- 619,850
--------------------------------------------------------------------------------------------
Wolverine Tube, Inc. (13) 1,010,500 -- 1,010,500
----------------------------------------
3,621,600 4,653 3,626,253
- - -----------------------------------------------------------------------------------------------
MANUFACTURING - 1.5%
--------------------------------------------------------------------------------------------
AGCO Corp. 826,200 -- 826,200
--------------------------------------------------------------------------------------------
Dover Corp. -- 191,000 191,000
--------------------------------------------------------------------------------------------
Mannesmann AG 1,312,100 -- 1,312,100
--------------------------------------------------------------------------------------------
Pacific Dunlop Ltd. 690,320 -- 690,320
--------------------------------------------------------------------------------------------
Tenneco, Inc. 1,904,750 -- 1,904,750
--------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 479,250 -- 479,250
----------------------------------------
5,212,620 191,000 5,403,620
- - -----------------------------------------------------------------------------------------------
TRANSPORTATION - 1.4%
--------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 2,067,188 -- 2,067,188
--------------------------------------------------------------------------------------------
Canadian National Railway Co. 554,949 -- 554,949
--------------------------------------------------------------------------------------------
CSX Corp. -- 1,212,000 1,212,000
--------------------------------------------------------------------------------------------
Stolt-Nielsen SA 909,375 -- 909,375
--------------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 400,781 -- 400,781
----------------------------------------
3,932,293 1,212,000 5,144,293
- - -----------------------------------------------------------------------------------------------
TECHNOLOGY - 10.0%
- - -----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.2%
--------------------------------------------------------------------------------------------
Rockwell International Corp. 845,625 -- 845,625
- - -----------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.3%
--------------------------------------------------------------------------------------------
Compaq Computer Corp. (13) -- 1,154,250 1,154,250
--------------------------------------------------------------------------------------------
Data General Corp. (13) -- 1,540,000 1,540,000
--------------------------------------------------------------------------------------------
Digital Equipment Corp. (13)(14) 607,750 -- 607,750
--------------------------------------------------------------------------------------------
International Business Machines Corp. 1,531,350 1,120,500 2,651,850
</TABLE>
<PG$PCN>
<TABLE>
<CAPTION>
SHARES
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Moore Corp. Ltd. 40,000 -- 40,000
----------------------------------------------------------------------------------------
Xerox Corp. (14) 30,000 -- 30,000
- - -------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 3.2%
----------------------------------------------------------------------------------------
America Online, Inc. (13) 23,600 -- 23,600
----------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR (13) 50,000 -- 50,000
----------------------------------------------------------------------------------------
Computer Associates International, Inc. (14) 54,300 -- 54,300
----------------------------------------------------------------------------------------
Electronic Arts, Inc. (13)(14) 38,500 -- 38,500
----------------------------------------------------------------------------------------
Microsoft Corp. (13)(14) 6,700 -- 6,700
----------------------------------------------------------------------------------------
Nintendo Co. Ltd. 31,500 -- 31,500
----------------------------------------------------------------------------------------
Novell, Inc. (13) 97,000 -- 97,000
----------------------------------------------------------------------------------------
Sybase, Inc. (13) 32,000 -- 32,000
----------------------------------------------------------------------------------------
Symantec Corp. (13) 90,502 -- 90,502
- - -------------------------------------------------------------------------------------------
ELECTRONICS - 2.8%
----------------------------------------------------------------------------------------
Applied Materials, Inc. (13) -- 3,000 3,000
----------------------------------------------------------------------------------------
Hewlett-Packard Co. 31,500 -- 31,500
----------------------------------------------------------------------------------------
Intel Corp. (14) 54,000 -- 54,000
----------------------------------------------------------------------------------------
Kyocera Corp. 12,000 -- 12,000
----------------------------------------------------------------------------------------
LSI Logic Corp. (13) 36,500 -- 36,500
----------------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR, A Shares (14) 20,500 -- 20,500
----------------------------------------------------------------------------------------
VLSI Technology, Inc. (13) 51,200 -- 51,200
- - -------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.5%
----------------------------------------------------------------------------------------
Airtouch Communications, Inc. (13) 32,900 -- 32,900
----------------------------------------------------------------------------------------
Bay Networks, Inc. (13) 19,180 -- 19,180
----------------------------------------------------------------------------------------
Celcaribe SA (5)(13) -- 65,040 65,040
----------------------------------------------------------------------------------------
Cisco Systems, Inc. (13) 13,700 -- 13,700
----------------------------------------------------------------------------------------
ECI Telecommunications Ltd. (14) 45,000 -- 45,000
----------------------------------------------------------------------------------------
MCI Communications Corp. 89,000 -- 89,000
- - -------------------------------------------------------------------------------------------
UTILITIES - 1.8%
- - -------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.8%
----------------------------------------------------------------------------------------
Korea Electric Power Corp. 15,800 -- 15,800
----------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 42,000 -- 42,000
----------------------------------------------------------------------------------------
Verbund Oest Electriz 17,100 -- 17,100
- - -------------------------------------------------------------------------------------------
GAS UTILITIES - 0.2%
----------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. 374,488 -- 374,488
- - -------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 0.8%
----------------------------------------------------------------------------------------
BCE, Inc. 30,600 -- 30,600
----------------------------------------------------------------------------------------
Portugal Telecom SA (13) 10,500 -- 10,500
----------------------------------------------------------------------------------------
U S West Communications Group 50,000 -- 50,000
Total Common Stocks (Cost $103,868,767, Cost
$27,693,470, Combined $131,562,237)
</TABLE>
<TABLE>
<CAPTION>
SHARES
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Moore Corp. Ltd. 735,000 -- 735,000
--------------------------------------------------------------------------------------------
Xerox Corp. (14) 1,608,750 -- 1,608,750
4,482,850 3,814,750 8,297,600
- - -----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 3.2%
--------------------------------------------------------------------------------------------
America Online, Inc. (13) 840,750 -- 840,750
--------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR (13) 962,500 -- 962,500
--------------------------------------------------------------------------------------------
Computer Associates International, Inc. (14) 3,244,425 -- 3,244,425
--------------------------------------------------------------------------------------------
Electronic Arts, Inc. (13)(14) 1,438,938 -- 1,438,938
--------------------------------------------------------------------------------------------
Microsoft Corp. (13)(14) 883,563 -- 883,563
--------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 2,022,222 -- 2,022,222
--------------------------------------------------------------------------------------------
Novell, Inc. (13) 1,067,000 -- 1,067,000
--------------------------------------------------------------------------------------------
Sybase, Inc. (13) 476,000 -- 476,000
--------------------------------------------------------------------------------------------
Symantec Corp. (13) 984,209 -- 984,209
----------------------------------------
11,919,607 -- 11,919,607
- - -----------------------------------------------------------------------------------------------
ELECTRONICS - 2.8%
--------------------------------------------------------------------------------------------
Applied Materials, Inc. (13) -- 82,875 82,875
--------------------------------------------------------------------------------------------
Hewlett-Packard Co. 1,535,625 -- 1,535,625
--------------------------------------------------------------------------------------------
Intel Corp. (14) 5,153,625 -- 5,153,625
--------------------------------------------------------------------------------------------
Kyocera Corp. 856,566 -- 856,566
--------------------------------------------------------------------------------------------
LSI Logic Corp. (13) 848,625 -- 848,625
--------------------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR, A Shares (14) 907,125 -- 907,125
--------------------------------------------------------------------------------------------
VLSI Technology, Inc. (13) 832,000 -- 832,000
----------------------------------------
10,133,566 82,875 10,216,441
- - -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.5%
--------------------------------------------------------------------------------------------
Airtouch Communications, Inc. (13) 908,863 -- 908,863
--------------------------------------------------------------------------------------------
Bay Networks, Inc. (13) 522,655 -- 522,655
--------------------------------------------------------------------------------------------
Celcaribe SA (5)(13) -- 94,308 94,308
--------------------------------------------------------------------------------------------
Cisco Systems, Inc. (13) 850,256 -- 850,256
--------------------------------------------------------------------------------------------
ECI Telecommunications Ltd. (14) 945,000 -- 945,000
--------------------------------------------------------------------------------------------
MCI Communications Corp. 2,280,625 -- 2,280,625
----------------------------------------
5,507,399 94,308 5,601,707
- - -----------------------------------------------------------------------------------------------
UTILITIES - 1.8%
- - -----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.8%
--------------------------------------------------------------------------------------------
Korea Electric Power Corp. 522,203 -- 522,203
--------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 1,123,500 -- 1,123,500
--------------------------------------------------------------------------------------------
Verbund Oest Electriz 1,182,642 -- 1,182,642
----------------------------------------
2,828,345 -- 2,828,345
- - -----------------------------------------------------------------------------------------------
GAS UTILITIES - 0.2%
--------------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. 636,817 -- 636,817
- - -----------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 0.8%
--------------------------------------------------------------------------------------------
BCE, Inc. 1,308,150 -- 1,308,150
--------------------------------------------------------------------------------------------
Portugal Telecom SA (13) 270,107 -- 270,107
--------------------------------------------------------------------------------------------
U S West Communications Group 1,487,500 -- 1,487,500
----------------------------------------
3,065,757 -- 3,065,757
Total Common Stocks (Cost $103,868,767, Cost ----------------------------------------
$27,693,470, Combined $131,562,237) 148,691,394 31,482,071 180,173,465
</TABLE>
<PG$PCN>
<TABLE>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.8%
---------------------------------------------------------------------------------------
Alumax, Inc., $4.00 Cv., Series A 6,333 -- 6,333
---------------------------------------------------------------------------------------
California Federal Bank, 10.625%
Non-Cum., Series B -- 500 500
---------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv.,
Series A 17,666 -- 17,666
---------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. -- 2,000 2,000
---------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B -- 12,000 12,000
---------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Cum., Series K,
Exchangeable Preferred Stock (5)(7) 734 -- 734
Total Preferred Stocks (Cost $1,973,515,
Cost $551,813, Combined $2,525,328)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------
OTHER SECURITIES - 0.0%
- - ------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., 8.255% Cv. Preferred
Redeemable Increased Dividend Equity
Securities (Cost $25,344) -- 2,400 2,400 --
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
UNITS
- - ------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Telecasting, Inc. Wts., Exp. 6/99 -- 2,000 2,000
---------------------------------------------------------------------------------------
Communication Cellular SA Wts., Exp. 11/03 (5) -- 300 300
---------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
Wts., Exp. 9/97 57,874 -- 57,874
---------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc.
Wts., Exp. 4/01 (5) 500 400 900
---------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 (5) -- 300 300
Total Rights, Warrants and Certificates
(Cost $15,337, Cost $0, Combined $15,337)
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
FACE AMOUNT(1)
- - ------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 0.8%
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bayerische Landesbank Girozentrale, New
York Branch, 7.15% Deutsche Mark
Currency Protected Yield Curve CD, 7/25/97 $ -- $ 70,000 $ 70,000
---------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce,
New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to
the cross currency rates of Greek Drachma
and European Currency Unit) -- 550,000 550,000
16.75% CD Linked Nts., 4/16/97 (indexed to
the Federation GKO, Zero Coupon, 4/9/97) -- 100,000 100,000
17.30% CD Linked Nts., 2/26/97 (indexed to
the Federation GKO, Zero Coupon, 2/19/97) -- 200,000 200,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.8%
----------------------------------------------------------------------------------------------
Alumax, Inc., $4.00 Cv., Series A 861,288 -- 861,288
----------------------------------------------------------------------------------------------
California Federal Bank, 10.625%
Non-Cum., Series B -- 55,125 55,125
----------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv.,
Series A 925,257 -- 925,257
----------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. -- 226,500 226,500
----------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B -- 240,000 240,000
----------------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Cum., Series K,
Exchangeable Preferred Stock (5)(7) 774,370 -- 774,370
Total Preferred Stocks (Cost $1,973,515, -----------------------------------------
Cost $551,813, Combined $2,525,328) 2,560,915 521,625 3,082,540
</TABLE>
<TABLE>
<S> <C> <C>
- - -------------------------------------------------------------------------------------------------
OTHER SECURITIES - 0.0%
- - -------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., 8.255% Cv. Preferred
Redeemable Increased Dividend Equity
Securities (Cost $25,344) 27,000 27,000
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------
UNITS
- - -------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Telecasting, Inc. Wts., Exp. 6/99 -- 9,000 9,000
----------------------------------------------------------------------------------------------
Communication Cellular SA Wts., Exp. 11/03 (5) -- 1,500 1,500
----------------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
Wts., Exp. 9/97 17,587 -- 17,587
----------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc.
Wts., Exp. 4/01 (5) 5,000 4,000 9,000
----------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 (5) -- -- --
-----------------------------------------
Total Rights, Warrants and Certificates
(Cost $15,337, Cost $0, Combined $15,337) 22,587 14,500 37,087
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------
FACE AMOUNT(1)
- - -------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 0.8%
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bayerische Landesbank Girozentrale, New
York Branch, 7.15% Deutsche Mark
Currency Protected Yield Curve CD, 7/25/97 -- 69,454 69,454
----------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce,
New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to
the cross currency rates of Greek Drachma
and European Currency Unit) -- 543,070 543,070
16.75% CD Linked Nts., 4/16/97 (indexed to
the Federation GKO, Zero Coupon, 4/9/97) -- 99,400 99,400
17.30% CD Linked Nts., 2/26/97 (indexed to
the Federation GKO, Zero Coupon, 2/19/97) -- 199,200 199,200
</TABLE>
<PG$PCN>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Internationale Nederlanden Bank NV,
Prague Branch, Zero Coupon Promissory
Nts., 10.486%, 4/28/97 (6)CZK -- 4,600,000 4,600,000 --
160,735 160,735
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Internationale Nederlanden (U.S.) Capital
Holdings Corp.:
Czech Koruna Linked Nts., 11.60%,
12/23/96 -- 70,000 70,000 -- 69,165 69,165
Zero Coupon Chilean Peso Linked Nts.,
11.122%, 12/11/96 (6) -- 130,000 130,000 -- 126,386
126,386
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Salomon Brothers, Inc., Zero Coupon
Chilean Peso Indexed Enhanced Access
Nts.:
12.145%, 12/11/96 (6) -- 70,000 70,000 -- 68,180
68,180
10.853%, 12/18/96 (6) -- 70,000 70,000 -- 67,914
67,914
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Swiss Bank Corp., New York Branch, 6.60%
CD Linked Nts., 1/30/97 (indexed to the
closing Nikkei 225 Index on 1/23/97) NZD -- 256,720 256,720 --
186,629 186,629
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United Mexican States Linked Nts.,
11/27/96 (indexed to the greater of Cetes
Option Amount or USD LIBOR Option Amount,
11/27/96) -- 380,000 380,000 -- 462,808
462,808
---------------------------------
Total Structured Instruments (Cost $2,010,133) -- 2,052,941
2,052,941
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PUT OPTIONS PURCHASED - 0.0%
Italy (Republic of) Treasury Bonds, Buoni del
Tesoro Poliennali, 9.50%, 5/1/01 Put Opt 7/97 $102.30 -- 211 211 -- 1,057
1,057
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Swiss Franc Put Opt 10/96 1.22 CHF -- 885,245 885,245 -- 23,628
23,628
---------------------------------
Total Put Options Purchased (Cost $12,370) -- 24,685
24,685
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT(1)
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS - 7.1%
Repurchase agreement with Zion First
National Bank, 5.62%, dated 9/30/96, to be
repurchased at $24,003,747 on 10/1/96,
collateralized by U.S. Treasury Nts., 5.75%-
8.875%, 5/15/97-8/15/04, with a value
of $24,493,438 $24,000,000 $ -- $24,000,000 24,000,000 --
24,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repurchase agreement with PaineWebber,
Inc., 5.62%, dated 9/30/96, to be repurchased
at $2,100,328 on 10/1/96, collateralized by
U.S. Treasury Bonds, 6.75%, 8/15/26, with a
value of $2,067,056 and U.S. Treasury Nts.,
6.125%, 5/15/98, with a value of $77,236 -- 2,100,000 2,100,000 --
2,100,000 2,100,000
</TABLE>
<PG$PCN>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Total Repurchase Agreements (Cost $24,000,000,
Cost $2,100,000, Combined $26,100,000) 24,000,000 2,100,000
26,100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
TOTAL INVESTMENTS, AT VALUE (COST $241,874,276,
COST $75,252,756, COMBINED $316,927,032) 100.0% 104.6% 101.00%
291,465,285 80,295,960 371,761,245
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0) (4.6) (1.0) (23,538)
(3,509,389) (3,532,927)
----- ----- ----- ------------- ------------- -------------
NET ASSETS 100.0% 100.0% 100.0% $ 291,441,747 $
76,786,571 $ 368,228,318
===== ===== ===== =============
============= =============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD - Australian Dollar IEP - Irish Punt
CAD - Canadian Dollar ITL - Italian Lira
CHF - Swiss Franc JPY - Japanese Yen
CZK - Czech Koruna MXP - Mexican Peso
DEM - German Deutsche Mark NZD - New Zealand Dollar
DKK - Danish Krone PLZ - Polish Zloty
ESP - Spanish Peseta SEK - Swedish Krona
GBP - British Pound Sterling THB - Thai Baht
IDR - Indonesian Rupiah ZAR - South African Rand
2. When-issued security to be delivered and settled after September 30,
1996.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed-income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to
changes in prepayment rates than traditional mortgage-backed securities (for
example, GNMA pass-throughs). Interest rates disclosed represent current
yields based upon the current cost basis and estimated timing and amount of
future cash flows.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid.
6. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
7. Interest or dividend is paid in kind.
8. Represents the current interest rate for an increasing rate security.
9. Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
10. Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units
which represent debt securities, face amount disclosed represents total
underlying principal.
11. Securities with an aggregate market value of $328,125 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts.
12. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $1,639,102 or 0.45% the combined net
assets, at September 30, 1996.
13. Non-income producing security.
<PG$PCN>
14. A sufficient amount of securities has been designated to cover outstanding
call options, as follows:
<TABLE>
<CAPTION>
Shares Expiration Exercise Premium Market
Value
Subject to Call Date Price Received See Note
1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 3,200 1/97 $ 95 $ 8,300 $ 3,200
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
American International Group, Inc. 1,600 2/97 100 5,752
9,400
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
American Re Corp. 7,200 1/97 50 25,175
106,200
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
American Re Corp. 4,500 10/96 65 4,927 563
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Bristol-Myers Squibb Co. 4,400 12/96 95 7,568
18,700
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Chase Manhattan Corp. (New) 19,000 3/97 80 73,053
114,000
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Citicorp 2,000 1/97 90 9,440 11,750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Computer Associates International, Inc. 10,800 1/97 55 34,775
87,750
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Computer Associates International, Inc. 10,800 1/97 60 50,974
67,500
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Digital Equipment Corp. 3,400 1/97 45 7,123
4,250
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
ECI Telecommunications Ltd. 9,000 2/97 25 16,604
12,375
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Electronic Arts, Inc. 8,400 3/97 30 30,197 87,150
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Gymboree Corp. 6,600 1/97 35 8,877 14,438
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
IBP, Inc. 27,000 11/96 25 59,938 10,125
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Intel Corp. 10,800 1/97 90 33,425 113,400
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Manor Care, Inc. 4,200 4/97 40 5,649 9,713
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Medtronic, Inc. 3,800 2/97 55 12,236 40,850
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Microsoft Corp. 6,700 1/97 125 60,097 97,150
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
NationsBank Corp. 13,000 2/97 90 67,858
47,124
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Nokia Corp., Sponsored ADR, A Shares 4,000 4/97 45 10,880
18,500
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Toys 'R' Us, Inc. 6,400 3/97 35 6,608 3,200
- - ------------------------------------------------------------------------------------------------------------------
- - -----------
Xerox Corp. 6,000 1/97 55 12,738 18,750
==========================
$ 552,194 $ 896,088
==========================
</TABLE>
15. A sufficient amount of securities have been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
Contracts/Face Expiration Exercise Premium Market
Value
Subject to Call Date Price Received See Note
1
- - ------------------------------------------------------------------------------------------------------------------
- - ---------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 461,100 10/96 1.258 AUD $ 3,074
$ 555
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on New Zealand Dollar 191,675 10/96 1.435 NZD
930 1,131
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on New Zealand Dollar 163,560 10/96 1.437 NZD
816 1,112
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on Swiss Franc 939,130 10/96 1.15 CHF 2,047
94
- - ------------------------------------------------------------------------------------------------------------------
- - ------------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 500,000 10/96 $90.438
3,711 1,016
====================
$10,578 $3,908
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund, Oppenheimer Strategic Income &
Growth, and Oppenheimer Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & Oppenheimer ProForma
Multiple
Fund (1) Growth Fund(2) Fund (3) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C> <C>
Investments, at value (cost * ) (including
repurchase agreements **) $291,465,285 $80,295,960 $286,243,139
$658,004,384
Cash 397,482 611,472 174,735 1,183,689
Unrealized appreciation of forward foreign currency
exchange contracts 974 43,919 - 44,893
Receivables:
Interest, dividends and principal paydowns 2,638,803 926,291 414,680
3,979,774
Shares of beneficial interest sold 286,715 387,169 35,621
709,505
Investments sold 679,786 1,717,088 1,232,407
3,629,281
Closed forward foreign currency exchange contracts - 59,215 -
59,215
Daily variation on futures contracts - 6,862 - 6,862
Other 19,537 2,864 7,074 29,475
- - ------------------------------------------------------------------------------
Total assets $295,488,582 $84,050,840 $288,107,656 -
667,647,078
- - ------------------------------------------------------------------------------
LIABILITIES:
Unrealized depreciation on forward foreign currency
exchange contracts - 4,400 - 4,400
Options written, at value (premiums received
$552,194; $15,908; $759,339) 896,088 5,777 1,274,413
2,176,278
Payables and other liabilities:
Investments purchased 1,918,420 6,610,736 2,652,010
11,181,166
Dividends - 313,878 - 313,878
Shares of beneficial interest redeemed 629,197 115,879 719,941
1,465,017
Daily variation on futures contracts - 1,500 - 1,500
Trustees' fees 182,123 - - 182,123
Distributions and service plan fees 144,390 - 89,634
234,024
Shareholder reports 56,678 - - 56,678
Transfer and shareholder servicing agent fees 26,623 - 39,783
66,406
Deferred Trustee fees - - 128,506 128,506
Other 193,316 212,099 126,711 532,126
- - ------------------------------------------------------------------------------
Total liabilities 4,046,835 7,264,269 5,030,998 -
16,342,102
- - ------------------------------------------------------------------------------
NET ASSETS $291,441,747 $76,786,571 $283,076,658 $ 0
$651,304,976
=====================================================================
=========
COMPOSITION OF NET ASSETS:
Paid-in capital $225,707,312 $66,681,618 $175,019,654
$467,408,584
Undistributed net investment income 615,057 (318,871) 4,720,092
5,016,278
Accumulated net realized gain from investments
and foreign currency transactions 15,672,173 5,349,088 27,842,531
48,863,792
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 49,447,205 5,074,736 75,494,381
130,016,322
- - ------------------------------------------------------------------------------
NET ASSETS $291,441,747 $76,786,571 $283,076,658 $ 0
$651,304,976
=====================================================================
=========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Assets and Liabilities September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund, Oppenheimer Strategic Income &
Growth, and Oppenheimer Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & Oppenheimer ProForma
Multiple
Fund (1) Growth Fund(2) Fund (3) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value and Redemption Price Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $264,358,580, $46,746,928,
$276,725,396 and $587,830,904 and 18,756,434,
7,956,397, 22,168,406 and 41,714,016 shares of
beneficial interest outstanding for Oppenheimer
Multiple Strategies Fund, Oppenheimer Strategic
Income & Growth Fund, Oppenheimer Fund and Combined
Oppenheimer Multiple Strategies Fund, respectively) $14.09 $5.88 $12.48
$14.09
Maximum offering price per share (net asset value
plus sales charge of 5.75%, 4.75%, 5.75% and 5.75%,
respectively, of offering price) $14.95 $6.17 $13.24 $14.95
Class B Shares:
Net asset value and redemption price per share
(based on net assets of $5,996,160, $28,933,298,
$2,039,515 and $36,968,973 and 428,130, 4,932,725,
164,776 and 2,638,895 shares of beneficial interest
outstanding for Oppenheimer Multiple Strategies Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Fund and Combined Oppenheimer Multiple
Strategies Fund, respectively) $14.01 $5.87 $12.38
$14.01
Class C Shares:
Net asset value and redemption price per share
(based on net assets of $21,087,007, $1,106,345,
$4,311,747 and $26,505,099 and 1,503,813, 188,933,
352,590 and 1,890,267 shares of beneficial interest
outstanding for Oppenheimer Multiple Strategies Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Fund and Combined Oppenheimer Multiple
Strategies Fund, respectively) $14.02 $5.86 $12.23
$14.02
*Cost $241,674,276 $75,252,756 $210,233,490
$527,160,522
**Repurchase agreements $24,000,000 $2,100,000 $29,000,000
$55,100,000
</TABLE>
(1) On March 6, 1997, the name of Oppenheimer Asset Allocation Fund changed to
Oppenheimer Multiple Strategies Fund.
(2) Oppenheimer Strategic Income & Growth Fund Class A shares will be
exchanged for Oppenheimer Multiple Strategies Fund Class A shares. Oppenheimer
Strategic Income & Growth Fund Class B shares will be exchanged for Oppenheimer
Multiple Strategies Fund Class B shares. Oppenheimer Strategic Income & Growth
Fund Class B shares will be exchanged for Oppenheimer Multiple Strategies Fund
Class C shares.
(3) Oppenheimer Fund Class A shares will be exchanged for Oppenheimer
Multiple Strategies Fund Class A shares. Oppenheimer Fund Class B shares will be
exchanged for Oppenheimer Multiple Strategies Fund Class B shares. Oppenheimer
Fund Class C shares will be exchanged for Oppenheimer Multiple Strategies Fund
Class C shares.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combining Statements of Operations For Period Ended September 30, 1996 (Unaudited)
Oppenheimer Funds - Oppenheimer Multiple Strategies Fund, Oppenheimer Strategic Income &
Growth, and Oppenheimer Fund
Oppenheimer Oppenheimer Combined
Multiple Strategic Oppenheimer
Strategies Income & Oppenheimer ProForma
Multiple
Fund (1) Growth Fund(2) Fund (3) Adjustments
Strategies Fund
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes
of $12,214) $12,320,040 $4,441,077 $ 1,865,166
$18,626,283
Dividends (net of foreign withholding of
$86,080; $5,550; $109,320) 3,327,666 457,180 5,710,916
9,495,762
- - ------------------------------------------------------------------------------
Total income 15,647,706 4,898,257 7,576,082 -
28,122,045
- - ------------------------------------------------------------------------------
EXPENSES:
Management fees 2,040,804 513,195 2,027,333 (151,930)(1)
4,429,402
Distribution and service plan fees:
Class A 457,920 105,726 340,155 903,801
Class B 28,131 242,309 8,822 279,262
Class C 170,994 3,963 38,503 213,460
Transfer and shareholder servicing agent fees 347,905 128,032 529,143
1,005,080
Custodian fees and expenses 92,078 51,822 66,427
210,327
Legal and auditing fees 59,356 14,158 66,881
140,395
Insurance expenses 15,980 3,974 21,689
41,643
Shareholder reports 144,915 86,699 135,395
367,009
Trustees' fees and expenses 108,139 3,002 104,384
215,525
Registration and filing fees:
Class A 654 837 667 2,158
Class B 2,810 2,469 677 5,956
Class C 4,971 393 228 5,592
Other 28,540 8,985 70,185 107,710
- - ------------------------------------------------------------------------------
Total expenses 3,503,197 1,165,564 3,410,489 (151,930)
7,927,320
- - ------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,144,509 3,732,693 4,165,593
151,930 20,194,725
- - ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain from investments and
options written 18,280,560 8,028,979 23,938,675
50,248,214
Closing and expiration of options written 797,616 (106,455) 1,490,071
2,181,232
Closing of futures contracts - (14,626) - (14,626)
Foreign currency transactions 666,351 44,109 278,759
989,219
- - ------------------------------------------------------------------------------
Net realized gain 19,744,527 7,952,007 25,707,505 -
53,404,039
- - ------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments 4,995,947 (1,417,530) 6,856,858
10,435,275
Translation of assets and liabilities denominated
in foreign currencies (1,495,680) (45,705) (1,384,524)
(2,925,909)
- - ------------------------------------------------------------------------------
Net change 3,500,267 (1,463,235) 5,472,334 -
7,509,366
- - ------------------------------------------------------------------------------
Net realized and unrealized gain 23,244,794 6,488,772 31,179,839 -
60,913,405
- - ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $35,389,303 $10,221,465 $35,345,432
$ 151,930 $81,108,130
=====================================================================
=========
</TABLE>
(1) Calculated in accordance with the investment advisory agreement of
Oppenheimer Multiple Strategies Fund (.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). This assumes that the
management fee structure had been in place for the entire period.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Pro Forma Combining Statement of Investments September 30, 1996 (Unaudited)
Oppenheimer Multiple Strategies Fund (formerly Oppenheimer Asset Allocation Fund),
Oppenheimer Strategic Income & Growth Fund and Oppenheimer Fund
Face Amount (1) Market Value
- - --------------------------------------------------------------------------------------------------------
Opp. Opp. Opp. Pro Forma Opp. Opp. Opp. Pro
Forma
Multiple Stategic Fund Combined Multiple Stategic Fund
Combined
Strategies Income & Strategies Income
Fund Growth Fund Fund Growth Fund
=====================================================================
===============================================================
Mortgage-Backed
Obligations - 2.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Government Agency - 2.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
FHLMC/FNMA/Sponsored - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Federal Home Loan
Mortgage Corp.,
Collateralized Mtg.
Obligations, Gtd.
Multiclass Mtg.
Participation
Certificates,
Series 176, Cl. F,
8.95%, 3/15/20 $ -- $ 59,951 $ -- $ 59,951 $ -- $ 60,139 $ --
$ 60,139
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Federal National
Mortgage Assn.:
11.50%, 7/1/11 146,907 -- -- 146,907 162,530 -- --
162,530
11.75%, 1/1/16 175,012 -- -- 175,012 196,833 -- --
196,833
7.50%, 10/15/26(2) -- 5,000,000 -- 5,000,000 -- 4,940,650 --
4,940,650
Gtd. Real Estate Mtg.
Investment Conduit
Pass-Through
Certificates,
Trust 1992-103,
Cl. JB, 10.50%,
11/25/20 -- 315,000 -- 315,000 -- 351,323 --
351,323
Interest-Only Stripped
Mtg.-Backed Security,
Trust 257, Cl. 2,
10.955%, 2/1/24(3) -- 1,712,531 -- 1,712,531 -- 593,766 --
593,766
Series 1994-83, Cl. Z,
7.50%, 6/25/24 -- 378,624 -- 378,624 -- 337,801 --
337,801
----------------------------------------------------
359,363 6,283,679 -- 6,643,042
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
GNMA/Guaranteed - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Government National
Mortgage Assn.:
9%, 11/15/08-5/15/09 524,930 -- -- 524,930 558,216 -- --
558,216
6%, 3/20/26 -- 1,437,892 -- 1,437,892 -- 1,434,298 --
1,434,298
7%, 4/15/26 -- 4,460,633 -- 4,460,633 -- 4,296,705 --
4,296,705
----------------------------------------------------
558,216 5,731,003 -- 6,289,219
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Private - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Commercial - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Morgan Stanley Capital I,
Inc., Commercial Mtg.
Pass-Through Certificates,
Series 1996- C1, Cl. F,
7.51%, 2/1/28(4)(5) -- 97,137 -- 97,137 -- 62,289 --
62,289
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Resolution Trust Corp.,
Commercial Mtg. Pass-
Through Certificates:
Series 1992-CHF, Cl. D,
8.25%, 12/25/20 -- 267,639 -- 267,639 -- 268,936 --
268,936
Series 1993-C1, Cl. D,
9.45%, 5/25/24 -- 252,980 -- 252,980 -- 259,621 --
259,621
Series 1994-C2, Cl. E,
8%, 4/25/25 375,127 449,792 -- 824,919 364,225 436,721
-- 800,946
Series 1994-C2, Cl. G,
8%, 4/25/25 -- 209,655 -- 209,655 -- 180,337 --
180,337
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Structured Asset
Securities Corp.,
Multiclass Pass-Through
Certificates, Series
1995-C4, Cl. E, 8.849%,
6/25/26(4)(5) -- 27,688 -- 27,688 -- 22,566 --
22,566
----------------------------------------------------
364,225 1,230,470 -- 1,594,695
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Multi-Family - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mortgage Capital Funding,
Inc., Multifamily Mortgage
Pass-Through Certificates,
Series 1996-MC1, Cl. G,
7.15%, 6/15/06(5) -- 400,000 -- 400,000 -- 302,625 --
302,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Resolution Trust Corp.,
Commercial Mtg. Pass-
Through Certificates,
Series 1991-M6, Cl. B4,
7.103%, 6/25/21(4) -- 68,681 -- 68,681 -- 67,157 --
67,157
----------------------------------------------------
-- 369,782 -- 369,782
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Residential - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Salomon Brothers Mortgage
Securities VII, Series
1996-B, Cl. 1, 7.136%,
4/25/26 -- 299,020 -- 299,020 -- 174,927 --
174,927
----------------------------------------------------
Total Mortgage-Backed
Obligations (Cost
$1,162,963,
Cost $13,599,896,
Combined $14,762,859) 1,281,804 13,789,861 --
15,071,665
=====================================================================
===============================================================
U.S. Government
Obligations - 5.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U.S. Treasury Bonds,
STRIPS, Zero Coupon:
7.10%, 11/15/18(6) 17,000,000 -- -- 17,000,000 3,502,476 --
- - -- 3,502,476
7.313%, 8/15/19(6) 18,700,000 -- -- 18,700,000 3,651,736 --
- - -- 3,651,736
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U.S. Treasury Nts.:
8.25%, 7/15/98 16,000,000 -- -- 16,000,000 16,590,000 -- --
16,590,000
8.875%, 11/15/98 950,000 -- -- 950,000 1,001,062 -- --
1,001,062
9.25%, 8/15/98 9,450,000 -- -- 9,450,000 9,972,697 -- --
9,972,697
6%, 2/15/26(15) -- 500,000 -- 500,000 -- 439,844 --
439,844
----------------------------------------------------
Total U.S. Government
Obligations (Cost
$34,052,281,
Cost $447,860,
Combined $34,500,141) 34,717,971 439,844 --
35,157,815
=====================================================================
===============================================================
Foreign Government
Obligations - 9.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Argentina - 2.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Argentina (Republic of):
Bonds, Bonos de
Consolidacion de
Deudas, Series I,
5.461%, 4/1/01(4)(7) 1,544,136 559,749 -- 2,103,885 1,408,007 510,403
-- 1,918,410
Par Bonds, 5.25%,
3/31/23(8) 10,000,000 -- -- 10,000,000 5,850,000 -- --
5,850,000
Past Due Interest Bonds,
Series L, 6.625%,
3/31/05(4) 5,880,000 -- -- 5,880,000 4,931,850 -- --
4,931,850
Past Due Interest Bonds,
Series L, 6.312%,
3/31/05(4) -- 834,000 3,920,000 4,754,000 -- 699,517
3,287,900 3,987,417
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco de Galicia y Buenos
Aires SA Sr. Unsec. Nts.,
9.387%, 4/15/99(4) -- 35,000 -- 35,000 -- 35,634 --
35,634
----------------------------------------------------
12,189,857 1,245,554 3,287,900
16,723,311
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Australia - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Australia (Commonwealth
of) Bonds:
10%, 2/15/06 AUD -- 500,000 -- 500,000 -- 453,666 --
453,666
9.50%, 8/15/03 AUD -- 15,000 -- 15,000 -- 13,060 --
13,060
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Queensland Treasury
Corp.:
Exchangeable Gtd. Nts.,
8%, 8/14/01 AUD -- 615,000 -- 615,000 -- 498,166 --
498,166
Exchangeable Gtd. Nts.,
10.50%, 5/15/03 AUD 2,500,000 -- -- 2,500,000 2,263,395 --
-- 2,263,395
Gtd. Nts., 8%,
5/14/03 AUD -- 300,000 -- 300,000 -- 240,793 --
240,793
Gtd. Nts., 10.50%,
5/15/03 AUD -- 90,000 -- 90,000 -- 81,482 --
81,482
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Treasury Corp. of
Victoria Gtd. Bonds:
8.25%, 10/15/03 AUD 1,500,000 -- -- 1,500,000 1,219,490 --
-- 1,219,490
10.25%, 11/15/06 AUD -- 425,000 -- 425,000 -- 390,210
- - -- 390,210
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Western Australia
Treasury Corp. Gtd.
Bonds, 10%, 7/15/05 AUD -- 190,000 -- 190,000 -- 170,279
-- 170,279
----------------------------------------------------
3,482,885 1,847,656 -- 5,330,541
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Brazil - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Brazil (Federal
Republic of):
Capitalization Bonds,
8%, 4/15/14 -- 1,001,247 -- 1,001,247 -- 705,567 --
705,567
Par Bonds, 5%, 4/15/24(8) 7,500,000 -- -- 7,500,000 4,476,563 --
-- 4,476,563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telecomunicacoes
Brasileiras SA Medium-
Term Nts., 11.30%,
12/9/99(4) -- 10,000 -- 10,000 -- 10,288 --
10,288
----------------------------------------------------
4,476,563 715,855 -- 5,192,418
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bulgaria - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bulgaria (Republic of):
Disc. Bonds, Tranche A,
6.688%, 7/28/24(4) -- 70,000 -- 70,000 -- 35,569 --
35,569
Front-Loaded Interest
Reduction Bearer
Bonds, Tranche A,
2.25%, 7/28/12(8) -- 755,000 -- 755,000 -- 248,442 --
248,442
Interest Arrears Bonds,
6.688%, 7/28/11(4) -- 325,000 -- 325,000 -- 149,500 --
149,500
----------------------------------------------------
-- 433,511 -- 433,511
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Canada - 1.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Canada (Government of)
Bonds:
11.75%, 2/1/03 CAD -- 220,000 -- 220,000 -- 204,386 --
204,386
9.75%, 10/1/97 CAD -- 250,000 -- 250,000 -- 193,333 --
193,333
9.75%, 12/1/01 CAD 6,000,000 260,000 -- 6,260,000 5,068,535 219,637
-- 5,288,172
9.75%, 6/1/01 CAD 2,000,000 -- -- 2,000,000 1,677,282 --
- - -- 1,677,282
9.75%, 6/1/01(15)CAD -- 1,335,000 -- 1,335,000 -- 1,119,586
-- 1,119,586
Series A-33, 11.50%,
9/1/00 CAD -- 140,000 -- 140,000 -- 122,410 --
122,410
Series A-76, 9%,
6/1/25 CAD -- 465,000 -- 465,000 -- 392,682 --
392,682
----------------------------------------------------
6,745,817 2,252,034 -- 8,997,851
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Denmark - 0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK -- 1,670,000 -- 1,670,000 -- 312,070
- - -- 312,070
8%, 3/15/06 DKK 21,900,000 1,130,000 -- 23,030,000 4,004,914 206,646
-- 4,211,560
----------------------------------------------------
4,004,914 518,716 -- 4,523,630
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Germany - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Germany (Republic of)
Bonds, Series 94,
6.25%, 1/4/24(15)DEM -- 2,670,000 -- 2,670,000 -- 1,612,575
-- 1,612,575
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Great Britain - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP -- 355,000 -- 355,000 -- 633,054
- - -- 633,054
Debs., 8.50%, 12/7/05 GBP -- 55,000 -- 55,000 -- 91,012 --
91,012
Nts., 13%, 7/14/00 GBP 1,050,000 -- -- 1,050,000 1,967,831 --
-- 1,967,831
Nts., 12.50%, 11/21/05 GBP -- 62,000 -- 62,000 -- 123,738
- - -- 123,738
Nts., 8%, 6/10/03 GBP -- 125,000 -- 125,000 -- 202,509 --
202,509
----------------------------------------------------
1,967,831 1,050,313 -- 3,018,144
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Ireland - 0.00%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Ireland (Government of)
Bonds, 9.25%, 7/11/03 IEP -- 60,000 -- 60,000 -- 110,024 --
110,024
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Italy - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Italy (Republic of)
Treasury Bonds, Buoni
del Tesoro Poliennali:
8.50%, 8/1/99 ITL 1,800,000,000 -- -- 1,800,000,000 1,204,257 --
-- 1,204,257
10.50%, 4/1/00 ITL -- 285,000,000 -- 285,000,000 -- 201,403
-- 201,403
10.50%, 7/15/00 ITL -- 170,000,000 -- 170,000,000 -- 121,241
-- 121,241
----------------------------------------------------
1,204,257 322,644 -- 1,526,901
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Japan - 0.00%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Japan (Government of)
Bonds, Series 174,
4.60%, 9/20/04 JPY -- 27,500,000 -- 27,500,000 -- 279,877
- - -- 279,877
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mexico - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco Nacional de
Comercio Exterior SNC:
International Finance
BV Gtd. Bonds,
10.758%, 6/23/97(4)(5) -- 120,000 -- 120,000 -- 123,900 --
123,900
International Finance
BV Gtd. Registered
Bonds, 11.25%, 5/30/06 -- 135,000 -- 135,000 -- 141,581 --
141,581
Nts., 7.25%, 2/2/04 -- 75,000 -- 75,000 -- 64,687 --
64,687
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bonos de la Tesoreria
de la Federacion, Zero
Coupon, 48.252%,
10/3/96(6) MXP 4,384,900 -- -- 4,384,900 579,822 -- --
579,822
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United Mexican States
Bonds:
10.375%, 1/29/03 DEM -- 150,000 -- 150,000 -- 103,851
- - -- 103,851
16.50%, 9/1/08 GBP -- 35,000 -- 35,000 -- 74,486 --
74,486
----------------------------------------------------
579,822 508,505 -- 1,088,327
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
New Zealand - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
New Zealand Government
Bonds:
8%, 2/15/01 NZD 7,460,000 -- -- 7,460,000 5,203,616 --
- - -- 5,203,616
10%, 7/15/97 NZD -- 1,040,000 -- 1,040,000 -- 733,982
- - -- 733,982
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Transpower Finance Ltd.
Gtd. Unsec. Unsub. Bonds:
8%, 2/15/01(5) NZD -- 165,000 -- 165,000 -- 113,525 --
113,525
8%, 3/15/02 NZD -- 165,000 -- 165,000 -- 113,459 --
113,459
----------------------------------------------------
5,203,616 960,966 -- 6,164,582
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Panama - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Panama (Republic of)
Interest Reduction
Bonds, 3.50%, 7/17/14(8) -- 130,000 -- 130,000 -- 81,738 --
81,738
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Poland - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Poland (Republic of)
Treasury Bills, Zero
Coupon:
20.70%, 1/8/97(6) PLZ 2,360,000 -- -- 2,360,000 799,056 --
- - -- 799,056
24.131%, 11/13/96(6) PLZ 2,300,000 -- -- 2,300,000 801,216 --
-- 801,216
21.464%, 10/16/96(6) PLZ -- 2,000,000 -- 2,000,000 -- 706,837
-- 706,837
21.656%, 10/2/96(6) PLZ -- 430,000 -- 430,000 -- 152,854
- - -- 152,854
----------------------------------------------------
1,600,272 859,691 -- 2,459,963
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Russia - 0.00%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Russia (Government of)
Interest Nts., 6.547%,
12/29/49(2)(4) -- 260,000 -- 260,000 -- 167,294 --
167,294
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
South Africa - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Eskom Depositary
Receipts, Series E168,
11%, 6/1/08 ZAR 6,430,000 -- -- 6,430,000 1,093,837 -- --
1,093,837
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Spain - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Spain (Kingdom of):
Bonds, Bonos y Obligacion
del Estado, 10.15%,
1/31/06 ESP -- 39,200,000 -- 39,200,000 -- 349,431 --
349,431
Gtd. Bonds, Bonos y
Obligacion del Estado,
10.25%, 11/30/98 ESP -- 25,800,000 -- 25,800,000 -- 212,018
-- 212,018
Gtd. Bonds, Bonos y
Obligacion del Estado,
10.30%, 6/15/02 ESP -- 22,500,000 -- 22,500,000 -- 197,305
-- 197,305
Gtd. Bonds, Bonos y
Obligacion del Estado,
12.25%, 3/25/00 ESP -- 17,700,000 -- 17,700,000 -- 157,405
-- 157,405
----------------------------------------------------
-- 916,159 -- 916,159
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sweden - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sweden (Kingdom of)
Bonds:
Series 1030, 13%,
6/15/01 SEK -- 2,200,000 -- 2,200,000 -- 414,114 --
414,114
Series 1033, 10.25%,
5/5/03 SEK -- 600,000 -- 600,000 -- 105,220 --
105,220
Series 1034, 9%,
4/20/09 SEK -- 1,400,000 -- 1,400,000 -- 233,811 --
233,811
Series 1035, 6%,
2/9/05 SEK -- 1,300,000 -- 1,300,000 -- 179,414 --
179,414
----------------------------------------------------
-- 932,559 -- 932,559
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Venezuela - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Venezuela (Republic
of):
Disc. Bonds, Series DL,
6.625%, 12/18/07(4) -- 250,000 -- 250,000 -- 207,500 --
207,500
Front-Loaded Interest
Reduction Bonds,
Series A, 6.375%,
3/31/07(4) -- 100,000 -- 100,000 -- 84,313 --
84,313
New Money Bonds,
Series A, 6.75%,
12/18/05(4) -- 250,000 -- 250,000 -- 208,438 --
208,438
----------------------------------------------------
-- 500,251 -- 500,251
----------------------------------------------------
Total Foreign Government
Obligations (Cost
$39,944,054, Cost
$14,828,341, Cost
$2,290,334, Combined
$57,062,729) 42,549,671 15,315,922 3,287,900
61,153,493
=====================================================================
===============================================================
Loan Participations- 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Colombia (Republic of)
1989-1990 Integrated Loan
Facility Bonds, 6.563%,
7/1/01(4)(5) -- 314,320 -- 314,320 -- 298,604 --
298,604
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Morocco (Kingdom of) Loan
Participation Agreement,
Tranche A, 6.437%,
1/1/09(4) -- 325,000 -- 325,000 -- 255,633 --
255,633
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Trinidad & Tobago Loan
Participation Agreement,
Tranche A, 1.772%,
9/30/00(4)(5) JPY -- 44,836,363 -- 44,836,363 -- 358,288 --
358,288
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United Mexican States,
Combined Facility 3, Loan
Participation Agreement,
Tranche A, 6.563%,
9/20/97(4)(5) -- 66,720 -- 66,720 -- 59,256 --
59,256
----------------------------------------------------
Total Loan Participation
(Cost $969,966) -- 971,781 -- 971,781
=====================================================================
===============================================================
Non-Convertible
Corporate Bonds
and Notes - 7.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Basic Materials - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chemicals - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NL Industries, Inc.,
11.75% Sr. Sec. Nts.,
10/15/03 -- 200,000 -- 200,000 -- 211,000 --
211,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Quantum Chemical Corp.,
10.375% First Mtg. Nts.,
6/1/03 500,000 -- -- 500,000 546,146 -- --
546,146
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Viridian, Inc., 9.75%
Nts., 4/1/03 750,000 -- -- 750,000 780,000 -- --
780,000
----------------------------------------------------
1,326,146 211,000 -- 1,537,146
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Metals - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kaiser Aluminum &
Chemical Corp., 12.75%
Sr. Sub. Nts., 2/1/03 500,000 -- -- 500,000 545,000 -- --
545,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
UCAR Global Enterprises,
Inc., 12% Sr. Sub. Nts.,
1/15/05 -- 100,000 -- 100,000 -- 114,750 --
114,750
----------------------------------------------------
545,000 114,750 -- 659,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Paper - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gaylord Container Corp.,
12.75% Sr. Sub. Disc.
Debs., 5/15/05 750,000 -- -- 750,000 826,875 -- --
826,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repap New Brunswick,
Inc., 8.937% First
Priority Sr. Sec.
Nts., 7/15/00(4) -- 200,000 -- 200,000 -- 200,000 --
200,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repap Wisconsin, Inc.,
9.875% Second Priority
Sr. Nts., 5/1/06 1,000,000 -- -- 1,000,000 985,000 -- --
985,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Riverwood International
Corp.:
10.875% Sr. Sub. Nts.,
4/1/08 1,000,000 -- -- 1,000,000 990,000 -- --
990,000
10.25% Sr. Nts., 4/1/06 -- 300,000 -- 300,000 -- 303,000 --
303,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
SD Warren Co., 12% Sr.
Sub. Nts., Series B,
12/15/04 1,000,000 -- -- 1,000,000 1,083,750 -- --
1,083,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Stone Container Corp.,
10.75% First Mtg. Nts.,
10/1/02 -- 200,000 -- 200,000 -- 210,500 --
210,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tembec Finance Corp.,
9.875% Gtd. Sr. Nts.,
9/30/05 500,000 -- -- 500,000 485,000 -- --
485,000
----------------------------------------------------
4,370,625 713,500 -- 5,084,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Cyclicals - 2.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Autos & Housing - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Blue Bell Funding, Inc.,
11.85% Sec.
Extendible Adjustable Rate
Nts., 5/1/99 -- 396,000 -- 396,000 -- 397,980 --
397,980
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hovnanian K. Enterprises,
Inc., 11.25% Sub. Gtd.
Nts., 4/15/02 725,000 -- -- 725,000 712,312 -- --
712,312
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Lear Corp., 9.50% Sub.
Nts., 7/15/06 1,000,000 -- -- 1,000,000 1,047,500 -- --
1,047,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Penda Corp., 10.75%
Sr. Nts., Series B,
3/1/04 -- 150,000 -- 150,000 -- 146,250 --
146,250
----------------------------------------------------
1,759,812 544,230 -- 2,304,042
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Leisure & Entertainment
- - - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International
Group, Inc., 11.70%
Unsec. Unsub. Bonds,
12/4/01 ITL -- 95,000,000 -- 95,000,000 -- 71,778 --
71,778
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Apple South, Inc., 9.75%
Sr. Nts., 6/1/06 500,000 -- -- 500,000 495,000 -- --
495,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gillett Holdings, Inc.,
12.25% Sr. Sub. Nts.,
Series A, 6/30/02(5) 213,908 160,431 -- 374,339 223,266 167,450
-- 390,716
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Imax Corp., 7% Sr.
Nts., 3/1/01(8) -- 320,000 -- 320,000 -- 313,600 --
313,600
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Trump Atlantic City
Associates/Trump
Atlantic City Funding,
Inc., 11.25% First Mtg.
Nts., 5/1/06 -- 100,000 -- 100,000 -- 99,250 --
99,250
----------------------------------------------------
718,266 652,078 -- 1,370,344
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Media - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Telecasting,
Inc., 0%/14.50% Sr. Disc.
Nts., 6/15/04 (9) -- 100,316 -- 100,316 -- 75,488 --
75,488
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Australis Media Ltd.,
Units (each unit
consists of $1,000
principal amount of
0%/14% sr. sub. disc.
nts., 5/15/03 and one
warrant to purchase
57.721 ordinary shares)
(9)(10) -- 200,000 -- 200,000 -- 121,000 --
121,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bell & Howell Co. (New),
0%/11.50% Sr. Disc.
Debs., Series B,
3/1/05(9) -- 250,000 -- 250,000 -- 176,250 --
176,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bell Cablemedia PLC,
0%/11.95% Sr. Disc.
Nts., 7/15/04(9) 200,000 500,000 -- 700,000 153,500 383,750
-- 537,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cablevision Industries
Corp., 9.25% Sr. Debs.,
Series B, 4/1/08 1,000,000 -- -- 1,000,000 1,030,000 -- --
1,030,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cablevision Systems
Corp.:
10.75% Sr. Sub.
Debs., 4/1/04 500,000 -- -- 500,000 518,125 -- --
518,125
10.50% Sr. Sub.
Debs., 5/15/16 -- 250,000 -- 250,000 -- 255,000 --
255,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
EchoStar Communications
Corp., 0%/12.875% Sr.
Disc. Nts., 6/1/04(9) -- 200,000 -- 200,000 -- 158,500 --
158,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
News America Holdings,
Inc., 8.50% Sr. Nts.,
2/15/05 1,000,000 -- -- 1,000,000 1,061,373 -- --
1,061,373
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Panamsat LP/Panamsat
Capital Corp., 0%/11.375%
Sr. Sub. Disc. Nts.,
8/1/03(9) 1,250,000 750,000 -- 2,000,000 1,137,500 682,500
-- 1,820,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Rogers Cablesystems Ltd.,
10% Sr. Sec. Second
Priority Debs., 12/1/07 1,000,000 300,000 -- 1,300,000 1,005,000 301,500
-- 1,306,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
SCI Television, Inc.,
11% Sr. Nts., 6/30/05 500,000 -- -- 500,000 535,625 -- --
535,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Time Warner, Inc.,
7.95% Nts., 2/1/00 1,000,000 -- -- 1,000,000 1,028,109 -- --
1,028,109
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
TKR Cable I, Inc.,
10.50% Sr. Debs.,
10/30/07 1,100,000 300,000 -- 1,400,000 1,221,967 333,264
-- 1,555,231
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United International
Holdings, Inc., Zero
Coupon Sr. Sec. Disc.
Nts., 12.819%,
11/15/99(6) 550,000 -- -- 550,000 385,000 -- --
385,000
----------------------------------------------------
8,076,199 2,487,252 -- 10,563,451
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: General - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
PT Polysindo Eka Perkasa,
Zero Coupon Promissory
Nts., 36.897%,
10/23/96(6) IDR -- 1,200,000,000 -- 1,200,000,000 -- 511,932
-- 511,932
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Synthetic Industries,
Inc., 12.75% Sr. Sub.
Debs., 12/1/02 900,000 200,000 -- 1,100,000 976,500 217,000
-- 1,193,500
----------------------------------------------------
976,500 728,932 -- 1,705,432
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: Specialty- 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cole National Group,
Inc., 11.25% Sr.
Nts., 10/1/01 500,000 -- -- 500,000 534,375 -- --
534,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Non-Cyclicals
- - - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Food - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Grand Union Co., 12%
Sr. Nts., 9/1/04 1,137,000 198,000 -- 1,335,000 1,152,634 200,722
-- 1,353,356
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kash 'N Karry Food
Stores, Inc., 11.50%
Sr. Nts., 2/1/03(7) -- 564,400 -- 564,400 -- 567,222 --
567,222
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Penn Traffic Co., 11.50%
Sr. Nts., 4/15/06 -- 50,000 -- 50,000 -- 44,625 --
44,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Ralph's Grocery Co.:
10.45% Sr. Nts.,
6/15/04 500,000 -- -- 500,000 511,250 -- --
511,250
11% Sr. Sub. Nts.,
6/15/05 500,000 -- -- 500,000 505,625 -- --
505,625
----------------------------------------------------
2,169,509 812,569 -- 2,982,078
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Supplies &
Services - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Magellan Health Services,
Inc., 11.25% Sr. Sub.
Nts., Series A, 4/15/04 1,000,000 -- -- 1,000,000 1,095,000 -- --
1,095,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Multicare Cos., Inc.
(The), 12.50% Sr. Sub.
Nts., 7/1/02 345,000 -- -- 345,000 383,813 -- --
383,813
----------------------------------------------------
1,478,813 -- -- 1,478,813
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Household Goods - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Coleman Holdings, Inc.,
Zero Coupon Sr. Sec.
Disc. Nts., Series B,
12.09%, 5/27/98(6) 1,000,000 -- -- 1,000,000 855,000 -- --
855,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Fletcher Challenge
Industries Ltd., 10%
Cv. Sub. Unsec. Nts.,
4/30/05 NZD -- 70,000 -- 70,000 -- 50,290 --
50,290
----------------------------------------------------
855,000 50,290 -- 905,290
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy Services &
Producers - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Global Marine, Inc.,
12.75% Sr. Sec. Nts.,
12/15/99 400,000 -- -- 400,000 434,000 -- --
434,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
J. Ray McDermott SA,
9.375% Sr. Sub. Bonds,
7/15/06 1,000,000 -- -- 1,000,000 1,022,500 -- --
1,022,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Maxus Energy Corp.,
11.50% Debs., 11/15/15 1,000,000 -- -- 1,000,000 1,045,000 --
-- 1,045,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mesa Operating Co.,
10.625% Gtd. Sr. Sub.
Nts., 7/1/06 1,000,000 -- -- 1,000,000 1,056,250 -- --
1,056,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
TransTexas Gas Corp.,
11.50% Sr. Sec. Gtd.
Nts., 6/15/02 1,000,000 -- -- 1,000,000 1,065,000 -- --
1,065,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Triton Energy Corp.,
Zero Coupon Sr. Sub.
Disc. Nts., 10.394%,
11/1/97(6) -- 400,000 -- 400,000 -- 371,000 --
371,000
----------------------------------------------------
4,622,750 371,000 -- 4,993,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Financial - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banks - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco Bamerindus do
Brasil SA, 10.50% Debs.,
6/23/97 -- 25,000 -- 25,000 -- 24,687 --
24,687
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Siam City Bank Co. Ltd.,
Zero Coupon Debs.,
11.084%, 10/31/96
(2)(6) THB -- 2,000,000 -- 2,000,000 -- 77,981 --
77,981
----------------------------------------------------
-- 102,668 -- 102,668
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Diversified Financial
- - - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco del Atlantico SA,
7.875% Eurobonds, 11/5/98 -- 50,000 -- 50,000 -- 48,875
- - -- 48,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
GPA Delaware, Inc., 8.75%
Gtd. Nts., 12/15/98 1,250,000 -- -- 1,250,000 1,262,500 -- --
1,262,500
----------------------------------------------------
1,262,500 48,875 -- 1,311,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Insurance - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Conseco, Inc., 8.125%
Sr. Nts., 2/15/03 1,000,000 -- -- 1,000,000 1,023,948 -- --
1,023,948
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Life Partners Group,
Inc., 12.75% Sr. Sub.
Nts., 7/15/02(11) -- 300,000 -- 300,000 -- 328,125 --
328,125
----------------------------------------------------
1,023,948 328,125 -- 1,352,073
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Materials
- - - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Owens-Illinois, Inc.:
10% Sr. Sub. Nts.,
8/1/02 500,000 -- -- 500,000 521,250 -- --
521,250
11% Sr. Debs., 12/1/03 650,000 -- -- 650,000 713,375 -- --
713,375
----------------------------------------------------
1,234,625 -- -- 1,234,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Services
- - - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
EnviroSource, Inc., 9.75%
Sr. Nts., 6/15/03 1,000,000 200,000 -- 1,200,000 955,000 191,000
-- 1,146,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Grupo Elektra SA de CV,
12.75% Sr. Nts.,
5/15/01(12) -- 500,000 -- 500,000 -- 525,000 --
525,000
----------------------------------------------------
955,000 716,000 -- 1,671,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Transportation - 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Transtar Holdings LP/
Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts.,
Series B, 12/15/03(9) -- 500,000 -- 500,000 -- 378,125 --
378,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tribasa Toll Road Trust,
10.50% Nts., Series
1993-A, 12/1/11 (5) -- 500,000 -- 500,000 -- 402,500 --
402,500
----------------------------------------------------
-- 780,625 -- 780,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Technology - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Aerospace/Defense - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Communications & Power
Industries, Inc., 12% Sr.
Sub. Nts., Series B,
8/1/05 1,000,000 -- -- 1,000,000 1,092,500 -- --
1,092,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Unisys Corp., 15% Credit
Sensitive Nts.,
7/1/97(4) 200,000 -- -- 200,000 212,000 -- --
212,000
----------------------------------------------------
1,304,500 -- -- 1,304,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telecommunications-
Technology - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Call-Net Enterprises,
Inc., 0%/13.25% Sr. Disc.
Nts., 12/1/04(9) -- 200,000 -- 200,000 -- 156,500 --
156,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Celcaribe SA, 0%/13.50%
Sr. Sec. Nts.,
3/15/04(5)(9) -- 350,000 -- 350,000 -- 282,625 --
282,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cellular Communications
International, Inc.,
Zero Coupon Sr. Disc.
Nts., 12.323%, 8/15/00(6) -- 600,000 -- 600,000 -- 382,500 --
382,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Comunicacion Celular SA,
0%/13.125% Sr. Deferred
Coupon Bonds,
11/15/03(9) -- 300,000 -- 300,000 -- 186,000 --
186,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hyperion Telecommuni-
cations, Inc.:
0%/13% Sr. Disc.
Nts., Series B, 4/15/03
(9)(12) 500,000 -- -- 500,000 307,500 -- --
307,500
0%/13% Sr. Disc. Nts.,
4/15/03 (9)(12) -- 400,000 -- 400,000 -- 246,000 --
246,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IntelCom Group (USA),
Inc.:
0%/12.50% Gtd. Sr. Disc.
Nts., 5/1/06(9) -- 270,000 -- 270,000 -- 168,075 --
168,075
0%/13.50% Sr. Disc. Nts.,
9/15/05(9) -- 100,000 -- 100,000 -- 67,375 --
67,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Omnipoint Corp., 11.625%
Sr. Nts., 8/15/06(12) -- 300,000 -- 300,000 -- 314,250 --
314,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ORBCOMM Global LP/ORBCOMM
Global Capital Corp., 14%
Sr. Nts., 8/15/04(12) -- 155,000 -- 155,000 -- 160,037 --
160,037
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
PriCellular Wireless
Corp., 0%/12.25% Sr. Sub.
Disc. Nts., 10/1/03(9) 1,000,000 -- -- 1,000,000 815,000 -- --
815,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
PriCellular Wireless
Corp., 0%/14% Sr. Sub.
Disc. Nts., 11/15/01(9) -- 500,000 -- 500,000 -- 471,250 --
471,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Teleport Communications
Group, Inc., 0%/11.125%
Sr. Disc. Nts., 7/1/07(9) -- 400,000 -- 400,000 -- 258,000 --
258,000
----------------------------------------------------
1,122,500 2,692,612 -- 3,815,112
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Utilities - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electric Utilities - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
CalEnergy Co., Inc.,
0%/10.25% Sr. Disc.
Nts., 1/15/04(9) -- 450,000 -- 450,000 -- 460,125 --
460,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
El Paso Electric Co.,
9.40% First Mtg.
Bonds, Series E, 5/1/11 -- 250,000 -- 250,000 -- 258,750 --
258,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
First PV Funding Corp.,
10.15% Lease Obligation
Bonds, Series 1986B,
1/15/16 1,000,000 300,000 -- 1,300,000 1,057,500 317,250
- - -- 1,374,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
New Zealand Electric
Corp., 10% Debs.,
10/15/01 NZD -- 330,000 -- 330,000 -- 245,092 --
245,092
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Subic Power Corp.:
9.50% Sr. Sec. Nts.,
12/28/08 -- 431,034 -- 431,034 -- 431,573 --
431,573
9.50% Sr. Sec. Nts.,
12/28/08 (12) -- 86,206 -- 86,206 -- 86,315 --
86,315
----------------------------------------------------
1,057,500 1,799,105 -- 2,856,605
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telephone Utilities- 0.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Western Wireless Corp.,
10.50% Sr. Sub. Nts.,
6/1/06 750,000 -- -- 750,000 770,625 -- --
770,625
----------------------------------------------------
Total Non-Convertible
Corporate Bonds and
Notes (Cost $35,105,263,
Cost $12,668,769,
Combined $47,774,032) 36,164,193 13,153,611 --
49,317,804
=====================================================================
===============================================================
Convertible Corporate
Bonds and Notes - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco de Colombia, 5.20%
Cv. Jr. Sub. Unsec. Nts.,
2/1/99 -- 50,000 -- 50,000 -- 46,500 -- 46,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Capstone Capital Corp.,
10.50% Cv. Sub. Debs.,
4/1/02 -- 190,000 -- 190,000 -- 247,475 --
247,475
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
MEDIQ, Inc., 7.50%
Exchangeable Sub.
Debs., 7/15/03 1,650,000 -- 1,850,000 3,500,000 1,476,750 --
1,655,750 3,132,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Protection One Alarm
Monitoring, Inc., 6.75%
Cv. Sr. Sub. Nts.,
9/15/03 -- 110,000 -- 110,000 -- 108,144 --
108,144
----------------------------------------------------
Total Convertible
Corporate Bonds and Notes
(Cost $1,552,096, Cost
$344,794, Cost $1,752,096,
Combined $3,648,989) 1,476,750 402,119 1,655,750
3,534,619
Shares
=====================================================================
===============================================================
Common Stocks - 66.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Basic Materials - 3.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chemicals - 2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Agrium, Inc. 80,000 -- 87,100 167,100 1,086,250 -- 1,182,655
2,268,905
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bayer AG, Sponsored ADR 90,000 -- 170,000 260,000 3,304,341 --
6,241,533 9,545,874
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Georgia Gulf Corp. -- -- 22,100 22,100 -- -- 660,237
660,237
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Morton International,
Inc. -- 24,000 -- 24,000 -- 954,000 -- 954,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Union Carbide Corp. -- 18,000 -- 18,000 -- 821,250 --
821,250
----------------------------------------------------
4,390,591 1,775,250 8,084,425
14,250,266
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Metals - 0.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Brush Wellman, Inc. 72,300 -- 151,400 223,700 1,391,775 --
2,914,450 4,306,225
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Paper - 0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Aracruz Celulose SA,
Sponsored ADR, Cl. B 99,000 -- 165,000 264,000 866,250 --
1,443,750 2,310,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
MacMillan Bloedel Ltd. -- -- 90,323 90,323 -- -- 1,223,280
1,223,280
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
MacMillan Bloedel Ltd. -- -- 4,900 4,900 -- -- 65,537
65,537
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Stone Container Corp. 54,200 -- 84,800 139,000 846,875 --
1,325,000 2,171,875
----------------------------------------------------
1,713,125 -- 4,057,567 5,770,692
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Cyclicals-12.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Autos & Housing - 1.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Capstone Capital Corp. -- 260 -- 260 -- 5,460 --
5,460
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chromcraft Revington,
Inc.(13) -- -- 18,500 18,500 -- -- 464,812
464,812
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Duracell International,
Inc. 16,000 -- 22,000 38,000 1,026,000 -- 1,410,750
2,436,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Fleetwood Enterprises,
Inc. -- 42,000 -- 42,000 -- 1,291,500 --
1,291,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
General Motors Corp. 18,000 -- 26,000 44,000 864,000 --
1,248,000 2,112,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IRSA Inversiones y
Representaciones, SA 193,056 -- 214,506 407,562 563,796 --
626,438 1,190,234
----------------------------------------------------
2,453,796 1,296,960 3,750,000
7,500,756
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Leisure & Entertainment
- - -6.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Alaska Air Group,
Inc.(13) 77,000 -- 97,000 174,000 1,645,875 -- 2,073,375
3,719,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
AMR Corp.(13)(14)(16) 17,600 22,000 25,400 65,000 1,401,400 1,751,750
2,022,475 5,175,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Carnival Corp., Cl. A 43,800 -- 30,800 74,600 1,357,800 --
954,800 2,312,600
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Circus Circus Enterprises,
Inc.(13) 18,000 -- 35,000 53,000 636,750 -- 1,238,125
1,874,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cracker Barrel Old
Country Store, Inc. 55,300 -- 90,800 146,100 1,251,162 --
2,054,350 3,305,512
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Delta Air Lines, Inc. -- 16,000 -- 16,000 -- 1,152,000 --
1,152,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Disney (Walt) Co. -- -- 13,000 13,000 -- -- 823,875
823,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Eastman Kodak Co. 22,000 -- 28,000 50,000 1,727,000 --
2,198,000 3,925,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
International Game
Technology 68,000 -- 61,700 129,700 1,394,000 -- 1,264,850
2,658,850
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
King World Productions,
Inc.(13) 27,000 -- 56,500 83,500 995,625 -- 2,083,437
3,079,062
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mattel, Inc. 39,437 -- 76,093 115,530 1,020,432 -- 1,968,906
2,989,338
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nintendo Co. Ltd. -- -- 45,000 45,000 -- -- 2,888,888
2,888,888
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Outback Steakhouse,
Inc.(13) 2,400 -- -- 2,400 57,900 -- -- 57,900
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Shangri-La Asia Ltd. 550,000 -- 725,000 1,275,000 732,573 --
965,664 1,698,237
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Shimano, Inc. 54,000 -- 82,000 136,000 1,003,636 -- 1,524,040
2,527,676
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U S West Media Group(13) 47,000 -- -- 47,000 793,125 --
- - -- 793,125
----------------------------------------------------
14,017,278 2,903,750 22,060,785
38,981,813
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Media - 2.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Comcast Corp., Cl. A
Special 112,800 -- 171,600 284,400 1,734,300 -- 2,638,350
4,372,650
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Dow Jones & Co., Inc. 21,000 -- 30,000 51,000 777,000 --
1,110,000 1,887,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
EchoStar Communications
Corp., Cl. A(13) -- 900 -- 900 -- 24,525 --
24,525
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
South China Morning
Post Holdings Ltd. 1,440,000 -- 2,400,000 3,840,000 1,070,733 --
1,784,556 2,855,289
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Time Warner, Inc. 30,000 -- 45,000 75,000 1,158,750 --
1,738,125 2,896,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U S West Media Group -- -- 65,000 65,000 -- -- 1,096,875
1,096,875
----------------------------------------------------
4,740,783 24,525 8,367,906
13,133,214
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: General - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cone Mills Corp.(13) 161,500 -- 268,000 429,500 1,271,812 --
2,110,500 3,382,312
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Donna Karan Interna-
tional, Inc.(13) 44,500 -- 54,500 99,000 1,017,937 -- 1,246,687
2,264,624
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Price/Costco, Inc.(13) 54,300 -- 73,100 127,400 1,113,150 --
1,498,550 2,611,700
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Russell Corp. -- 36,000 -- 36,000 -- 1,161,000 --
1,161,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Wal-Mart Stores, Inc. -- -- 32,900 32,900 -- -- 867,737
867,737
----------------------------------------------------
3,402,899 1,161,000 5,723,474
10,287,373
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Retail: Specialty - 1.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
General Nutrition Cos.,
Inc. -- -- 70,000 70,000 -- -- 1,229,375
1,229,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gymboree Corp.(13)
(14)(16) 33,000 -- 60,000 93,000 1,002,375 -- 1,822,500
2,824,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Toys 'R' Us, Inc.
(13)(14)(16) 32,600 -- 69,200 101,800 949,475 -- 2,015,450
2,964,925
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tractor Supply Co. -- -- 25,000 25,000 -- -- 534,375
534,375
----------------------------------------------------
1,951,850 -- 5,601,700 7,553,550
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Consumer Non-
Cyclicals - 11.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Beverages - 0.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Guinness PLC 144,000 -- 182,000 326,000 1,029,967 --
1,301,764 2,331,731
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
PepsiCo, Inc. -- 26,000 -- 26,000 -- 734,500 --
734,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Whitman Corp. 11,500 -- 11,300 22,800 265,938 -- 261,312
527,250
----------------------------------------------------
1,295,905 734,500 1,563,076
3,593,481
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Food - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chiquita Brands Interna-
tional, Inc. 45,000 -- 38,249 83,249 551,250 -- 468,550
1,019,800
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Groupe Danone 3,707 -- 6,841 10,548 541,550 -- 999,392
1,540,942
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IBP, Inc.(14)(16) 27,000 -- 31,500 58,500 627,750 -- 732,375
1,360,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nestle SA, Sponsored ADR 20,000 -- 40,000 60,000 1,115,232 --
2,230,464 3,345,696
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sara Lee Corp. 30,000 -- 58,000 88,000 1,072,500 -- 2,073,500
3,146,000
----------------------------------------------------
3,908,282 -- 6,504,281 10,412,563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Drugs - 5.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Abbott Laboratories 20,000 -- 27,000 47,000 985,000 --
1,329,750 2,314,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Home Products
Corp. 15,400 -- 22,800 38,200 981,750 -- 1,453,500
2,435,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Astra AB Free, Series A 23,000 -- 32,000 55,000 971,240 --
1,351,290 2,322,530
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bristol-Myers Squibb
Co.(14)(16) 21,400 -- 45,600 67,000 2,062,425 -- 4,394,700
6,457,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Ciba-Geigy AG 2,275 -- 2,825 5,100 2,911,013 -- 3,614,774
6,525,787
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Genzyme Corp.(13) 42,000 -- 65,500 107,500 1,071,000 --
1,670,250 2,741,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Johnson & Johnson 36,800 22,000 38,600 97,400 1,886,000 1,127,500
1,978,250 4,991,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mylan Laboratories,
Inc. 45,800 -- 66,600 112,400 784,325 -- 1,140,525
1,924,850
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
SmithKline Beecham PLC,
ADR 16,000 -- 25,600 41,600 974,000 -- 1,558,400
2,532,400
----------------------------------------------------
12,626,753 1,127,500 18,491,439
32,245,692
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Healthcare/Supplies
& Services - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Biomet, Inc.(13) -- -- 45,000 45,000 -- -- 736,875
736,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manor Care, Inc.(14)(16) 21,600 -- 30,770 52,370 828,900 --
1,180,799 2,009,699
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Medtronic, Inc.(14)(16) 19,800 -- 20,000 39,800 1,269,675 --
1,282,500 2,552,175
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nellcor Puritan
Bennett, Inc.(13) 36,000 -- 50,000 86,000 792,000 -- 1,100,000
1,892,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sofamor Danek Group,
Inc.(13)(16) -- -- 22,000 22,000 -- -- 679,250
679,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
WellPoint Health
Networks, Inc.(13) 30,009 -- 40,000 70,009 975,293 --
1,300,000 2,275,293
----------------------------------------------------
3,865,868 -- 6,279,424 10,145,292
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Household Goods - 1.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kimberly-Clark Corp. 9,800 -- 13,100 22,900 863,625 --
1,154,437 2,018,062
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Procter & Gamble Co. 12,000 -- 15,400 27,400 1,170,000 --
1,501,500 2,671,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Wella AG 1,350 -- 1,750 3,100 812,515 -- 1,053,260
1,865,775
----------------------------------------------------
2,846,140 -- 3,709,197 6,555,337
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tobacco - 1.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Philip Morris Cos., Inc. 20,600 11,000 54,300 85,900 1,848,850 987,250
4,873,425 7,709,525
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
UST, Inc. -- 31,000 -- 31,000 -- 918,375 --
918,375
----------------------------------------------------
1,848,850 1,905,625 4,873,425
8,627,900
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy - 4.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Energy Services &
Producers - 0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kerr-McGee Corp. 9,000 -- 13,000 22,000 547,875 --
791,375 1,339,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Landmark Graphics
Corp.(13) 28,600 -- 35,500 64,100 840,125 -- 1,042,812
1,882,937
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Weatherford Enterra,
Inc.(13) 27,000 -- 34,000 61,000 739,125 -- 930,750
1,669,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Western Atlas, Inc.(13) -- -- 20,000 20,000 -- -- 1,245,000
1,245,000
----------------------------------------------------
2,127,125 -- 4,009,937 6,137,062
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Oil-Integrated - 4.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Atlantic Richfield Co. 13,500 -- 19,500 33,000 1,721,250 --
2,486,250 4,207,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Enterprise Oil PLC 90,000 -- 118,000 208,000 768,254 --
1,007,267 1,775,521
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Louisiana Land &
Exploration Co. 12,000 -- 20,000 32,000 631,500 -- 1,052,500
1,684,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Phillips Petroleum Co. -- 29,000 -- 29,000 -- 1,239,750 --
1,239,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Royal Dutch Petroleum Co. 6,300 -- 9,500 15,800 983,588 --
1,483,188 2,466,776
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Saga Petroleum AS, Cl. B 63,000 -- 82,000 145,000 925,397 --
1,204,485 2,129,882
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Total SA, Sponsored ADR 17,800 -- 52,680 70,480 696,425 --
2,061,105 2,757,530
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Unocal Corp. 50,000 35,000 95,000 180,000 1,800,000 1,260,000
3,420,000 6,480,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
USX-Marathon Group -- 57,000 -- 57,000 -- 1,232,625
- - -- 1,232,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
YPF SA, Cl. D, ADR 35,000 -- 43,500 78,500 800,625 --
995,063 1,795,688
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Yukong Ltd., GDR(12) -- -- 39,500 39,500 -- -- 259,219
259,219
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Yukong Ltd., GDR -- -- 1,438 1,438 -- -- 9,437
9,437
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Yukong Ltd., GDR -- -- 3,294 3,294 -- -- 21,617
21,617
----------------------------------------------------
8,327,039 3,732,375 14,000,131
26,059,545
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Financial - 10.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banks - 5.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Akbank T.A.S. 1,995,500 -- 2,661,250 4,656,750 204,215 --
272,347 476,562
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Banco Frances del
Rio de la Plata SA 81,675 -- 109,900 191,575 710,663 --
956,252 1,666,915
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
BankAmerica Corp. -- 15,000 -- 15,000 -- 1,231,875 --
1,231,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chase Manhattan Corp.
(New)(14)(16) 90,000 -- 100,000 190,000 7,211,250 --
8,012,500 15,223,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citicorp(14)(16) 9,900 -- 16,000 25,900 897,188 -- 1,450,000
2,347,188
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Deutsche Bank,
Sponsored ADR 22,500 -- 60,000 82,500 1,060,634 --
2,828,358 3,888,992
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NationsBank Corp.(14)(16) 65,200 14,000 72,200 151,400 5,664,250 1,216,250
6,272,375 13,152,875
----------------------------------------------------
15,748,200 2,448,125 19,791,832
37,988,157
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Diversified Financial
- - - 2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Express Co. 29,000 -- 48,000 77,000 1,341,250 --
2,220,000 3,561,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Dean Witter, Discover
& Co. 14,000 3,000 20,000 37,000 770,000 165,000
1,100,000 2,035,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Federal Home Loan
Mortgage Corp. 8,600 13,000 9,700 31,300 841,725 1,272,375
949,388 3,063,488
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Federal National
Mortgage Assn. -- 27,000 -- 27,000 -- 941,625 --
941,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Green Tree
Financial Corp. -- 36,000 -- 36,000 -- 1,413,000 --
1,413,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Merrill Lynch &
Co., Inc. -- 19,000 -- 19,000 -- 1,246,875 --
1,246,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Morgan Stanley
Group, Inc. -- 10,000 -- 10,000 -- 497,500 --
497,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Salomon, Inc. -- 27,000 -- 27,000 -- 1,231,875 --
1,231,875
----------------------------------------------------
2,952,975 6,768,250 4,269,388
13,990,613
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Insurance - 2.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ACE Ltd. 20,000 -- 27,000 47,000 1,057,500 -- 1,427,625
2,485,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International
Group, Inc.(14)(16) 8,100 -- 13,700 21,800 816,075 -- 1,380,275
2,196,350
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp.(14)(16) 36,000 -- 48,800 84,800 2,286,000 --
3,098,800 5,384,800
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cigna Corp. -- 10,000 -- 10,000 -- 1,198,750 --
1,198,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Loews Corp. -- 13,000 -- 13,000 -- 1,005,875 --
1,005,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Skandia Forsakrings AB 27,000 -- 40,000 67,000 747,206 --
1,106,972 1,854,178
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
UNUM Corp. 12,000 -- 17,000 29,000 769,500 --
1,090,125 1,859,625
----------------------------------------------------
5,676,281 2,204,625 8,103,797
15,984,703
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial - 7.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electrical Equipment - 0.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
General Electric Co. 13,400 -- 31,600 45,000 1,219,400 --
2,875,600 4,095,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Materials - 1.6%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Equitable Bag, Inc.(5)(13) -- 1,861 -- 1,861 -- 4,653 --
4,653
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Insituform Technologies,
Cl. A(13) -- -- 82,300 82,300 -- -- 658,400
658,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Interpool, Inc. -- -- 27,900 27,900 -- -- 585,900
585,900
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Owens Corning 54,000 -- 77,000 131,000 1,991,250 --
2,839,375 4,830,625
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Rubbermaid, Inc. 25,300 -- 33,000 58,300 619,850 -- 808,500
1,428,350
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Wolverine Tube, Inc.(13) 23,500 -- 41,700 65,200 1,010,500 --
1,793,100 2,803,600
----------------------------------------------------
3,621,600 4,653 6,685,275 10,311,528
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Industrial Services - 0.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Ecolab, Inc. -- -- 35,400 35,400 -- -- 1,194,750
1,194,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manufacturing - 2.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
AGCO Corp. 32,400 -- 42,000 74,400 826,200 -- 1,071,000
1,897,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citic Pacific Ltd. -- -- 214,000 214,000 -- -- 968,574
968,574
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Dover Corp. -- 4,000 -- 4,000 -- 191,000 --
191,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hutchison Whampoa Ltd. -- -- 132,000 132,000 -- -- 887,622
887,622
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Mannesmann AG 3,500 -- 6,000 9,500 1,312,100 --
2,249,314 3,561,414
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Pacific Dunlop Ltd. 333,000 -- 476,000 809,000 690,320 --
986,764 1,677,084
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Tenneco, Inc. 38,000 -- 83,000 121,000 1,904,750 -- 4,160,375
6,065,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Westinghouse Air Brake Co. 42,600 -- 60,200 102,800 479,250 --
677,250 1,156,500
----------------------------------------------------
5,212,620 191,000 11,000,899
16,404,519
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Transportation - 2.2%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Airborne Freight Corp. -- -- 44,000 44,000 -- -- 940,500
940,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Burlington Northern
Santa Fe Corp. 24,500 -- 57,400 81,900 2,067,188 -- 4,843,125
6,910,313
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Canadian National Railway
Co. 27,000 -- 38,000 65,000 554,949 -- 781,040
1,335,989
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
CSX Corp. -- 24,000 -- 24,000 -- 1,212,000 --
1,212,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Stolt-Nielsen SA 58,200 -- 116,000 174,200 909,375 --
1,812,500 2,721,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Stolt-Nielsen SA,
Sponsored ADR 25,650 -- 58,000 83,650 400,781 --
906,250 1,307,031
----------------------------------------------------
3,932,293 1,212,000 9,283,415
14,427,708
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Technology - 14.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Aerospace/Defense - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Rockwell International
Corp. 15,000 -- 35,000 50,000 845,625 -- 1,973,125
2,818,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Hardware - 3.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Compaq Computer
Corp.(13) -- 18,000 -- 18,000 -- 1,154,250 --
1,154,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Data General Corp.(13) -- 110,000 -- 110,000 -- 1,540,000 --
1,540,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Digital Equipment
Corp.(13)(14)(16) 17,000 -- 24,000 41,000 607,750 -- 858,000
1,465,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
International Business
Machines Corp. 12,300 9,000 17,400 38,700 1,531,350 1,120,500
2,166,300 4,818,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Moore Corp. Ltd. 40,000 -- 69,400 109,400 735,000 --
1,275,225 2,010,225
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Optical Data Systems,
Inc. -- -- 44,000 44,000 -- -- 748,000 748,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Xerox Corp.(14)(16) 30,000 -- 111,000 141,000 1,608,750 --
5,952,375 7,561,125
----------------------------------------------------
4,482,850 3,814,750 10,999,900
19,297,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Software - 4.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
America Online, Inc.(13) 23,600 -- 33,200 56,800 840,750 --
1,182,750 2,023,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Software, Inc. -- -- 50,000 50,000 -- -- 331,250
331,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Business Objects SA,
Sponsored ADR(13) 50,000 -- 50,000 100,000 962,500 --
962,500 1,925,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates
International,
Inc.(14)(16) 54,300 -- 66,150 120,450 3,244,425 -- 3,952,463
7,196,888
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronic Arts,
Inc.(13)(14)(16) 38,500 -- 43,800 82,300 1,438,938 -- 1,637,025
3,075,963
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Inference Corp., Cl. A -- -- 55,000 55,000 -- -- 976,250
976,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Microsoft
Corp.(13)(14)(16) 6,700 -- 9,800 16,500 883,563 -- 1,292,375
2,175,938
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nintendo Co. Ltd. 31,500 -- -- 31,500 2,022,222 -- --
2,022,222
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Novell, Inc.(13) 97,000 -- 261,000 358,000 1,067,000 --
2,871,000 3,938,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sybase, Inc.(13) 32,000 -- 60,000 92,000 476,000 -- 892,500
1,368,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Symantec Corp.(13) 90,502 -- 151,340 241,842 984,209 --
1,645,823 2,630,032
----------------------------------------------------
11,919,607 -- 15,743,936 27,663,543
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronics - 4.7%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Applied Materials,
Inc.(13) -- 3,000 -- 3,000 -- 82,875 -- 82,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hewlett-Packard Co. 31,500 -- 71,500 103,000 1,535,625 --
3,485,625 5,021,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Intel Corp.(14)(16) 54,000 -- 119,800 173,800 5,153,625 --
11,433,413 16,587,038
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kyocera Corp. 12,000 -- 17,000 29,000 856,566 -- 1,213,468
2,070,034
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
LSI Logic Corp.(13) 36,500 -- 50,700 87,200 848,625 --
1,178,775 2,027,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nokia Corp., Sponsored
ADR, A Shares(14)(16) 20,500 -- 25,000 45,500 907,125 --
1,106,250 2,013,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Proxima Corp. -- -- 70,000 70,000 -- -- 813,750
813,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Samsung Electronics
(First New)(13) -- -- 79 79 -- -- 5,949 5,949
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Samsung Electronics Co. -- -- 265 265 -- -- 20,789
20,789
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
VLSI Technology,
Inc.(13) 51,200 -- 85,800 137,000 832,000 -- 1,394,250
2,226,250
----------------------------------------------------
10,133,566 82,875 20,652,269
30,868,710
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telecommunications-
Technology - 2.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Airtouch Communications,
Inc.(13) 32,900 -- 45,500 78,400 908,863 -- 1,256,938
2,165,801
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bay Networks, Inc.(13) 19,180 -- 26,870 46,050 522,655 --
732,208 1,254,863
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Celcaribe SA(5)(13) -- 65,040 -- 65,040 -- 94,308 --
94,308
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cisco Systems, Inc.(13) 13,700 -- 18,300 32,000 850,256 --
1,135,744 1,986,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ECI Telecommunications
Ltd.(14)(16) 45,000 -- 57,500 102,500 945,000 -- 1,207,500
2,152,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kinnevik Investments AB
Free, Series B -- -- 31,500 31,500 -- -- 821,859
821,859
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
MCI Communications Corp. 89,000 -- 110,000 199,000 2,280,625 --
2,818,750 5,099,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NetCom Systems AB,
B Shares -- -- 31,500 31,500 -- -- 353,922
353,922
----------------------------------------------------
5,507,399 94,308 8,326,921
13,928,628
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Utilities - 2.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electric Utilities
- - - 0.9%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Korea Electric
Power Corp. 15,800 -- 20,000 35,800 522,203 -- 661,017
1,183,220
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Public Service Enterprise
Group, Inc. 42,000 -- 30,000 72,000 1,123,500 -- 802,500
1,926,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Verbund Oest Electriz 17,100 -- 25,200 42,300 1,182,642 --
1,742,840 2,925,482
----------------------------------------------------
2,828,345 -- 3,206,357 6,034,702
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gas Utilities - 0.4%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hong Kong & China
Gas Co. Ltd. 374,488 -- 471,648 846,136 636,817 -- 802,038
1,438,855
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Southwestern Energy Co. -- -- 80,000 80,000 -- -- 1,190,000
1,190,000
----------------------------------------------------
636,817 -- 1,992,038 2,628,855
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Telephone Utilities
- - - 1.1%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
BCE, Inc. 30,600 -- 34,000 64,600 1,308,150 -- 1,453,500
2,761,650
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Portugal Telecom
SA(13) 10,500 -- 15,900 26,400 270,107 -- 409,020
679,127
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
U S West Communications
Group 50,000 -- 80,000 130,000 1,487,500 -- 2,380,000
3,867,500
----------------------------------------------------
3,065,757 -- 4,242,520 7,308,277
----------------------------------------------------
Total Common Stocks
(Cost $103,868,767,
Cost $27,693,470,
Cost $175,755,182,
Combined $307,317,419) 148,691,394 31,482,071
250,333,239 430,506,704
=====================================================================
===============================================================
Preferred Stocks - 0.8%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Alumax, Inc., $4.00 Cv.,
Series A 6,333 -- 6,333 12,666 861,288 -- 861,288
1,722,576
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
California Federal Bank,
10.625% Non-Cum.,
Series B -- 500 -- 500 -- 55,125 -- 55,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Cyprus Amax Minerals Co.,
$4.00 Cv., Series A 17,666 -- 20,666 38,332 925,257 --
1,082,382 2,007,639
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
First Nationwide Bank,
11.50% Non-Cum. -- 2,000 -- 2,000 -- 226,500 --
226,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Prime Retail, Inc.,
$19.00 Cv., Series B -- 12,000 -- 12,000 -- 240,000 --
240,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Time Warner, Inc.,
10.25% Cum., Series K,
Exchangeable Preferred
Stock(5)(7) 734 -- -- 734 774,370 -- --
774,370
----------------------------------------------------
Total Preferred Stocks
(Cost $1,973,515,
Cost $551,813, Cost
$1,416,188, Combined
$3,941,516) 2,560,915 521,625 1,943,670
5,026,210
=====================================================================
===============================================================
Other Securities - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Kaiser Aluminum Corp.,
8.255% Cv. Preferred
Redeemable Increased
Dividend Equity
Securities (Cost
$25,344) -- 2,400 -- 2,400 -- 27,000 --
27,000
Units
=====================================================================
===============================================================
Rights, Warrants and
Certificates - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Telecasting, Inc.
Wts., Exp. 6/99 -- 2,000 -- 2,000 -- 9,000 --
9,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Communication Cellular
SA Wts., Exp. 11/03(5) -- 300 -- 300 -- 1,500 --
1,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hong Kong & China Gas
Co. Ltd. Wts., Exp. 9/97 57,874 -- 74,304 132,178 17,587 --
22,580 40,167
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Hyperion Telecommuni-
cations, Inc. Wts.,
Exp. 4/01(5) 500 400 -- 900 5,000 4,000 --
9,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
In-Flight Phone Corp.
Wts., Exp. 8/02(5) -- 300 -- 300 -- -- -- --
----------------------------------------------------
Total Rights, Warrants
and Certificates
(Cost $15,337, Cost $0,
Cost $19,690, Combined
$35,027) 22,587 14,500 22,580 59,667
Face Amount (1)
=====================================================================
===============================================================
Structured Instruments
- - - 0.3%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bayerische Landesbank
Girozentrale, New York
Branch, 7.15% Deutsche
Mark Currency
Protected Yield Curve
CD, 7/25/97 $ -- $ 70,000 $ -- $ 70,000 -- 69,454 --
69,454
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Canadian Imperial Bank
of Commerce, New York
Branch:
14% CD Linked Nts.,
11/25/96 (indexed to
the cross currency
rates of Greek Drachma
and European Currency
Unit) -- 550,000 -- 550,000 -- 543,070 --
543,070
16.75% CD Linked Nts.,
4/16/97 (indexed to
the Federation GKO,
Zero Coupon, 4/9/97) -- 100,000 -- 100,000 -- 99,400 --
99,400
17.30% CD Linked Nts.,
2/26/97 (indexed to
the Federation GKO,
Zero Coupon, 2/19/97) -- 200,000 -- 200,000 -- 199,200 --
199,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Internationale Neder-
landen Bank NV, Prague
Branch, Zero Coupon
Promissory Nts., 10.486%,
4/28/97(6) CZK -- 4,600,000 -- 4,600,000 -- 160,735 --
160,735
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Internationale Neder
landen (U.S.) Capital
Holdings Corp.:
Czech Koruna Linked
Nts., 11.60%, 12/23/96 -- 70,000 -- 70,000 -- 69,165 --
69,165
Zero Coupon Chilean Peso
Linked Nts., 11.122%,
12/11/96(6) -- 130,000 -- 130,000 -- 126,386 --
126,386
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Salomon Brothers, Inc.,
Zero Coupon Chilean Peso
Indexed Enhanced Access
Nts.:
12.145%, 12/11/96(6) -- 70,000 -- 70,000 -- 68,180 --
68,180
10.853%, 12/18/96(6) -- 70,000 -- 70,000 -- 67,914 --
67,914
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Swiss Bank Corp., New
York Branch, 6.60% CD
Linked Nts., 1/30/97
(indexed to the closing
Nikkei 225 Index on
1/23/97) NZD -- 256,720 -- 256,720 -- 186,629 --
186,629
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
United Mexican States
Linked Nts., 11/27/96
(indexed to the greater
of Cetes Option Amount
or USD LIBOR Option
Amount, 11/27/96) -- 380,000 -- 380,000 -- 462,808 --
462,808
----------------------------------------------------
Total Structured
Instruments
(Cost $2,010,133) -- 2,052,941 --
2,052,941
Contracts
=====================================================================
===============================================================
Put Options Purchased
- - - 0.0%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Italy (Republic of)
Treasury Bonds, Buoni
del Tesoro Poliennali,
9.50%, 5/1/01 Put Opt.
Date--7/97
Strike--$102.30 -- 211 -- 211 -- 1,057 -- 1,057
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Swiss Franc Put Opt.
Date--10/96
Strike--1.22 CHF -- 885,245 -- 885,245 -- 23,628 --
23,628
----------------------------------------------------
Total Put Options
Purchased (Cost $12,370) -- 24,685 --
24,685
=====================================================================
===============================================================
Repurchase Agreements - 8.5%
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repurchase agreement
with Zion First
National Bank, 5.62%,
dated 9/30/96, to be
repurchased at
$24,003,747 on 10/1/96,
collateralized by U.S.
Treasury Nts., 5.75%-
8.875%, 5/15/97-8/15/04,
with a value
of $24,493,438 $ 24,000,000 $ -- $ -- $ 24,000,000 24,000,000 --
-- 24,000,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repurchase agreement
with PaineWebber, Inc.,
5.62%, dated 9/30/96, to
be repurchased at
$2,100,328 on 10/1/96,
collateralized by U.S.
Treasury Bonds, 6.75%,
8/15/26, with a value of
$2,067,056 and U.S.
Treasury Nts., 6.125%,
5/15/98, with a value
of $77,236 -- 2,100,000 -- 2,100,000 -- 2,100,000 --
2,100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Repurchase agreement
with Zion First
National Bank, 5.62%,
dated 9/30/96, to be
repurchased at
$29,004,527 on 10/1/96,
collateralized by U.S.
Treasury Nts., 5.75%-
8.875%, 5/15/97-8/15/04,
with a value of
$29,596,238 -- -- 29,000,000 29,000,000 -- -- 29,000,000
29,000,000
----------------------------------------------------
Total Repurchase
Agreements (Cost
$24,000,000, Cost
$2,100,000, Cost
$29,000,000,
Combined $55,100,000) 24,000,000 2,100,000 29,000,000
55,100,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Total Investments, at
Value (Cost
$241,674,276,
Cost $75,252,756,
Cost $210,233,490,
Combined $316,927,032) 100.0% 104.6% 101.1% 101.0% $291,465,285 $
80,295,960 $286,243,139 $658,004,384
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Liabilities in Excess
of Other Assets (0.0) (4.6) (1.1) (1.0) (23,538) (3,509,389)
(3,166,481) (6,699,408)
------ ------ ------ ------ ----------------------------------------------------
Net Assets 100.0% 100.0% 100.0% 100.0% $291,441,747 $ 76,786,571
$283,076,658 $651,304,976
====== ====== ====== ======
====================================================
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD - Australian Dollar IEP - Irish Punt
CAD - Canadian Dollar ITL - Italian Lira
CHF - Swiss Franc JPY - Japanese Yen
CZK - Czech Koruna MXP - Mexican Peso
DEM - German Deutsche Mark NZD - New Zealand Dollar
DKK - Danish Krone PLZ - Polish Zloty
ESP - Spanish Peseta SEK - Swedish Krona
GBP - British Pound Sterling THB - Thai Baht
IDR - Indonesian Rupiah ZAR - South African Rand
2. When-issued security to be delivered and settled after September 30, 1996.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed-income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Interest or dividend is paid in kind.
8. Represents the current interest rate for an increasing rate security.
9. Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
10. Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
11. Securities with an aggregate market value of $328,125 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts.
12. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $1,639,102 or 0.45% the combined net
assets, at September 30, 1996.
13. Non-income producing security.
<TABLE>
<CAPTION>
14. A sufficient amount of securities has been designated to cover outstanding
call options, as follows:
Market
Shares Value
Subject Expiration Exercise Premium See
to Call Date Price Received Note 1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 3,200 1/97 $ 95 $ 8,300 $
3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International Group, Inc. 1,600 2/97 100 5,752
9,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 7,200 1/97 50 25,175
106,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re Corp. 4,500 10/96 65 4,927
563
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bristol-Myers Squibb Co. 4,400 12/96 95 7,568
18,700
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chase Manhattan Corp. (New) 19,000 3/97 80 73,053
114,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citicorp 2,000 1/97 90 9,440 11,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 55 34,775
87,750
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Computer Associates International, Inc. 10,800 1/97 60 50,974
67,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Digital Equipment Corp. 3,400 1/97 45 7,123
4,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ECI Telecommunications Ltd. 9,000 2/97 25 16,604
12,375
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronic Arts, Inc. 8,400 3/97 30 30,197
87,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gymboree Corp. 6,600 1/97 35 8,877
14,438
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IBP, Inc. 27,000 11/96 25 59,938 10,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Intel Corp. 10,800 1/97 90 33,425
113,400
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manor Care, Inc. 4,200 4/97 40 5,649
9,713
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Medtronic, Inc. 3,800 2/97 55 12,236
40,850
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Microsoft Corp. 6,700 1/97 125 60,097
97,150
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
NationsBank Corp. 13,000 2/97 90 67,858
47,124
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nokia Corp., Sponsored ADR, A Shares 4,000 4/97 45 10,880
18,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Toys 'R' Us, Inc. 6,400 3/97 35 6,608 3,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Xerox Corp. 6,000 1/97 55 12,738
18,750
---------------------------
$552,194 $896,088
===========================
</TABLE>
<TABLE>
<CAPTION>
15. A sufficient amount of securities have been designated to cover outstanding written call options,
as follows:
Contracts/Face Expiration Exercise Premium
Market Value
Subject to Call Date Price Received See Note
1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 461,100 10/96 1.258 AUD $ 3,074
$ 555
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Call Option on New Zealand Dollar 191,675 10/96 1.435 NZD
930 1,131
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Call Option on New Zealand Dollar 163,560 10/96 1.437 NZD
816 1,112
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Call Option on Swiss Franc 939,130 10/96 1.15 CHF 2,047
94
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 500,000 10/96 $90.438
3,711 1,016
--------------------------
$10,578 $ 3,908
==========================
</TABLE>
<TABLE>
<CAPTION>
16. A sufficient amount of securities have been designated to cover outstanding
written call options, as follows:
Shares
Subject Expiration Exercise Premium Market
Value
to Call Date Price Received See Note
1
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
AMR, Corp. 4,800 1/97 $ 95 $ 12,456 $
4,800
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American International Group, Inc. 2,600 2/97 100 9,347
15,275
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re, Corp 9,600 11/96 50 33,566
141,600
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
American Re, Corp 6,100 10/96 65 6,679
763
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Bristol-Myers Squibb, Co. 9,600 12/96 95 16,511
40,800
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Chase Manhattan, Corp. (New) 18,500 3/97 80 71,130
111,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Citicorp 3,200 1/97 90 15,103 18,800
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Comupter Associates International, Inc. 13,200 1/97 55 42,503
107,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Comupter Associates International, Inc. 13,200 1/97 60 62,302
82,500
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Digital Equipment, Corp. 4,800 1/97 45 10,056
6,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
ECI Telecommunications Ltd. 11,500 2/97 25 21,217
15,813
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Electronic Arts, Inc. 9,600 3/97 30 34,511
99,600
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Gymboree, Corp. 12,000 1/97 35 16,139
26,250
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
IBP, Inc. 31,500 11/96 25 69,928 11,813
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Intel, Corp. 22,000 1/97 90 68,088
231,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Manor Care, Inc. 6,000 4/97 40 8,070
13,875
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Medtronic, Inc. 4,000 2/97 55 12,880
43,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Microsoft, Corp. 9,800 1/97 63 87,903
142,100
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nationsbank, Corp. 14,400 2/97 90 75,165
52,200
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Nokia Corp., A Shares, Sponsored ADR 5,000 4/97 45 13,600
23,125
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Sofamor Danek Group, Inc. 2,400 3/97 30 11,028
11,100
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Toys 'R' Us, Inc. 14,000 3/97 35 14,454
7,000
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------
Xerox, Corp. 22,000 1/97 55 46,704
68,750
---------------------------
$759,339 $ 1,274,413
===========================
</TABLE>
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES FUND
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article VIII of Registrant's Amended and
Restated Declaration of Trust filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Declaration of Trust dated March 6,
1997: 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) Not applicable.
(4) (i) Agreement and Plan of Reorganization between
Registrant and Oppenheimer Fund: See Exhibit A to Part A of this
Registration Statement.
(ii) Agreement and Plan of Reorganization between
Registrant and Oppenheimer Strategic Income and Growth Fund: See
Exhibit A to Part A of this Registration Statement.
(5) (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
Registrant's Post-Effective Amendment No. 24, 8/25/95, and
incorporated herein by reference.
(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.
(6) Investment Advisory Agreement dated 6/27/94: Filed with
Registrant's Post-Effective Amendment No. 20, 3/2/95, and
incorporated herein by reference.
(7) (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.
(8) 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.
(9) 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.
(10) (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
3/6/97 for Class B Shares pursuant to Rule 12b-1: Filed herewith.
(iii) Distribution and Service Plan and Agreement dated
3/6/97 for Class C Shares pursuant to Rule 12b-1: Filed herewith.
(11) 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.
(12) Form of Tax Opinion Relating to the Reorganization: Filed
herewith.
(13) Not applicable.
(14) (i) Consent of Auditors of Registrant and of
Oppenheimer Fund: Filed herewith.
(ii) Consent of Auditors of Oppenheimer Strategic
Income & Growth Fund: Filed herewith.
(15) Not applicable.
(16) Powers of Attorney and Certified Board Resolutions:
(Bridget A. Macaskill) filed with Registrant's Post-Effective
Amendment No. 26, 3/28/96; (all other Trustees) previously filed
with Registrant's Post-Effective Amendment No. 17, 2/28/94, and
incorporated herein by reference.
(17) (i) Declaration of Registrant under Rule 24f-2: Filed
herewith.
(ii) (a) Financial Data Schedules of Class A, Class B
and Class C shares of Registrant: Filed herewith.
(b) Financial Data Schedules of Class A, Class B
and Class C shares of Oppenheimer Fund : Filed herewith.
(c) Financial Data Schedules of Class A, Class B
and Class C shares of Oppenheimer Strategic Income & Growth Fund:
Filed herewith.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of the Registrant
in the City of New York and State of New York on the 24th day of
March, 1997.
OPPENHEIMER MULTIPLE STRATEGIES FUND
By: /s/ Bridget A. Macaskill *
------------------------------------
Bridget A. Macaskill, 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:
Signatures Title Date
- - ---------- ----- ----
/s/ Leon Levy* Chairman of the March 24, 1997
- - -------------- Board of Trustees
Leon Levy
/s/ Bridget A. Macaskill* President, Chief March 24, 1997
- - ------------------------ Executive Officer
Bridget A. Macaskill and Trustee
/s/ George Bowen* Treasurer and March 24, 1997
- - ----------------- Principal Financial
George Bowen and Accounting
Officer
/s/ Robert G. Galli* Trustee March 24, 1997
- - --------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee March 24, 1997
- - ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee March 24, 1997
- - --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee March 24, 1997
- - -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee March 24, 1997
- - --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee March 24, 1997
- - -----------------------------
Russell S. Reynolds, Jr.
/s/ Donald W. Spiro* Trustee March 24, 1997
- - --------------------
Donald W. Spiro
/s/ Pauline Trigere* Trustee March 24, 1997
- - --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee March 24, 1997
- - -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
-------------------
Robert G. Zack
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES FUND
FORM N-14
INDEX TO EXHIBITS
Exhibit
Number Document
16(1) Amended and Restated Declaration of Trust of
Registrant dated March 6, 1997
16(10)(ii) Distribution and Service Plan for Class B shares
dated March 6, 1997
16(10)(iii) Distribution and Service Plan for Class C shares
dated March 6, 1997
16(12) Form of Tax Opinion
16(14)(i) Consent of Auditors of Registrant and of Oppenheimer
Fund
16(14)(ii) Consent of Auditors of Oppenheimer Strategic Income
& Growth Fund
17(i) Declaration under Rule 24f-2
17(ii)(a) Financial Data Schedules of Registrant s Class A,
Class B, Class C Shares
17(ii)(b) Financial Data Schedules of Oppenheimer Fund s Class
A, Class B, Class C Shares
17(ii)(c) Financial Data Schedules of Oppenheimer Strategic
Income & Growth Fund s Class A, Class B, Class C
Shares
AMENDED AND RESTATED DECLARATION OF TRUST
OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
This AMENDED AND RESTATED DECLARATION OF TRUST, made as of
March 6, 1997 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, April
24, 1987, and June 1, 1992; and by the Amended and Restated
Declaration of Trust dated August 17, 1995;
WHEREAS, the Trustees desire to make permitted changes to said
Amended and Restated Declaration of Trust;
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: Effective March 6, 1997 this Trust shall be known as
OPPENHEIMER MULTIPLE STRATEGIES FUND. The address 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.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust that 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 of the Trust
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" means 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 of the Trust
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, redeem 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 a similar or
dissimilar 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, but the Trustees shall have the
authority from time to time, without obtaining shareholder
approval, to create one or more Series of Shares 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 or Classes of Shares 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 of Shares
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.
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.
(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 and liabilities 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 and liabilities 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 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.
(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
shareholders of such Series or Class in proportion to the number of
Shares of such Series or Class held by such shareholders 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 each Series and all
Classes of each Series that have 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 Series or Class of that Series only at such
times as Shareholders shall have the right to require the Trust to
redeem Shares of such Series or Class of that Series and at such
other times as may be permitted by the Trustees.
(f) Equality. Each Share of Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to such Series or any Class
of that Series), and each Share of any particular Series shall be
equal to each other Share of that Series and shares of each Class
of a Series shall be equal to each other Share of such Class; 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 Series or
allocable to that Class 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 exchanges of the aforesaid kind,
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 filed with the Commission or
any State, or as the Trustees may consider desirable.
2. The Trust will 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. Except as herein otherwise provided, 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, except as
otherwise provided in Article NINTH. 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 all or 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 qualify
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 then
effective Prospectus and/or Statement of Additional Information
relating to the shares under the Securities Act of 1933, as amended
from time to time) 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 be 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, and the Trustees may also take such other
action as may be permitted under Section 16(c) of the 1940 Act.
4. 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) of the 1940 Act and, if an exemptive order or orders
are issued by the Commission, such order or orders shall be deemed
part of said 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, the Trustees and the 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
or she 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 a 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;
(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; and
(t) to engage, employ or appoint any person or entities
to perform any act for the Trust or the Trustees and to authorize
their compensation.
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 assert 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 of Trustee 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" nor "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, 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) 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 together with any additional
documentation that may be reasonably required by the Trust or its
transfer agent to evidence the authority of the tender or to make
such request, 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 or Class 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 OppenheimerFunds, Inc. ("OFI"),
incidental to and as part of any one or more advisory, management
or supervisory contract which may be entered into by the Trust with
OFI. Such license shall allow OFI 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 OFI 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 and the names of any Series or Classes
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. The 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, doing 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 any 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), (c) and (d)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 an 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, if a vote of
Shareholders is required under this Declaration of Trust, 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 may 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#4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
instrument as of this 6th day of March, 1997.
/s/ Benjamin Lipstein /s/ Clayton K. Yeutter
- - --------------------------- ----------------------------
Benjamin Lipstein Clayton K. Yeutter
591 Breezy Hill Road 1325 Merrie Ridge Road
Hillsdale, NY 12529 McLean, VA 22101
/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/ Kenneth A. Randall /s/ Edward V. Regan
- - ---------------------------- ----------------------------
Kenneth A. Randall Edward V. Regan
6 Whittaker's Mill 40 Park Avenue
Williamsburg, VA 23185 New York, NY 10016
/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/Bridget A. Macaskill
- - ---------------------------
Bridget A. Macaskill
160 East 81st Street
New York, NY 10028
ORGZN\240#4
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
6th day of March, 1997, by and between Oppenheimer Multiple
Strategies Fund (the "Fund") and OppenheimerFunds Distributor, Inc.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and
service plan for Class B shares of the Fund (the "Shares"),
contemplated by Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act"), pursuant to which the Fund
will compensate the Distributor for its services in connection with
the distribution of Shares, and the personal service and
maintenance of shareholder accounts that hold Shares ("Accounts").
The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients,"
as hereinafter defined, for rendering (1) distribution assistance
in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be
interpreted and defined in a manner consistent with the provisions
and definitions contained in (i) the 1940 Act, (ii) the Rule, (iii)
Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor
to such rule (the "NASD Conduct Rules"), and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution to which the Fund is subject under any order on which
the Fund relies, issued at any time by the Securities and Exchange
Commission.
2. Definitions. As used in this Plan, the following terms shall
have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares
or has provided administrative support services with respect
to Shares held by Customers (defined below) of the Recipient;
(ii) shall furnish the Distributor (on behalf of the Fund)
with such information as the Distributor shall reasonably
request to answer such questions as may arise concerning the
sale of Shares; and (iii) has been selected by the Distributor
to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial
interest in the operation of this Plan or in any agreements
relating to this Plan (the "Independent Trustees") may remove
any broker, dealer, bank or other person or entity as a
Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient,
or (ii) such customers, clients and/or accounts as to which
such Recipient is a fiduciary or custodian or co-fiduciary or
co-custodian (collectively, the "Customers"), but in no event
shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that more
than one person or entity would otherwise qualify as
Recipients as to the same Shares, the Recipient which is the
dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares
for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) The Fund will make payments to the Distributor, (i)
within forty-five (45) days of the end of each calendar
quarter, in the aggregate amount of 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of
the aggregate net asset value of the Shares computed as of the
close of each business day (the "Service Fee"), plus (ii)
within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the
average during the month of the aggregate net asset value of
Shares computed as of the close of each business day (the
"Asset-Based Sales Charge") outstanding for six years or less
(the "Maximum Holding Period"). Such Service Fee payments
received from the Fund will compensate the Distributor and
Recipients for providing administrative support services with
respect to Accounts. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor and
Recipients for providing distribution assistance in connection
with the sale of Shares.
The distribution assistance and administrative support
services to be rendered by the Distributor in connection with
the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer,
bank or other person or entity that sells Shares, and\or
paying such persons "Advance Service Fee Payments" (as defined
below) in advance of, and\or greater than, the amount provided
for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor
who support distribution of Shares by Recipients; (iii)
obtaining financing or providing such financing from its own
resources, or from an affiliate, for the interest and other
borrowing costs of the Distributor's unreimbursed expenses
incurred in rendering distribution assistance and
administrative support services to the Fund; (iv) paying other
direct distribution costs, including without limitation the
costs of sales literature, advertising and prospectuses, other
than those furnished to current holders of the Fund's shares
("Shareholders"), and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a
Recipient may render as described below in this Section 3(a).
Such services include distribution assistance and
administrative support services rendered in connection with
Shares acquired (1) by purchase, (2) in exchange for shares of
another investment company for which the Distributor serves as
distributor or sub-distributor, or (3) pursuant to a plan of
reorganization to which the Fund is a party. In the event
that the Board should have reason to believe that the
Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection
with the sale of Shares, then the Distributor, at the request
of the Board, shall provide the Board with a written report or
other information to verify that the Distributor is providing
appropriate services in this regard.
The administrative support services in connection with
the Accounts to be rendered by Recipients may include, but
shall not be limited to, the following: answering routine
inquiries concerning the Fund, assisting in the establishment
and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and
providing such other information and services in connection
with the rendering of personal services and/or the maintenance
of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale
of Shares to be rendered by the Recipients may include, but
shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to
current Shareholders, and providing such other information and
services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided
distribution assistance or administrative support services
qualifying for payment under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan.
In the event that either the Distributor or the Board should
have reason to believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the
sale of Shares or administrative support services for
Accounts, then the Distributor, at the request of the Board,
shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this
regard. If the Distributor or the Board of Trustees still is
not satisfied, either may take appropriate steps to terminate
the Recipient's status as such under the Plan, whereupon such
Recipient's rights as a third-party beneficiary hereunder
shall terminate.
(b) The Distributor shall make service fee payments to each
Recipient quarterly, within forty-five (45) days of the end of
each calendar quarter, at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter
of the aggregate net asset value of Shares computed as of the
close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its
Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, to be set from time to time
by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option,
make the following service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each
calendar quarter: (i) at a rate not to exceed 0.25% of the
average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of business on the
day such Shares are sold, constituting Qualified Holdings sold
by the Recipient during that quarter and owned beneficially or
of record by the Recipient or by its Customers ("Advance
Service Fee Payments"), plus (ii) service fee payments at a
rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of
more than one (1) year, subject to reduction or chargeback so
that the aggregate service fee payment and Advance Service Fee
Payments do not exceed the limits on payments to Recipients
that are, or may be, imposed by Rule 2830 of the NASD Conduct
Rules. In the event Shares are redeemed less than one year
after the date such Shares were sold, the Recipient is
obligated and will repay to the Distributor on demand a pro
rata portion of such Advance Service Fee Payments, based on
the ratio of the time such shares were held to one (1) year.
The Advance Service Fee Payments described in part (i) of
the prior paragraph of this section 3(b) may, at the
Distributor's sole option, be made more often than quarterly,
and sooner than the end of the calendar quarter. However, no
such payments shall be made to any Recipient for any such
quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount
("Minimum Qualified Holdings"), if any, that may be set from
time to time by a majority of the Independent Trustees.
(c) A majority of the Independent Trustees may at any time or
from time to time decrease and thereafter adjust the rate of
fees to be paid to the Distributor or to any Recipient, but
not to exceed the rate set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding
Period, the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period and Minimum
Holding Period, if any, and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient
with written notice within thirty (30) days after any change
in these provisions. Inclusion of such provisions or a change
in such provisions in a revised current prospectus shall
constitute sufficient notice. The Distributor may make Plan
payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor or to the Distributor if such
affiliated person and/or the Distributor qualifies as a
Recipient.
(d) The Service Fee and the Asset-Based Sales Charge on
Shares are subject to reduction or elimination of such amounts
under the limits to which the Distributor is, or may become,
subject under Rule 2830 of the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i)
by OppenheimerFunds, Inc. ("OFI") from its own resources
(which may include profits derived from the advisory fee it
receives from the Fund), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from its borrowings.
(f) Notwithstanding any other provision of this Plan, this
Plan does not obligate or in any way make the Fund liable to
make any payment whatsoever to any person or entity other than
directly to the Distributor. In no event shall the amounts to
be paid by the Distributor exceed the rate of fees to be paid
by the Fund to the Distributor set forth in paragraph (a) of
this Section 3.
4. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination of those persons to be
Trustees of the Fund who are not "interested persons" of the Fund
("Disinterested Trustees") shall be committed to the discretion of
such Disinterested Trustees. Nothing herein shall prevent the
Disinterested Trustees from soliciting the views or the involvement
of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the
Fund shall provide written reports to the Fund's Board for its
review, detailing services rendered in connection with the
distribution of the Shares, the amount of all payments made and the
purpose for which the payments were made. The reports shall be
provided quarterly, and shall state whether all provisions of
Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall
be in writing and shall provide that: (i) such agreement may be
terminated at any time, without payment of any penalty, by a vote
of a majority of the Independent Trustees or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class, on not more than sixty
days' written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its
"assignment" (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of
voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by
a vote of the Board and its Independent Trustees cast in person at
a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called on October 10, 1996,
for the purpose of voting on this Plan, and shall take effect as of
the date first set forth above, at which time it should replace the
Fund's Distribution and Service Plan for the shares dated August
29, 1995. Unless terminated as hereinafter provided, it shall
continue in effect until December 31, 1997 and from year to year
thereafter or as the Board may otherwise determine only so long as
such continuance is specifically approved at least annually by a
vote of the Board and its Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance. This
Plan may not be amended to increase materially the amount of
payments to be made, without approval of the Class B Shareholders
in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of the Class. In the event of such termination,
the Board and its Independent Trustees shall determine whether the
Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in
respect of Shares sold prior to the effective date of such
termination.
8. Disclaimer of Shareholder and Trustee Liability. The
Distributor understands that the obligations of the Fund under this
Plan are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and
Trustee liability for acts or obligations of the Fund.
Oppenheimer Multiple Strategies Fund
/s/ Robert G. Zack
By:__________________________________
Robert G. Zack, Assistant Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By:__________________________________
Katherine P. Feld, Vice President
& Secretary
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
6th day of March, 1997, by and between Oppenheimer Multiple
Strategies Fund (the "Fund") and OppenheimerFunds Distributor, Inc.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and
service plan for Class C shares of the Fund (the "Shares"),
contemplated by Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act"), pursuant to which the Fund
will compensate the Distributor for its services in connection
with the distribution of Shares, and the personal service and
maintenance of shareholder accounts that hold Shares ("Accounts").
The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients,"
as hereinafter defined, for rendering (1) distribution assistance
in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be
interpreted and defined in a manner consistent with the provisions
and definitions contained in (i) the 1940 Act, (ii) the Rule, (iii)
Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor
to such rule (the "NASD Conduct Rules"), and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution to which the Fund is subject under any order on which
the Fund relies, issued at any time by the Securities and Exchange
Commission.
2. Definitions. As used in this Plan, the following terms shall
have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares
or has provided administrative support services with respect to
Shares held by Customers (defined below) of the Recipient; (ii)
shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to
answer such questions as may arise concerning the sale of
Shares; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest
in the operation of this Plan or in any agreements relating to
this Plan (the "Independent Trustees") may remove any broker,
dealer, bank or other person or entity as a Recipient,
whereupon such person's or entity's rights as a third-party
beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient,
or (ii) such brokerage or other customers, or investment
advisory or other clients of such Recipient and/or accounts as
to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more
than one Recipient for purposes of this Plan. In the event
that more than one person or entity would otherwise qualify as
Recipients as to the same Shares, the Recipient which is the
dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i)
within forty-five (45) days of the end of each calendar
quarter, in the aggregate amount of 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the
close of each business day (the "Service Fee"), plus (ii)
within ten (10) days of the end of each month, in the aggregate
amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares
computed as of the close of each business day (the "Asset-Based
Sales Charge"). Such Service Fee payments received from the
Fund will compensate the Distributor and Recipients for
providing administrative support services with respect to
Accounts. Such Asset-Based Sales Charge payments received from
the Fund will compensate the Distributor and Recipients for
providing distribution assistance in connection with the sale
of Shares.
The distribution assistance and administrative support
services to be rendered by the Distributor in connection with
the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer,
bank or other person or entity that sells Shares, and\or paying
such persons "Advance Service Fee Payments" (as defined below)
in advance of, and\or greater than, the amount provided for in
Section 3(b) of this Agreement; (ii) paying compensation to and
expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an
affiliate, for the interest and other borrowing costs of the
Distributor's unreimbursed expenses incurred in rendering
distribution assistance and administrative support services to
the Fund; (iv) paying other direct distribution costs,
including without limitation the costs of sales literature,
advertising and prospectuses (other than those furnished to
current holders of the Fund's shares ("Shareholders")) and
state "blue sky" registration expenses; and (v) any service
rendered by the Distributor that a Recipient may render as
described below in this Section 3(a). Such services include
distribution assistance and administrative support services
rendered in connection with Shares acquired (1) by purchase,
(2) in exchange for shares of another investment company for
which the Distributor serves as distributor or sub-distributor,
or (3) pursuant to a plan of reorganization to which the Fund
is a party. In the event that the Board should have reason to
believe that the Distributor may not be rendering appropriate
distribution assistance or administrative support services in
connection with the sale of Shares, then the Distributor, at
the request of the Board, shall provide the Board with a
written report or other information to verify that the
Distributor is providing appropriate services in this regard.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall
not be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and
providing such other information and services in connection
with the rendering of personal services and/or the maintenance
of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Recipients may include, but shall
not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to
current Shareholders, and providing such other information and
services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided
distribution assistance or administrative support services
qualifying for payment under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan.
In the event that either the Distributor or the Board should
have reason to believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale
of Shares or administrative support services for Accounts, then
the Distributor, at the request of the Board, shall require the
Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate
distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied,
either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's
rights as a third-party beneficiary hereunder shall terminate.
(b) (i) Service Fee. The Distributor shall make
service fee payments to each Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter at a
rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record
by the Recipient or by its Customers for a period of more than
the minimum period (the "Minimum Holding Period"), if any, to
be set from time to time by a majority of the Independent
Trustees.
Alternatively, the Distributor may, at its sole option,
make the following service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each
calendar quarter: (i) at a rate not to exceed 0.25% of the
average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of business on the
day such Shares are sold, constituting Qualified Holdings sold
by the Recipient during that quarter and owned beneficially or
of record by the Recipient or by its Customers ("Advance
Service Fee Payments"), plus (ii) service fee payments at a
rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record
by the Recipient or by its Customers for a period of more than
one (1) year, subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or
may be, imposed by Rule 2830 of the NASD Conduct Rules.
The Advance Service Fee Payments described in part (i)
of the prior paragraph may, at the Distributor's sole option,
be made more often than quarterly, and sooner than the end of
the calendar quarter. In the event Shares are redeemed less
than one year after the date such Shares were sold, the
Recipient is obligated and will repay to the Distributor on
demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such shares were held to one (1)
year.
(ii) Asset-Based Sales Charge Payments. Irrespective of
whichever alternative method of service fee payments is
selected by the Distributor, in addition the Distributor shall
make asset-based sales charge payments to each Recipient
quarterly, within forty-five (45) days after the end of each
calendar quarter, at a rate not to exceed 0.1875% (0.75% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of shares computed as of the close of
each business day constituting "Qualified Holdings" owned
beneficially or of record by the Recipient or its Customers for
a period of more than one (1) year. However, no such payments
shall be made to any Recipient for any such quarter in which
its Qualified Holdings do not equal or exceed, at the end of
such quarter, the minimum amount ("Minimum Qualified
Holdings"), if any, that may be set from time to time by a
majority of the Independent Trustees.
(c) A majority of the Independent Trustees may at any time
or from time to time decrease and thereafter adjust the rate of
fees to be paid to the Distributor or to any Recipient, but not
to exceed the rate set forth above, and/or direct the
Distributor to increase or decrease the Minimum Holding Period
or the Minimum Qualified Holdings. The Distributor shall
notify all Recipients of the Minimum Qualified Holdings and
Minimum Holding Period, if any, and the rate of payments
hereunder applicable to Recipients, and shall provide each
Recipient with written notice within thirty (30) days after any
change in these provisions. Inclusion of such provisions or a
change in such provisions in a revised current prospectus shall
constitute sufficient notice. The Distributor may make Plan
payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor or to the Distributor if such
affiliated person and/or the Distributor qualifies as a
Recipient.
(d) The Service Fee and the Asset-Based Sales Charge on
Shares are subject to reduction or elimination of such amounts
under the limits to which the Distributor is, or may become,
subject under Rule 2830 of the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i)
by OppenheimerFunds, Inc. ("OFI") from its own resources (which
may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of
OFI), from its own resources, from Asset-Based Sales Charge
payments or from its borrowings.
(f) Notwithstanding any other provision of this Plan, this
Plan does not obligate or in any way make the Fund liable to
make any payment whatsoever to any person or entity other than
directly to the Distributor. In no event shall the amounts to
be paid by the Distributor exceed the rate of fees to be paid
by the Fund to the Distributor set forth in paragraph (a) of
this Section 3.
4. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination of those persons to be
Trustees of the Fund who are not "interested persons" of the Fund
("Disinterested Trustees") shall be committed to the discretion of
such Disinterested Trustees. Nothing herein shall prevent the
Disinterested Trustees from soliciting the views or the involvement
of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the
Fund shall provide written reports to the Fund's Board for its
review, detailing services rendered in connection with the
distribution of the Shares, the amount of all payments made, and
the purpose for which the payments were made. The reports shall be
provided quarterly, and shall state whether all provisions of
Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall
be in writing and shall provide that: (i) such agreement may be
terminated at any time, without payment of any penalty, by a vote
of a majority of the Independent Trustees or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class, on not more than sixty
days' written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its
"assignment" (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of
voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by
a vote of the Board and its Independent Trustees cast in person at
a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called on October 10, 1996 for
the purpose of voting on this Plan, and shall take effect as of the
date first set forth above, at which time it should replace the
Fund's Distribution and Service Plan for the shares dated December
1, 1993. Unless terminated as hereinafter provided, it shall
continue in effect until December 31, 1997 and from year to year
thereafter or as the Board may otherwise determine only so long as
such continuance is specifically approved at least annually by a
vote of the Board and its Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance. This
Plan may not be amended to increase materially the amount of
payments to be made, without approval of the Class C Shareholders,
in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of the Class. In the event of such termination,
the Board and its Independent Trustees shall determine whether the
Distributor shall be entitled to payment from the Fund of all or
a portion of the Service Fee and/or the Asset-Based Sales Charge in
respect of Shares sold prior to the effective date of such
termination.
8. Disclaimer of Shareholder and Trustee Liability. The
Distributor understands that the obligations of the Fund under this
Plan are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and
Trustee liability for acts or obligations of the Fund.
Oppenheimer Multiple Strategies Fund
/s/ Robert G. Zack
By:___________________________________
Robert G. Zack, Assistant Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By:________________________________________
Katherine P. Feld
Vice President and Secretary
DRAFT
[Letterhead of KPMG Peat Marwick LLP]
______________, 1997
Oppenheimer Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Oppenheimer Multiple Strategies Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Dear Sirs:
We have reviewed the Agreement and Plan of Reorganization between
Oppenheimer Fund (the "Fund") and Oppenheimer Multiple Strategies
Fund ("OMSF") which is attached as Exhibit A to the Proxy Statement
and Prospectus of the Fund included as part of OMSF's Registration
Statement on Form N-14 filed under the Securities Act of 1933, as
amended, with the Securities and Exchange Commission on ________,
1997 (the "Agreement"), concerning the acquisition by OMSF of
substantially all of the assets of the Fund solely for voting
shares of beneficial interest in OMSF, followed by the distribution
of OMSF shares to the shareholders of the Fund in complete
liquidation of the Fund.
In connection with the rendering of this opinion, we have reviewed
the Agreement, the most recent audited financial statements and
related documents and other materials as we deemed relevant to the
rendering of this opinion. Based upon all of the foregoing and the
representations made by the Fund and OMSF, attached hereto, in our
opinion, the federal tax consequences of the transaction will be as
follows:
1. The transactions contemplated by the Agreement will qualify as
a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code").
2. The Fund and OMSF will each qualify as a "party to a
reorganization" within the meaning of Section 368(b)(2) of the
Code.
3. No gain or loss will be recognized by the shareholders of the
Fund upon the distribution of shares of beneficial interest in
OMSF to the shareholders of the Fund, pursuant to Section 354
of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by the Fund by reason of the transfer of its assets
solely in exchange for Class A, Class B and Class C shares of
OMSF, respectively.
5. Under Section 1032 of the Code no gain or loss will be
recognized by OMSF by reason of the transfer of the Fund's
assets solely in exchange for Class A, Class B and Class C
shares of OMSF, respectively.
6. The stockholders of the Fund will have the same tax basis and
holding period for the shares of beneficial interest in OMSF
that they receive as they had for the stock of the Fund that
they previously held, pursuant to Sections 358(a) and 1223(1),
respectively, of the Code.
7. The securities transferred by the Fund to OMSF will have the
same tax basis and holding period in the hands of OMSF as they
had for the Fund, pursuant to Sections 362(b) and 1223(1),
respectively, of the Code.
Very truly yours
<PAGE>
DRAFT
[Letterhead of KPMG Peat Marwick LLP]
______________, 1997
Oppenheimer Strategic Income & Growth Fund
6803 South Tucson Way
Englewood, Colorado 80112
Oppenheimer Multiple Strategies Fund
Two World Trade Center 34th Floor
New York, New York 10048-0203
Dear Sirs:
We have reviewed the Agreement and Plan of Reorganization between
Oppenheimer Strategic Income & Growth Fund (the "Fund") and
Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund")
which is attached as Exhibit A to the Proxy Statement and
Prospectus of the Fund included as part of Multiple Strategies Fund
Registration Statement on Form N-14 filed under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission on
________, 1997 (the "Agreement"), concerning the acquisition by
Multiple Strategies Fund of substantially all of the assets of the
Fund solely for voting shares of beneficial interest in Multiple
Strategies Fund, followed by the distribution of Multiple
Strategies Fund shares to the shareholders of the Fund in complete
liquidation of the Fund.
In connection with the rendering of this opinion, we have reviewed
the Agreement, the most recent audited financial statements and
related documents and other materials as we deemed relevant to the
rendering of this opinion. Based upon all of the foregoing and the
representations made by the Fund and Multiple Strategies Fund,
attached hereto, in our opinion, the federal tax consequences of
the transaction will be as follows:
1. The transactions contemplated by the Agreement will qualify as
a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code").
2. The Fund and Multiple Strategies Fund will each qualify as a
"party to a reorganization" within the meaning of Section
368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of the
Fund upon the distribution of shares of beneficial interest in
Multiple Strategies Fund to the shareholders of the Fund,
pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by the Fund by reason of the transfer of its assets
solely in exchange for Class A, Class B and Class C shares of
Multiple Strategies Fund, respectively.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Multiple Strategies Fund by reason of the
transfer of the Fund's assets solely in exchange for Class A,
Class B and Class C shares of Multiple Strategies Fund,
respectively.
6. The stockholders of the Fund will have the same tax basis and
holding period for the shares of beneficial interest in
Multiple Strategies Fund that they receive as they had for the
stock of the Fund that they previously held, pursuant to
Sections 358(a) and 1223(1), respectively, of the Code.
7. The securities transferred by the Fund to Multiple Strategies
Fund will have the same tax basis and holding period in the
hands of Multiple Strategies Fund as they had for the Fund,
pursuant to Sections 362(b) and 1223(1), respectively, of the
Code.
Very truly yours
KPMG Peat Marwick LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Oppenheimer Multiple Strategies Fund on Form N-14 of
our report dated October 21, 1996 appearing in the 1996 Annual
Report of Oppenheimer Multiple Strategies Fund (formerly
Oppenheimer Asset Allocation Fund) and our report dated July 22,
1996 appearing in the 1996 Annual Report of Oppenheimer Fund,
and to the reference to our firm under the heading "Tax Aspects
of the Reorganization."
/s/ KPMG Peat Marwick LLP
- - --------------------------
KPMG Peat Marwick LLP
Denver, Colorado
March 24, 1997
INDEPENDENT AUDITORS' CONSENT
We consent to use in this Registration Statement of Oppenheimer
Multiple Strategies Fund on Form N-14 of our report dated October
21, 1996 appearing in the September 30, 1996 Annual Report of
Oppenheimer Strategic Income & Growth Fund, included and
incorporated by reference in such Registration Statement.
/s/ Deloitte & Touche LLP
- - --------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
March 21, 1997
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. 27 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940
AMENDMENT NO. 26 /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.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- - -----------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/X/ On January 15, 1997, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ________, pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On ________, pursuant to paragraph (a)(2)
of Rule 485
- - -----------------------------------------------------------------
The Registrant has registered an indefinite number of shares under
the Securities Act of 1933 pursuant to Rule 24f-2 promulgated under
the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ended September 30, 1996 was filed on
November 27, 1996.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 241,674,276
<INVESTMENTS-AT-VALUE> 291,465,285
<RECEIVABLES> 3,605,304
<ASSETS-OTHER> 19,537
<OTHER-ITEMS-ASSETS> 398,456
<TOTAL-ASSETS> 295,488,582
<PAYABLE-FOR-SECURITIES> 1,918,420
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<OTHER-ITEMS-LIABILITIES> 2,128,415
<TOTAL-LIABILITIES> 4,046,835
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<PAID-IN-CAPITAL-COMMON> 225,707,312
<SHARES-COMMON-STOCK> 18,756,434
<SHARES-COMMON-PRIOR> 19,233,516
<ACCUMULATED-NII-CURRENT> 615,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,672,173
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,447,205
<NET-ASSETS> 264,358,580
<DIVIDEND-INCOME> 2,710,998
<INTEREST-INCOME> 9,646,866
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<EXPENSES-NET> 2,662,147
<NET-INVESTMENT-INCOME> 9,695,717
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<NET-CHANGE-FROM-OPS> 29,633,485
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<NUMBER-OF-SHARES-SOLD> 860,353
<NUMBER-OF-SHARES-REDEEMED> 1,862,109
<SHARES-REINVESTED> 524,674
<NET-CHANGE-IN-ASSETS> 23,417,934
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<ACCUMULATED-GAINS-PRIOR> 736,164
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,544,001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,662,147
<AVERAGE-NET-ASSETS> 256,765,000
<PER-SHARE-NAV-BEGIN> 13.07
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> 0.43
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<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 241,674,276
<INVESTMENTS-AT-VALUE> 291,465,285
<RECEIVABLES> 3,605,304
<ASSETS-OTHER> 19,537
<OTHER-ITEMS-ASSETS> 398,456
<TOTAL-ASSETS> 295,488,582
<PAYABLE-FOR-SECURITIES> 1,918,420
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,128,415
<TOTAL-LIABILITIES> 4,046,835
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 225,707,312
<SHARES-COMMON-STOCK> 428,130
<SHARES-COMMON-PRIOR> 97,156
<ACCUMULATED-NII-CURRENT> 615,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,672,173
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,447,205
<NET-ASSETS> 5,996,160
<DIVIDEND-INCOME> 2,710,998
<INTEREST-INCOME> 9,646,866
<OTHER-INCOME> 0
<EXPENSES-NET> 2,662,147
<NET-INVESTMENT-INCOME> 9,695,717
<REALIZED-GAINS-CURRENT> 15,544,485
<APPREC-INCREASE-CURRENT> 4,393,283
<NET-CHANGE-FROM-OPS> 29,633,485
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 114,496
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 366,656
<NUMBER-OF-SHARES-REDEEMED> 42,546
<SHARES-REINVESTED> 6,864
<NET-CHANGE-IN-ASSETS> 23,417,934
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 736,164
<OVERDISTRIB-NII-PRIOR> 621,120
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,544,001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,662,147
<AVERAGE-NET-ASSETS> 3,546,000
<PER-SHARE-NAV-BEGIN> 13.03
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.93
<PER-SHARE-DIVIDEND> 0.36
<PER-SHARE-DISTRIBUTIONS> 0.00
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<PER-SHARE-NAV-END> 14.01
<EXPENSE-RATIO> 2.12
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<PERIOD-END> SEP-30-1996
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
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<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 75,252,756
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<NET-INVESTMENT-INCOME> 3,732,693
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<OVERDISTRIB-NII-PRIOR> 129,448
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<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 75,252,756
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<RECEIVABLES> 3,096,625
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<OTHER-ITEMS-ASSETS> 655,391
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<OTHER-ITEMS-LIABILITIES> 653,533
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<ACCUMULATED-NET-GAINS> 5,349,088
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<NET-INVESTMENT-INCOME> 3,732,693
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-02-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 75,252,756
<INVESTMENTS-AT-VALUE> 80,295,960
<RECEIVABLES> 3,096,625
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 074661
<NAME> Oppenheimer Fund - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 202,407,776
<INVESTMENTS-AT-VALUE> 280,394,997
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<OTHER-ITEMS-LIABILITIES> 1,980,940
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<ACCUMULATED-NET-GAINS> 18,274,717
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<EXPENSES-NET> 3,498,852
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<SHARES-REINVESTED> 1,924,123
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<ACCUMULATED-NII-PRIOR> 3,477,408
<ACCUMULATED-GAINS-PRIOR> 14,735,357
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,498,852
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<PER-SHARE-NII> 0.20
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<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 074661
<NAME> Oppenheimer Fund - Class B
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 202,407,776
<INVESTMENTS-AT-VALUE> 280,394,997
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<ACCUMULATED-NII-CURRENT> 4,179,246
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<ACCUMULATED-NET-GAINS> 18,274,717
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 78,090,579
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<INTEREST-INCOME> 1,929,027
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<EXPENSES-NET> 3,498,852
<NET-INVESTMENT-INCOME> 4,317,646
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<PER-SHARE-NAV-END> 12.07
<EXPENSE-RATIO> 2.13
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 074661
<NAME> Oppenheimer Fund - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
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<PAID-IN-CAPITAL-COMMON> 178,389,656
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<ACCUMULATED-NII-CURRENT> 4,179,246
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<ACCUMULATED-NET-GAINS> 18,274,717
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 78,090,579
<NET-ASSETS> 4,085,715
<DIVIDEND-INCOME> 5,887,471
<INTEREST-INCOME> 1,929,027
<OTHER-INCOME> 0
<EXPENSES-NET> 3,498,852
<NET-INVESTMENT-INCOME> 4,317,646
<REALIZED-GAINS-CURRENT> 22,794,882
<APPREC-INCREASE-CURRENT> 16,879,025
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,415
<DISTRIBUTIONS-OF-GAINS> 287,511
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<NUMBER-OF-SHARES-SOLD> 238,989
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<SHARES-REINVESTED> 26,363
<NET-CHANGE-IN-ASSETS> 6,398,723
<ACCUMULATED-NII-PRIOR> 3,477,408
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