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
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(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.
<PAGE>
FORM N-1A
OPPENHEIMER ASSET ALLOCATION FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed -
Organization and History; Investment Objective and
Policies; Investment Restrictions
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes; Investment
Objective and Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy
Shares; Special Investor Services; How to Sell Shares;
How to Exchange Shares; Service Plan for Class A
Shares; Distribution and Service Plan for Class B
Shares; Distribution and Service Plan for Class C
Shares
8 Special Investor Services; How to Sell Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Trustees and Officers of the
Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed - Distribution and Service
Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 Financial Statements
- ---------------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
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 32, (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 40, 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 40, 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 PS0240.009
<PAGE>
OPPENHEIMER
ASSET ALLOCATION FUND
Prospectus dated January 15, 1997
Oppenheimer Asset Allocation Fund is a mutual fund that seeks
high total investment return as its investment objective. That
means the Fund seeks current income and capital appreciation in the
value of its shares. In seeking this objective, the Fund may
invest in different types of securities, including common stocks
and other equity securities, money market securities, and bonds and
other debt securities. The Fund may invest up to 35% of its total
assets in lower-rated, high yield debt securities commonly known
as "junk bonds."
In seeking its objective, the Fund periodically allocates some
or all of its assets to invest in any one or more of different
types of securities. The Fund also uses "hedging instruments" to
seek to reduce the risks of market fluctuations that can affect the
value of the securities the Fund holds, or to attempt to seek
increased total return. Some investment techniques the Fund uses
may be considered to be speculative investment methods that may
increase the risks of investing in the Fund and may also increase
the Fund's operating costs. You should carefully review the risks
associated with an investment in the Fund.
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 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).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
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: 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 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" from pages 28 through 50 for an explanation of how and
when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge on Purchases 5.75% None None
(as a % of offering price)
Maximum Deferred Sales Charge None(1) 5% in the 1% if shares
(as a % of the lower of the first year, are redeemed
original offering price or declining to within 12 months
redemption proceeds) 1% in the of purchase(2)
sixth year
and eliminated
thereafter(2)
Maximum Sales Charge on Reinvested None None None
Dividends
Redemption Fee None(3) None(3) None(3)
Exchange Fee None None None
</TABLE>
(1)If you invest $1 million or more ($500,000 or more for purchases
by "Retirement Plans," as defined in "Class A Contingent Deferred
Sales Charge" on page___) 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 charges.
(3)There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemptions paid by ACH transfers through
AccountLink. See "How to Sell Shares."
Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
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 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.18% 1.00% 1.00%
Other Expenses 0.29% 0.38% 0.33%
Total Fund
Operating Expenses 1.21% 2.12% 2.07%
The numbers for Class A, Class B and Class C shares in the
chart above are based upon the Fund's expenses 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
class of the Fund's shares for that year. The actual expenses for
each class of shares in future years may be more or less, depending
on a number of factors, including the actual amount of the assets
represented by each class of shares.
The 12b-1 Plan fees for Class A shares are the service fees
(the maximum fee is 0.25% of average annual net assets of that
class). Currently, the Board of Trustees has set the maximum fee
at 0.15% for assets representing Class A shares sold before April
1, 1988, and 0.25% for assets representing Class A shares sold on
or after that date. For Class B and Class C shares, the 12b-1Plan
Fees are the service fee (the maximum service fee is 0.25% of
average annual net assets of each class) and the asset-based sales
charge of 0.75%. 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 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 $69 $94 $120 $196
Class B Shares $72 $96 $134 $201
Class C Shares $31 $65 $111 $240
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
Class A Shares $69 $94 $120 $196
Class B Shares $22 $66 $114 $201
Class C Shares $21 $65 $111 $240
*In the first example, expenses include the Class A initial sales
charge and the applicable Class B and Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the asset-
based sales charge and the contingent deferred sales charge imposed
on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
What Is the Fund's Investment Objective? The Fund's
investment objective is to seek high total investment return, which
includes both current income and capital appreciation.
What Does the Fund Invest In? The Fund invests in a
variety of different types of securities. These include common and
preferred stocks, convertible securities and warrants, debt
securities such as corporate bonds and notes, U.S. Government
securities, and money market instruments. The Fund's investments
can include "junk bonds" and foreign securities, including foreign
debt securities that are below investment grade, which have special
risks. While all securities investments entail risks, high yield
bonds and foreign securities have special risks, described in more
detail in "Investment Risks." The Fund may also write covered
calls and use certain types of securities called "derivative
investments" and hedging instruments to try to manage investment
risks. These investments are more fully explained in "Investment
Objective and Policies" starting on page __.
Who Manages the Fund? The Fund's investment advisor (the
"Manager") is OppenheimerFunds, Inc., which (including a
subsidiary) manages investment company portfolios currently having
over $62 billion in assets at December 31, 1996. The Manager is
paid an advisory fee by the Fund, based on its net assets. The
Fund's portfolio manager, who is employed by the Manager and is
primarily responsible for the selection of the Fund's securities,
is Richard H. Rubinstein. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor 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 bond and stock market movements. A 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. The Fund's investments in foreign securities are
subject to additional risks associated with investing abroad, such
as the effect 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 considered moderately aggressive
because it may invest in foreign securities and high-yield debt
securities ("junk bonds") and may invest for capital appreciation
in stocks. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the
Fund's objective, and your shares may be worth more or less than
their original cost when you redeem them. Please refer to
"Investment Risks" starting on page ___ for a more complete
discussion of the Fund's investment risks.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How to Buy Shares" on page ___ for more details.
Will I Pay A Sales Charge to Buy Shares? The Fund has
three classes of shares. 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 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 purchase. There is also an annual asset-
based sales charge on Class B and Class C shares. Please review
"How to Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for
you.
How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How to Sell Shares" on page
___. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page __.
How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total returns 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 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 KPMG Peat Marwick 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.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1996(2) 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <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
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .49 .52 .54 .44 .39
Net realized and unrealized gain (loss) .96 2.08 (.75) 1.43 .44
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.45 2.60 (.21) 1.87 .83
- ---------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.43) (.49) (.53) (.44) (.42)
Distributions from net realized gain -- (.56) (.79) (.01) --
- ---------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.43) (1.05) (1.32) (.45) (.42)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.09 $ 13.07 $ 11.52 $ 13.05 $ 11.63
===============================================================
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(6) 11.22% 22.79% (1.59)% 16.30% 7.54%
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $264,359 $251,353 $237,771 $277,914 $266,713
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $256,765 $249,660 $260,767 $272,303 $269,096
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.73%(7) 3.97% 4.10% 3.58% 3.41%
Expenses 1.21%(7) 1.15% 1.09% 1.14% 1.17%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 31.7% 28.5% 31.5% 32.7% 60.3%
Average brokerage commission rate(9) $ 0.0336 $ 0.0350 -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
1991(5) 1990 1989 1988 1987(4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 10.19 $ 10.67 $ 9.78 $ 8.89 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .40 .53 .49 .39 .27
Net realized and unrealized gain (loss) 1.06 (.43) 1.17 1.09 (1.11)
- -------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.46 .10 1.66 1.48 (.84)
- -------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.43) (.52) (.48) (.40) (.26)
Distributions from net realized gain -- (.06) (.29) (.19) (.01)
- -------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.43) (.58) (.77) (.59) (.27)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.22 $ 10.19 $ 10.67 $ 9.78 $ 8.89
=========================================================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(6) 14.67% 0.93% 18.21% 15.88% (8.60)%
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $276,800 $83,292 $81,194 $51,602 $32,718
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $192,870 $82,490 $68,134 $40,662 $31,407
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.78% 5.14% 4.71% 4.30% 3.84%(7)
Expenses 1.27% 1.36% 1.47% 1.50% 1.60%(7)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 102.0% 71.3% 60.2% 185.5% 83.7%
Average brokerage commission rate(9) -- -- -- -- --
</TABLE>
<TABLE>
<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(6) 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%(7) 2.62%(7) 3.84%(7) 3.08% 3.30% 2.19%(7)
Expenses 2.12%(7) 2.27%(7) 2.07%(7) 1.99% 2.00% 2.50%(7)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 31.7% 28.5% 31.7% 28.5% 31.5% 32.7%
Average brokerage commission rate(9) $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. For the period from April 24, 1987 (commencement of operations) to December
31, 1987.
5. Per share amounts calculated based on the weighted average number of shares
outstanding during the year.
6. 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.
7. Annualized.
8. 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.
9. 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.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high total investment return, which
includes current income as well as capital appreciation in the
value of its shares.
Investment Policies and Strategies. The Fund seeks its investment
objective by investing its assets in a variety of different types
of securities. In general, those investments include the
categories listed below.
Equity Securities. Generally these are securities that
represent an ownership interest in the company issuing the
security. They include common stocks, preferred stocks,
convertible securities and warrants issued by domestic and foreign
companies. When investing in convertible securities, the Manager
looks to the conversion feature and treats the securities as
"equity securities."
Debt Securities. The Fund's 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.
The Fund is not required to invest any set amount or
percentage of its assets at any one time in one or more of the
types of investments identified above. 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. To
seek the Fund's investment objective of a high total investment
return, from time to time the Manager reallocates the Fund's assets
among the different investment categories listed above. That
allocation is based upon many factors, including the Manager's
evaluation of general economic and market conditions in the U.S.
and abroad and its expectations as to the potential total return of
a particular category of investments. For example, at certain
times, equity securities may be emphasized. When stock market
conditions are unstable, the Fund may reallocate its assets to debt
securities, with emphasis on money market instruments. Using this
"asset allocation" approach, the proportion of the Fund's assets
invested in any one type of investment will vary from time to time.
The Fund's portfolio manager may employ special investing
techniques in selecting investments for the Fund. These are also
described below in "Investment Techniques and Strategies."
Additional information about the types of investments, techniques
and strategies the Fund employs may be found under the same
headings in the Statement of Additional Information.
Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless
this Prospectus or the Statement of Additional Information says
that a particular policy is "fundamental." The Fund's investment
objective is a fundamental policy.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
At a meeting of the Fund's shareholders scheduled for February
20, 1997, shareholders will be asked to approve changes in certain
of the Fund's fundamental investment policies, described below. If
approved, that proposal will not be effective until the Fund's
Prospectus and Statement of Additional Information are updated to
reflect those changes. The proposed changes in fundamental
investment policy are as follows:
(1) to change the Fund's investment objective to be "high
total return consistent with preservation of principal"; if
approved, two non-fundamental investment policies will be adopted:
the Fund will invest (a) at least 25% of its total assets in fixed-
income senior securities and (b) at least 25% of its total assets
in equity securities, including common stocks, preferred stocks and
securities convertible into common stocks;
(2) to change the Fund's diversification from 100% to 75% of
its total assets, which will enable the Fund to freely invest up to
25% of its total assets;
(3) to replace the fundamental policy that prohibits the Fund
from investing in commodities or commodity contracts with the
following: "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."
(4) to replace the fundamental policy that prohibits the Fund
from investing in other open-end investment companies or investing
more than 5% of its net assets in closed-end investment companies
with the following: "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."
Regardless of whether shareholders approve the proposed
changes in fundamental investment policy, the Fund intends to
change its name on or shortly after the date of the shareholders
meeting to "Oppenheimer Multiple Strategies Fund." The new name
will be reflected in an updated Prospectus and Statement of
Additional Information for the Fund. The Manager believes that the
Fund's new name, and the proposed investment policies, more
accurately reflect the Fund's investment style.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." Generally, the Fund will
not trade in securities for short-term profits, and the Fund's
portfolio turnover rate is normally expected to be less than 100%
a year. However, the portfolio turnover rate may vary when the
Fund re-allocates its assets. The Fund will actively use portfolio
trading to try to benefit from differences in short-term yields
among different issues of debt securities, to try to increase its
income, or to take advantage of differences in securities prices.
The "Financial Highlights," above, show the Fund's portfolio
turnover rate during past fiscal years.
High portfolio turnover may affect the ability of the Fund to
qualify as a "regulated investment company" under the Internal
Revenue Code for tax deductions for dividends and capital gains
distributions the Fund pays to shareholders. The Fund qualified in
its last fiscal year and intends to do so in the coming year,
although it reserves the right not to qualify. Portfolio turnover
affects brokerage costs, dealer markups and other transaction
costs, and results in the Fund's realization of capital gains or
losses for tax purposes.
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
obligations 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 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. The 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. 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. 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.
Special Risks of Investing in Lower-Grade Securities. The
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. The Fund may invest
in securities rated as low as "C" or "D" by Standard & Poor's or by
Moody's. 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 the Fund 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, the Fund's allocation of its assets among
different types of investments under normal conditions may reduce
some of the risk that investing in these securities can have on the
value of the Fund's shares, as will the Fund's policy of
diversifying its investments.
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
the Fund may use 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 information about these practices,
including limitations on their use that may help reduce some of the
risks.
Foreign Securities. The Fund may invest in equity and debt
securities issued by foreign companies and debt securities issued
by foreign governments. The Fund does not have any limit on the
amount of foreign securities it may purchase. However, normally
the Fund does not expect to have more than 50% of its assets
invested 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. The Fund may purchase foreign securities issued
by companies engaged in mining gold and other precious metals.
Equity Securities. When investing for capital appreciation,
the Fund may buy equity securities issued by domestic or foreign
companies in any industry (for example, industrial, financial or
utility). These investments may include common stocks, preferred
stocks, convertible securities and warrants. In selecting stocks,
the Fund may 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 the 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.
Debt Securities. The 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.
The Fund may invest in any debt securities, including bonds,
debentures, notes, participation interests, asset-backed securities
and zero coupon securities, issued by corporations in any industry.
The Fund may also invest in U.S. Government securities.
Certain of these obligations, including U.S. Treasury notes, bills
and bonds, and mortgage-backed securities guaranteed by Government
National Mortgage Association (these securities are called "Ginnie
Maes") are supported by the full faith and credit of the U.S.
Government. Other mortgage-related U.S. Government securities the
Fund invests in are issued or guaranteed by federal agencies or
government-sponsored entities but are not supported by the full
faith and credit of the U.S. Government. Those securities include
obligations supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal 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"). The Fund may invest in zero
coupon U.S. Treasury securities (described below) and short-term
U.S. Government Securities that are money market instruments.
Money Market Instruments. The Fund may invest in money
market instruments, which are debt obligations generally maturing
in 13 months or less. They may include short-term certificates of
deposit, bankers' acceptances, commercial paper (including variable
amount master demand notes), U.S. Government obligations, and other
debt instruments (including bonds) issued by corporations. These
securities may have variable or floating interest rates. The
Fund's investments in this sector include high quality commercial
paper (in general, paper in the top two rating categories of
Standard & Poor's or Moody's); in addition, there are restrictions
on the types of issuers whose securities will be purchased. These
are more fully described in the Statement of Additional
Information.
Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies.
These interests are acquired from banks or brokers that have made
the loan or are members of the lending syndicate. No more than 5%
of the Fund's total 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.
Asset-Backed Securities. The Fund may invest in "asset-
backed" securities. These are interests in pools of consumer loans
and other trade receivables similar to mortgage-backed securities,
described below. They are issued by trusts and "special purpose
corporations." They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a
number of different parties. The income from the underlying pool
is passed through to holders, such as the Fund. These securities
may be supported by a credit enhancement, such as a letter of
credit, a guarantee or a preference right. However, the extent of
the credit enhancement may be different for different securities
and generally applies to only a fraction of the security's value.
These securities present special risks. For example, in the case
of credit card receivables, the issuer of the security may have no
security interest in the debt that forms the income stream for the
security.
Mortgage-Backed Securities and CMOs. The Fund may invest in
securities that represent an interest in a pool of residential
mortgage loans. These include collateralized mortgage-backed
obligations (referred to as "CMOs"). CMOs are considered U.S.
Government securities if they are issued or guaranteed by agencies
or instrumentalities of the U.S. Government (for example, Ginnie
Maes, Freddie Macs and Fannie Maes). However, other mortgage-
backed securities represent pools of mortgages "packaged" and
offered by private issuers, and there is a risk that private
issuers will be unable to meet their obligations on CMOs.
CMOs and mortgage-backed securities differ from conventional
debt securities that provide periodic payments of interest in fixed
amounts and repay the principal at maturity or specified call
dates. Mortgage-backed securities provide monthly payments that
are, in effect, a "pass-through" of the monthly interest and
principal payments made by the individual borrowers on the pooled
mortgage loans. Those payments may include prepayments of
mortgages, which have the effect of paying the debt on the CMO
early. When the Fund receives scheduled principal payments and
unscheduled prepayments it will have cash to reinvest but may have
to invest that cash in investments having lower interest rates than
the original investment. That could reduce the yield of the Fund.
The Fund may also invest in CMOs that are "stripped." That
means that the security is divided into two parts, one of which
receives some or all of the principal payments and the other which
receives some or all of the interest 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.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued either by private issuers or by the U.S.
Treasury. Some zero coupon securities of private issuers are notes
or debentures that do not pay current interest and are issued at
substantial discounts from par value. Other private issuer zero
coupon securities are notes or debentures that pay no current
interest until a stated date one or more years in the future, after
which the issuer is obligated to pay interest until maturity.
Usually that interest rate is higher than if interest were payable
from the date the security is issued. Private issuer zero coupon
securities are subject to the risk of the issuer's failure to pay
interest and repay the principal value of the security.
Zero coupon U.S. Treasury securities generally are U.S.
Treasury notes or bonds that have been "stripped" of their interest
coupons, U.S. Treasury bills issued without interest coupons, or
certificates representing an interest in the stripped securities.
A zero coupon Treasury security pays no current interest and trades
at a deep discount from its face value. It will be subject to
greater market fluctuations from changes in interest rates than
interest-paying securities.
While the Fund does not receive cash payments of interest on
zero coupon securities, it does accrue taxable income on these
securities. As a result, the Fund may be forced to sell portfolio
securities to pay cash dividends or meet redemptions.
Derivative Investments. In general, a "derivative
investment" is a specially designed investment. 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.
There are special risks in investing in derivative
investments. The company issuing the instrument may fail to pay
the amount due on the maturity of the instrument. Also, the
underlying investment or security on which the derivative is based
might not perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by
interest rate 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.
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 currently intends not to 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.
Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. The Fund must receive
collateral for a loan. As a matter of fundamental policy, these
loans are limited to not more than 25% of the value of the Fund's
total assets. Loans are subject to the conditions described in the
Statement of Additional Information. The Fund does not intend to
engage in loans of portfolio securities in excess of 5% of the
value of its total assets.
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 primarily used 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 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. The Fund
may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market
exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
Hedging. As described below, the Fund may purchase and
sell certain kinds of futures contracts, put and call options,
forward contracts, and options on futures, broadly-based stock or
bond indices and foreign currency. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments
for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are
described below and in greater detail in "Hedging" in the Statement
of Additional Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. It may do so to try to manage its exposure
to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, 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 Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities. Writing covered
call options may also provide income to the Fund for liquidity
purposes, or may be used for defensive reasons or to raise cash to
distribute to shareholders.
Futures. The 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
(together with Stock Index Futures, 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). These types of Futures are described in
"Hedging" in the Statement of Additional Information. At present,
the Fund does not intend to enter into Futures and options on
Futures if, after any such purchase or sale, the sum of margin
deposits on Futures and premiums paid on Futures options exceeds 5%
of the value of the Fund's total assets.
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, 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.
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. 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.
Other Investment Restrictions. The Fund has certain investment
restrictions which are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:
The Fund cannot invest in securities (except U.S. Government
Securities) of any issuer if immediately thereafter, either (a)
more than 5% of the Fund's total assets would be invested in
securities of that issuer, or (b) the Fund would then own more than
10% of that issuer's voting securities.
The Fund cannot lend money, except that the Fund may buy
debt securities that the Fund's investment policies and
restrictions permit it to purchase; the Fund may also make loans of
portfolio securities subject to the restrictions stated under
"Loans of Portfolio Securities."
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).
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.
The Fund cannot invest in commodities or commodity
contracts; however, the Fund may buy and sell hedging instruments
permitted by any of its other fundamental policies.
The Fund cannot concentrate investments in any particular
industry; therefore, the Fund will not purchase the securities of
companies in any one industry if thereafter more than 25% of the
value of the Fund's total assets would consist of securities of
companies in that industry. However, that limitation does not apply
to U.S. Government Securities.
Unless the Prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized as a
Massachusetts business trust in 1987 as the result of the
combination of three series of a mutual fund managed by the Manager
into a single fund that became the Fund, with a new investment
objective and policies. The Fund is an open-end, diversified
management investment company, with an unlimited number of
authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders under
Massachusetts law. The Trustees 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 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. Only
shares of a particular class vote as a class on matters that affect
that class alone. Shares are freely transferable.
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 for paying 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 $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 Manager. The Portfolio Manager of the Fund is
Richard H. Rubinstein, who is a Vice President of the Fund and also
a Senior Vice President of the Manager. Mr. Rubinstein is the
person primarily responsible for the day-to-day management of the
Fund's portfolio. He serves as an officer and portfolio manager of
other Oppenheimer funds.
Fees and Expenses. Under the Investment Advisory Agreement
that became effective June 27, 1994, the Fund pays the Manager a
monthly fee at the following annual rates, which may be higher than
the rates paid by some other mutual funds, and 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, and 0.60% of average annual 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, Class B and Class
C shares.
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 terms
"cumulative total return" and "average annual total return" to
illustrate its performance. The performance of each class of
shares is shown separately, because the performance of each class
will usually be different as a result of the different kinds of
expenses each class bears. These returns measure the performance
of a hypothetical account in the Fund over various periods, and do
not show the performance of each shareholder's account (which will
vary if dividends are received in cash, or shares are sold or
purchased). The Fund's performance data may be useful to help you
see how well your investment has done over time and to compare it
to market indices, as we have done below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. 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 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 sales charges, and those returns would be
less if sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during its fiscal year ended September
30, 1996, followed by a graphical comparison of the Fund's
performance to two appropriate broad-based market indices.
Management's Discussion of Performance. During the Fund's
fiscal year ended September 30, 1996, its positive performance was
affected principally by the overall strong performance of the U.S.
stock market, although the market experienced significant
volatility near the end of the fiscal year. The portfolio manager
focused on securities with long-term growth potential, including
energy stocks. Contributing factors to the Fund's strong
performance during its past fiscal year included the Fund's
exposure to emerging markets, in particular, Brady Bonds (U.S.
dollar-denominated bonds), and investments in high yield bonds
(which entail a greater risk that the issuer will default in its
interest or principal payments). The Fund focused new investments
in the technology sector ( including U.S. companies with broad
international exposure), which appreciated as the stock market
rose, and in the agricultural sector, which the Fund expects to
appreciate as emerging markets grow. The Fund's portfolio and its
portfolio manager's strategies are subject to change.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held until
September 30, 1996. In the case of Class A shares, performance is
measured from the inception of the Class on April 24, 1987; in the
case of Class B shares, from inception of the Class on August 29,
1995; and in the case of Class C shares, from the inception of the
Class on December 1, 1993. 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.
Because the Fund invests in a variety of equity and fixed-
income securities, the Fund's performance is compared to the
performance of two market indices: (i) the S&P 500 Index, a broad-
based index of equity securities widely regarded as a general
measurement of the performance of the U.S. equity securities
market; and (ii) the Lehman Brothers Aggregate Bond Index, a broad-
based index of U.S. corporate bond issues, U.S. Government
securities and mortgage-backed securities, widely regarded as a
measure of the performance of the domestic debt securities market.
Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and
none of the data below shows the effect of taxes. Also, the Fund's
performance data reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the
Fund's investments are not limited to the securities in any one
index and the index data does not reflect any assessment of the
risk of the investments included in the index.
Class A Shares
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Asset Allocation Fund Class A,
the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index
[Graph]
Average Annual Total Return of Class A shares
of the Fund at 9/30/96
1 Year 5 Years Life of Class
7.16% 10.83% 9.28%
Class B Shares
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Asset Allocation Fund Class B,
the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index
[Graph]
Average Annual Total Return of Class B shares
of the Fund at 9/30/96 (2)
1 year Life of Class
7.55% 10.33%
Class C Shares
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Asset Allocation Fund Class C,
the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index
[Graph]
Average Annual Total Return of Class C shares
of the Fund at 9/30/96
1 Year Life of Class
11.71% 10.90%
- ---------------------------
Total return and the ending account values in the graphs show
change in share value and include reinvestment of all dividends and
capital gains distributions.
The inception date of the Fund (Class A shares) was 4/24/87. The
average annual total returns and ending account value in the graph
are shown net of the applicable 5.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on
8/29/95. The cumulative total return and the ending account value
in the graph are shown net of the applicable 4% contingent deferred
sales charge.
Class C shares of the Fund were first publicly offered on 12/1/93.
The 1-year return is shown net of the applicable 1% contingent
deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
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 (at
least $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. 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 annual asset-based sales charges on
Class B and Class C expenses (which, like all expenses, will affect
your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment
each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class
of shares, and which class you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares and not a combination of
shares of different classes.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B or Class
C 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 6 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 may be more
advantageous as your investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most
cases Class A shares will be the most advantageous choice, no
matter how long you intend to hold your shares. For that reason,
the Distributor normally will not accept purchase orders of
$500,000 or more of Class B shares or $1 million or more of Class
C shares from a single investor.
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 for Class
B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of
shares is better for you. For example, share certificates are not
available for Class B or Class C shares, and if you are considering
using your shares as collateral for a loan, that may be a factor to
consider. Additionally, the dividends payable to Class B and Class
C shareholders will be reduced by the additional expenses borne
solely by those classes, such as the asset-based sales charges
described below and in the Statement of Additional Information.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purposes of the Class B and Class C contingent deferred sales
charges and asset-based sales charge is the same as the purpose of
the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can
make initial and subsequent investments of as little as $25; and
subsequent purchases of at least $25 can be made by telephone
through AccountLink.
Under pension, 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, it is recommended that 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, and to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
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., 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:
<TABLE>
<CAPTION>
Front-End Front-End Commission
Sales Charge Sales Charge as Percentage
as Percentage of as Percentage of of Offering
Amount of Purchase Offering Price Amount Invested Price
- ------------------ ---------------- ---------------- -------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the 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 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") will 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 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 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 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 your 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);
employee benefit plans purchasing shares through a
shareholder agent which the Distributor has appointed as its agent
to accept those purchase orders;
(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 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 B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; 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 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 redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class B contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales 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:
<TABLE>
<CAPTION>
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
<S> <C>
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution 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."
Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchased in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Waivers of Class
B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The 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 the Distributor
to reimburse it 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 Class B and Class C Distribution and Service
Plans to compensate the Distributor, in the case of Class B shares,
and to reimburse the Distributor, in the case of Class C shares,
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 that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives an annual service fee under each plan,
which is 0.25% for the Class B plan and a maximum of 0.25% for the
Class C plan. Shareholders will be asked to approve a
"compensation-type" Class C plan at a shareholders meeting
scheduled for February 20, 1997, under which the annual service fee
would be at the fixed rate of 0.25% (as it is under the Class B
plan). The new Class C plan will go into effect upon shareholder
approval. The Fund's Prospectus and Statement of Additional
Information will be updated accordingly.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or Class
C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price to dealers from its own resources at the time of
sale of Class B shares. The total commission paid by the
Distributor to the dealer at the time of sale of Class B shares is
4.00% of the purchase price. The Fund pays the asset-based sales
charge to the Distributor for its services rendered in connection
with the distribution of Class B shares. Those payments, retained
by the Distributor, are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B
shares.
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. The total commission paid by the
Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor retains the asset-
based sales charge during the first year Class C shares are
outstanding to recoup sales commissions it has paid, the advances
of service fee payments it has made, and its financing costs and
other 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 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 either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the service fee
and/or asset-based sales charge to the Distributor for certain
expenses it incurred before the Plan was terminated. At September
30, 1996, the end of the Class B Plan year, the Distributor had
incurred unreimbursed expenses under the Plan of $227,661 (equal to
3.80% of the Fund's net assets represented by Class B shares on
that date). At September 30, 1996, the end of the Class C Plan
year, the Distributor had incurred unreimbursed expenses under the
Plan of $201,723 (equal to 0.96% of the Fund's net assets
represented by Class C shares on that date), which have been
carried over into the present Plan year.
Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions of Shares in Certain Cases. The Class
B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent 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 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; 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;
shares issued in plans of reorganization to which the Fund
is a party; or
shares redeemed involuntarily, 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 exchange automatically an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each Oppenheimer funds account is
$25. These exchanges are subject to the terms of the exchange
privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge.
This privilege applies to Class A shares that you purchased subject
to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must
be sure to ask the Distributor for this privilege when you send
your payment. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR-SEP IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
401(k) prototype retirement plans for 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 net asset value next 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 as a fiduciary
or on behalf of a corporation, partnership or other business, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
<TABLE>
<S> <C>
Use the following address for requests by mail: Send courier or Express Mail requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
</TABLE>
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. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements For Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
You must meet the minimum purchase requirements for the
fund you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class 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 "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.
The Distributor has entered into agreements with certain
dealers and investment advisers permitting them to exchange their
clients' shares by telephone. These privileges are limited under
those agreements and the Distributor has the right to reject or
suspend those privileges. As a result, those exchanges may be
subject to notice requirements, delays and other limitations that
do not apply to shareholders who exchange their shares directly by
calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities 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 automatically apply to each owner of the
account and the dealer representative of record for the account
unless refused on the new account Application, or, if not refused,
will apply 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 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 $500 for reasons
other than the fact that the market value of shares has dropped,
and in some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied
at the rate of 31% from 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 charge when redeeming certain Class A, Class B and Class C
shares.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares quarterly, payable on or about the 29th
of March, June, September and December. Another date may be
selected by the Fund's Board of Trustees. Normally, distributions
paid on Class A shares generally are expected to be higher than for
Class B and Class C shares because expenses allocable to Class B
and Class C shares will generally be higher. There is no fixed
dividend rate and there can be no assurance as to the payment of
any dividends. The amount of a class's dividends or distributions
may vary from time to time depending on market conditions, the
composition of the Fund's portfolio and expenses borne by that
class.
Capital Gains. The Fund may make distributions annually in
December out of any net short-term or long-term capital gains, and
the Fund may make supplemental distributions of dividends and
capital gains following its fiscal year which ends September 30.
Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the year. Short-
term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
Oppenheimer funds 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 Funds
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 have held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
"Buying a Dividend": When a fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally, a capital gain or loss is the difference between the
price you paid for the shares and the price you received when you
sold them.
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>
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers
for Class A, Class B and Class C shares of the Fund described
elsewhere in this Prospectus are modified as described below for
those shareholders of (i) Quest for Value Fund, Inc., Quest for
Value Growth and Income Fund, Quest for Value Opportunity Fund,
Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those
funds, and (ii) Quest for Value U.S. Government Income Fund, Quest
for Value Investment Quality Income Fund, Quest for Value Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement Plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 32 to 33 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates.
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders.
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions. The Class A contingent deferred sales charge
will not apply to redemptions of Class A shares of the Fund
purchased by the following investors who were shareholders of any
Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is
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, Class B or Class
C shares of the Fund acquired by merger of a Former Quest for Value
Fund into the Fund or by exchange from an Oppenheimer fund that was
a Former Quest for Value Fund or into which such fund merged, if
those shares were purchased prior to March 6, 1995: in connection
with (i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
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, Class B or Class 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 Class 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, Class B or Class 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>
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER ASSET ALLOCATION FUND
Graphic material included in Prospectus of Oppenheimer Asset
Allocation Fund: "Comparison of Change in Value of $10,000
Investments in Oppenheimer Asset Allocation Fund, the S&P 500
Index, and The Lehman Brothers Aggregate Bond Index".
Linear graphs will be included in the Prospectus of Oppenheimer
Asset Allocation Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000
investment in each class of shares of the Fund. In the case of the
Fund's Class A shares, that graph will cover the life of the Fund
from April 24, 1987 through September 30, 1996; in the case of the
Fund's Class B shares will cover the period from the inception of
the class (August 29, 1995) through September 30, 1996; and in the
case of the Fund's Class C shares will cover the period from the
inception of the class (December 1, 1993) through September 30,
1996. The graphs will compare such values with hypothetical
$10,000 over the same time periods with S&P 500 Index and The
Lehman Brothers Aggregate Bond Index. Set forth below are the
relevant data points that will appear on the linear graphs.
Additional information with respect to the foregoing, including a
description of the S&P 500 Index and The Lehman Brothers Aggregate
Bond Index is set forth in the Prospectus under "How the Fund is
Managed - How Has the Fund Performed?"
Oppenheimer Lehman Brothers
Fiscal Year Asset Allocation Fund S&P Aggregate
(Period) Ended Class A Shares Index Bond Index
04/24/87 $ 9,425 $10,000 $10,000
12/31/87 $ 8,667 $8,751 $10,393
12/31/88 $10,043 $10,200 $11,213
12/31/89 $11,871 $13,427 $12,842
12/31/90 $11,981 $13,009 $13,993
12/31/91 $13,739 $16,964 $16,232
12/31/92 $14,774 $18,255 $17,434
12/31/93 $17,182 $20,091 $19,133
12/31/94 $16,909 $20,355 $18,575
12/31/95 $20,763 $27,995 $22,007
09/30/96 $23,093 $31,772 $22,142
Oppenheimer Lehman Brothers
Fiscal Year Asset Allocation Fund S&P Aggregate
(Period) Ended Class BShares Index Bond Index
08/29/95 $10,000 $10,000 $10,000
12/31/95 $10,444 $11,049 $10,528
09/30/96 $11,127 $12,540 $10,592
Oppenheimer Lehman Brothers
Fiscal Year Asset Allocation Fund S&P Aggregate
(Period) Ended Class CShares Index Bond Index
12/01/93 $10,000 $10,000 $10,000
12/31/93 $10,218 $10,121 $10,054
12/31/94 $ 9,963 $10,254 $9,761
12/31/95 $12,124 $14,103 $11,564
09/30/96 $13,403 $16,006 $11,635
<PAGE>
Oppenheimer Asset Allocation Fund
Two World Trade Center
New York, New York 10048
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
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.
PR0240.001.0197 Printed on recycled paper.
<PAGE>
Oppenheimer Asset Allocation Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated January 15, 1997
This Statement of Additional Information of Oppenheimer Asset
Allocation Fund is not a Prospectus. This document contains
additional information about the Fund and supplements information
in the Prospectus dated 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>
<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>
<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 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;
buy and retain securities of any issuer if officers and
Trustees or Directors of the Fund and the Manager individually
owning more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer; or
invest in other open-end investment companies, or invest
more than 5% of its net assets at the time of purchase in closed-
end investment companies (including small business investment
companies), nor make any such investments at commission rates in
excess of normal brokerage commissions.
In connection with the qualification of its shares in certain
states, the Fund 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 December 20, 1996, 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 and 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 advisory
subsidiaries of the Manager, a director of Shareholder Financial
Services, Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"),
transfer agent subsidiaries of the Manager, an officer of other
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),
Kemper Corporation (insurance and financial services company) and
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; 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 to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar,
Inc. (machinery), ConAgra, Inc. (food and agricultural products),
Farmers Insurance Company (insurance), FMC Corp. (chemicals and
machinery), 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 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 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, 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, 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; 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 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age 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 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 Fund Fund Expenses Oppenheimer funds(2)
<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 ,
Audit Committee
Member and Chairman
Russell S. Reynolds, Jr., $2,454 $3,516 $58,800
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $2,454 $3,516 $55,300
Clayton K. Yeutter, $2,454 $3,516 $58,800
Proxy Committee Member
and Trustee
______________________
1For the fiscal year ended September 30, 1996.
2For the 1996 calendar year.
Committee 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.
</TABLE>
The Fund has adopted a retirement plan that provides for
payment to a retired Trustee of up to 80% of the average
compensation paid during that Trustee's five years of service in
which the highest compensation was received. A Trustee must serve
in that capacity for any of the New York-based 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 December 20, 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 Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, Florida, 32246, which owned
87,637 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 C Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in
subsequent fiscal periods. Asset-based sales charge payments are
designed to permit an investor to purchase shares of the Fund
without the assessment of a front-end sales load and at the same
time permit the Distributor to compensate brokers and dealers in
connection with the sale of Class B and Class C shares of the Fund.
The Class B Plan (and the proposed "compensation-type" Class
C Plan submitted for approval of the Fund's Class C shareholders at
a meeting scheduled for February 20, 1997) provides 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 Asset Allocation 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>
<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>
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>
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 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
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements
--------------------
(1) Financial Highlights (See Parts A and B): Filed
herewith.
(2) Independent Auditors' Report (See Part B): Filed
herewith.
(3) Statement of Investments (See Part B): Filed
herewith.
(4) Statement of Assets and Liabilities (See Part B):
Filed herewith.
(5) Statement of Operations (See Part B): Filed
herewith.
(6) Statements of Changes in Net Assets (See Part B):
Filed herewith.
(7) Notes to Financial Statements (See Part B): Filed
herewith.
(b) Exhibits
--------
1. Amended and Restated Declaration of Trust dated as
of August 17, 1995: Filed with Registrant's Post-Effective
Amendment No. 24, 8/25/95, and incorporated herein by reference.
2. By-Laws, amended as of 8/6/87: Filed with
Registrant's 12/31/87 Annual Report Form N-SAR, refiled with
Registrant's Post-Effective Amendment No. 20, 3/2/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
3. Inapplicable
4. (i) Specimen Class A Share Certificate of
Registrant: Filed with Registrant's Post-Effective Amendment No.
17, 3/1/94, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
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.
5. Investment Advisory Agreement dated 6/27/94: Filed
with Registrant's Post-Effective Amendment No. 20, 3/2/95, and
incorporated herein by reference.
6. (i) General Distributor's Agreement dated
12/10/92: Filed with Registrant's Post-Effective Amendment No. 15,
4/19/93, refiled with Registrant's Post-Effective Amendment No. 20,
3/2/95, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc.
Broker Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc.
Agency Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated 10/1/86:
Filed with Post-Effective Amendment No. 25 of Oppenheimer Growth
Fund (Reg. No. 2-45272), 11/1/86, and refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg. No. 2-45272),
8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
7. Retirement Plan for Non-Interested Trustees or
Directors (dated 6/7/90): Filed with Post-Effective Amendment No.
97 of Oppenheimer Fund (File No. 2-14586), 8/30/90, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
8. Custody Agreement with The Bank of New York dated
11/12/92: Filed with Registrant's Post-Effective Amendment No. 15,
4/19/93, refiled with Registrant's Post-Effective Amendment No. 20,
3/2/95, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
9. Inapplicable.
10. Opinion and Consent of Counsel dated 3/2/87: Filed
with Registrant's Post-Effective Amendment No.7, 4/24/87, refiled
with Registrant's Post-Effective Amendment No. 20, 3/2/95, pursuant
to Item 102 of Regulation S-T, and incorporated herein by
reference.
11. Independent Auditors' Consent: Filed herewith.
12. Inapplicable.
13. Inapplicable.
14. (i) Form of Individual Retirement Account (IRA)
Trust Agreement: Filed with Post-Effective Amendment No. 21 of
Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and
incorporated herein by reference.
(ii) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plan and Money Purchase Pension Plan
for self-employed persons and corporations: Filed with Post
Effective Amendment No. 7 of the Registration Statement of
Oppenheimer Global Growth & Income Fund (Reg. No. 33-33799),
12/2/94, and 1/19/95, incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and
Custody Agreement for employees of public schools and tax-exempt
organizations: Filed with Post-Effective Amendment No. 47 of
Oppenheimer Growth Fund (File No. 2-45272), 10/21/94, and
incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed
with Post-Effective Amendment No. 42 of Oppenheimer Equity Income
Fund (Reg. No. 2-33043), 10/28/94 and incorporated herein by
reference.
(v) Form of Prototype 401(k) Plan: Previously
filed with Post-Effective Amendment No. 7 of the Registration
Statement of Oppenheimer Strategic Income & Growth Fund (Reg. No.
33-47378), 9/28/95, and incorporated herein by reference.
15. (i) Service Plan and Agreement dated 7/1/94 for
Class A Shares pursuant to Rule 12b-1: Filed with Registrant's
Post-Effective Amendment No. 20, 3/2/95, and incorporated herein by
reference.
(ii) Distribution and Service Plan and Agreement
dated 8/29/95 for Class B Shares pursuant to Rule 12b-1: Filed with
Registrant's Post-Effective Amendment No. 23, 6/27/95, and
incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement
dated December 1, 1993 for Class C Shares pursuant to Rule 12b-1:
Filed with Registrant's Post-Effective Amendment No. 17, 3/1/94,
and incorporated herein by reference.
16. Performance Data Calculation Schedule: Filed
herewith.
17. (i) Financial Data Schedule for Class A Shares:
Filed herewith.
(ii) Financial Data Schedule for Class B Shares:
Filed herewith.
(iii) Financial Data Schedule for Class C Shares:
Filed herewith.
18. OppenheimerFunds Multiple Class Plan under Rule 18f-
3 dated 10/24/95: Filed with Post-Effective Amendment No. 12 to the
Registration Statement of Oppenheimer California Tax-Exempt Fund,
Reg. No. 33-23566, 11/1/95, and incorporated herein by reference.
-- 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.
Item 25. Persons Controlled by or under Common Control
with Registrant
- -------- ---------------------------------------------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of Record
Holders as of
Title of Class December 20, 1996
- -------------- -----------------
Class A Shares of Beneficial Interest 16,995
Class B Shares of Beneficial Interest 667
Class C Shares of Beneficial Interest 1,399
Item 27. Indemnification
- -------- ---------------
Reference is made to paragraphs (c) through (g) of Section 12
of Article SEVENTH of Registrant's Declaration of Trust filed as
Exhibit 24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the
same capacity to other registered investment companies as described
in Parts A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial
nature in which each officer and director of OppenheimerFunds, Inc.
is, or at any time during the past two fiscal years has been,
engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name & Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- ------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers,
Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; Senior
Vice President of HarbourView;
prior to March, 1996 he was the
senior equity portfolio manager for
the Panorama Series Fund, Inc. (the
"Company") and other mutual funds
and pension funds managed by G.R.
Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment
adviser, which was a subsidiary of
Connecticut Mutual Life Insurance
Company; was also responsible for
managing the common stock
department and common stock
investments of Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Vice President and
Senior Portfolio Manager at First
of America Investment Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney,
Inc.
David Bernard,
Vice President Previously a Regional Sales
Director for Retirement Plan
Services at Charles Schwab & Co.,
Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the
Oppenheimer Funds (listed below);
previously a Fund Controller for
OppenheimerFunds, Inc. (the
"Manager").
George Bowen,
Senior Vice President &
Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Assistant Secretary and Treasurer
of the Denver-based Oppenheimer
Funds. Vice President and Treasurer
of OppenheimerFunds Distributor,
Inc. (the "Distributor") and
HarbourView Asset Management
Corporation ("HarbourView"), an
investment adviser subsidiary of
the Manager; Senior Vice President,
Treasurer, Assistant Secretary and
a director of Centennial Asset
Management Corporation
("Centennial"), an investment
adviser subsidiary of the Manager;
Vice President, Treasurer and
Secretary of Shareholder Services,
Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"),
transfer agent subsidiaries of the
Manager; Director, Treasurer and
Chief Executive Officer of
MultiSource Services, Inc.; Vice
President and Treasurer of
Oppenheimer Real Asset Management,
Inc.; President, Treasurer and
Director of Centennial Capital
Corporation; Vice President and
Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of
Educational Services for H.D. Vest
Investment Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio manager
of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel & Director Secretary of the New York-based
Oppenheimer Funds; Vice President
and Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General
Counsel of the Distributor;
President and a Director of
Centennial; Chief Legal Officer and
a Director of MultiSource Services,
Inc.; President and a Director of
Oppenheimer Real Asset Management,
Inc.; Executive Vice President,
General Counsel and Director of
SFSI and SSI; formerly Senior Vice
President and Associate General
Counsel of the Manager and the
Distributor.
George Evans,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Scott Farrar,
Vice President Assistant Treasurer of the New
York-based and Denver-based
Oppenheimer funds.
Katherine P. Feld,
Vice President & Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, MultiSource
Services, Inc. and Centennial Asset
Management Corporation; Secretary,
Vice President and Director of
Centennial Capital Corporation;
Vice President and Secretary of
ORAMI.
Ronald H. Fielding,
Senior Vice President;
Chairman: Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds. Formerly
Chairman of the Board and Director
of Rochester Fund Distributors,
Inc. ("RFD"), President and
Director of Fielding Management
Company, Inc. ("FMC"), President
and Director of Rochester Capital
Advisors, Inc. ("RCAI"), Managing
Partner of Rochester Capital
Advisors, L.P., President and
Director of Rochester Fund
Services, Inc. ("RFS"), President
and Director of Rochester Tax
Managed Fund, Inc.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester
Capital Advisors, L.P. and
Secretary of Rochester Tax Managed
Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions: Vice
President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President /
Director of Graphic and Print
Communications for Shearson Lehman
Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Barbara Hennigar,
Executive Vice President &
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the
Manager President and Director of SFSI;
President and Chief Executive
Officer of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director
of Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March, 1996 he was the senior bond
portfolio manager for Panorama
Series Fund, Inc., other mutual
funds and pension accounts managed
by G.R. Phelps; was also
responsible for managing the public
fixed-income securities department
at Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive
Officer and Director President, Director and Trustee of
the New York-based and the Denver-
based Oppenheimer funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of ORAMI;
Chairman and Director of SSI; a
Director of Oppenheimer Real Asset
Management, Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co.,
Salomon Brothers, and Kidder
Peabody.
Sally Marzouk,
Vice President None.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Portfolio Manager with
Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly a Vice President with
Cohane Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President Consultant for Prudential Insurance
on behalf of the General Motors
Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Securities Analyst for
the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly Vice President of RFS,
President and Director of RFD, Vice
President and Director of FMC, Vice
President and director of RCAI,
General Partner of RCA, an officer
and/or portfolio manager of certain
Oppenheimer funds.
David Rosenberg,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President and
Portfolio Manager/Security Analyst
for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Vice President and
Senior Portfolio Manager for Dean
Witter InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman and Trustee of the
New York-based Oppenheimer Funds;
formerly Chairman of the Manager
and the Distributor.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March, 1996 he was an equity
portfolio manager for Panorama
Series Fund, Inc. and other mutual
funds and pension accounts managed
by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the Denver-
based Oppenheimer Funds; President
and a Director of Centennial;
formerly President and Director of
OAMC, and Chairman of the Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund,
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant
Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Jerry A. Webman,
Senior Vice President Director of New York-based tax-
exempt fixed income Oppenheimer
Funds; Formerly Managing Director
and Chief Fixed Income Strategist
at Prudential Mutual Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to
March, 1996 he was an equity
portfolio manager for Panorama
Series Fund, Inc. and other mutual
funds and pension funds managed by
G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting
and member of the Board of
Directors of the Junior League of
Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds, and the Quest/Rochester
Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Multiple Strategies Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Bond Fund Series - Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, Quest funds, OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood, Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of is Bond Fund Series - Oppenheimer Bond Fund For
Growth, Rochester Fund Municipals and Rochester Portfolio Series -
Limited Term New York Municipal Fund 350 Linden Oaks, Rochester,
New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
George Clarence Bowen+ Vice President & Treasurer Vice President and
Treasurer of the
NY-based
Oppenheimer funds /
Vice President,
Secretary and
Treasurer of the
Denver-based
Oppenheimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425-1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of the
President, General New York-based
Counsel and Director Oppenheimer funds /
Vice President of
the Denver-based
Oppenheimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tucson Way, Englewood, CO 80012
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester Division")
(c) Not applicable.
Item 30. Location of Accounts and Records
- -------- --------------------------------
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act and rules promulgated thereunder are in
possession of OppenheimerFunds, Inc. at its offices at 3410 South
Galena Street, Denver, Colorado 80231.
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or
the Investment Company Act of 1940, the Registrant certifies that
it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York on the 13th day of
January, 1997.
OPPENHEIMER ASSET ALLOCATION 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 January 13, 1997
- -------------- Board of Trustees
Leon Levy
/s/ Bridget A. Macaskill* President, Chief January 13, 1997
- ------------------------ Executive Officer
Bridget A. Macaskill and Trustee
/s/ George Bowen* Treasurer and January 13, 1997
- ----------------- Principal Financial
George Bowen and Accounting
Officer
/s/ Robert G. Galli* Trustee January 13, 1997
- --------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee January 13, 1997
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee January 13, 1997
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee January 13, 1997
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee January 13, 1997
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee January 13, 1997
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Donald W. Spiro* Trustee January 13, 1997
- --------------------
Donald W. Spiro
/s/ Pauline Trigere* Trustee January 13, 1997
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee January 13, 1997
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
Registration No. 2-86903
Post-Effective Amendment No. 27
EXHIBIT INDEX
Exhibit No.
- -----------
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Data Calculation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Asset Allocation Fund:
We consent to the use in this Registration Statement of
Oppenheimer Asset Allocation Fund of our report dated October 21,
1996 appearing in the Statement of Additional Information, which is
a part of such Registration Statement, and to the reference to us
under the heading "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
January 13, 1997
Oppenheimer Asset Allocation Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10
years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
07/31/87 0.1200000 0.0000000 10.620
10/23/87 0.0900000 0.0000000 8.590
12/24/87 0.0500000 0.0050000 8.960
03/25/88 0.0700000 0.0000000 9.550
06/24/88 0.0750000 0.0000000 9.870
09/23/88 0.1350000 0.0000000 9.800
12/23/88 0.1200000 0.1900000 9.660
03/23/89 0.1200000 0.0000000 10.130
06/23/89 0.1200000 0.0000000 10.670
09/22/89 0.1200000 0.0000000 10.930
12/22/89 0.1200000 0.2900000 10.560
03/23/90 0.1100000 0.0000000 10.380
06/22/90 0.1200000 0.0550000 10.340
09/21/90 0.1200000 0.0000000 10.120
12/21/90 0.1650000 0.0000000 10.130
03/22/91 0.1200000 0.0000000 10.440
06/19/91 0.1200000 0.0000000 10.430
09/20/91 0.1000000 0.0000000 10.680
12/20/91 0.0900000 0.0000000 10.710
03/27/92 0.0900000 0.0000000 11.130
06/26/92 0.0900000 0.0000000 11.120
09/25/92 0.0900000 0.0000000 11.300
12/30/92 0.1490000 0.0000000 11.620
03/26/93 0.0700000 0.0000000 11.990
06/25/93 0.1400000 0.0000000 12.230
09/24/93 0.1000000 0.0000000 12.650
12/28/93 0.1280000 0.0120000 13.030
03/25/94 0.0880000 0.0000000 12.920
06/24/94 0.1000000 0.0000000 12.300
09/23/94 0.1200000 0.0000000 12.750
12/28/94 0.2240000 0.7870000 11.470
03/24/95 0.0800000 0.0000000 12.130
06/23/95 0.1200000 0.0000000 12.950
09/22/95 0.1300000 0.0000000 13.480
12/27/95 0.1559000 0.5627900 13.040
03/25/96 0.1000000 0.0000000 13.520
06/18/96 0.1800000 0.0000000 13.600
09/17/96 0.1500000 0.0000000 13.960
Class B Shares
09/22/95 0.1300000 0.0000000 13.460
12/27/95 0.1418900 0.5627900 13.000
03/25/96 0.0760000 0.0000000 13.450
06/18/96 0.1560000 0.0000000 13.520
09/17/96 0.1260000 0.0000000 13.880
Oppenheimer Asset Allocation Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class C Shares
12/28/93 0.1200000 0.0120000 13.030
03/25/94 0.0700000 0.0000000 12.900
06/24/94 0.0790000 0.0000000 12.270
09/23/94 0.0960000 0.0000000 12.720
12/28/94 0.1980000 0.7870000 11.440
03/24/95 0.0590000 0.0000000 12.090
06/23/95 0.0950000 0.0000000 12.900
09/22/95 0.1080000 0.0000000 13.420
12/27/95 0.1279500 0.5627900 12.980
03/25/96 0.0720000 0.0000000 13.460
06/18/96 0.1550000 0.0000000 13.530
09/17/96 0.1230000 0.0000000 13.900
1. Average Annual Total Returns for the Periods Ended 09/30/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$1,071.61 1 $1,672.06 .2
(---------) - 1 = 7.16% (---------) - 1 = 10.83%
$1,000 $1,000
Inception
$2,309.21 .1060
(---------) - 1 = 9.28%
$1,000
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the inception year:
One Year Inception
$1,075.51 1 $1,112.65 .9207
(---------) - 1 = 7.55% (---------) - 1 = 10.33%
$1,000 $1,000
Oppenheimer Asset Allocation Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 09/30/96 (Continued):
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00% for the
first year, and 0.00% for the inception year:
One Year Inception
$1,117.09 1 $1,340.27 .3533
(---------) - 1 = 11.71% (---------) - 1 = 10.90%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,136.98 1 $1,774.10 .2
(---------) - 1 = 13.70% (---------) - 1 = 12.15%
$1,000 $1,000
Inception
$2,450.14 .1060
(---------) - 1 = 9.97%
$1,000
Class B Shares
One Year Inception
$1,125.51 1 $1,152.64 .9207
(---------) - 1 = 12.55% (---------) - 1 = 13.97%
$1,000 $1,000
Class C Shares
One Year Inception
$1,127.08 1 $1,340.27 .3533
(---------) - 1 = 12.71% (---------) - 1 = 10.90%
$1,000 $1,000
Oppenheimer Asset Allocation Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 09/30/96:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year
$1,071.61 - $1,000 $1,672.06 - $1,000
------------------ = 7.16% ------------------ = 67.21%
$1,000 $1,000
Inception
$2,309.21 - $1,000
------------------ = 130.92%
$1,000
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00% for
the first year, and 4.00% for the inception year:
One Year Inception
$1,075.51 - $1,000 $1,112.65 - $1,000
------------------ = 7.55% ------------------ = 11.27%
$1,000 $1,000
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00% for
the first year, and 0.00% for the inception year:
One Year Inception
$1,117.09 - $1,000 $1,340.27 - $1,000
------------------ = 11.71% ------------------ = 34.03%
$1,000 $1,000
Oppenheimer Asset Allocation Fund
Page 5
2. Cumulative Total Returns for the Periods Ended 09/30/96 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,136.98 - $1,000 $1,774.10 - $1,000
------------------ = 13.70% ------------------ = 77.41%
$1,000 $1,000
Inception
$2,450.14 - $1,000
------------------ = 145.01%
$1,000
Class B Shares
One Year Inception
$1,125.51 - $1,000 $1,152.64 - $1,000
------------------ = 12.55% ------------------ = 15.26%
$1,000 $1,000
Class C Shares
One Year Inception
$1,127.08 - $1,000 $1,340.27 - $1,000
------------------ = 12.71% ------------------ = 34.03%
$1,000 $1,000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<INVESTMENTS-AT-VALUE> 291,465,285
<RECEIVABLES> 3,605,304
<ASSETS-OTHER> 19,537
<OTHER-ITEMS-ASSETS> 398,456
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<PAYABLE-FOR-SECURITIES> 1,918,420
<SENIOR-LONG-TERM-DEBT> 0
<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
<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> 8,029,426
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 860,353
<NUMBER-OF-SHARES-REDEEMED> 1,862,109
<SHARES-REINVESTED> 524,674
<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> 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
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.09
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAID-IN-CAPITAL-COMMON> 225,707,312
<SHARES-COMMON-STOCK> 428,130
<SHARES-COMMON-PRIOR> 97,156
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<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
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.01
<EXPENSE-RATIO> 2.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
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<PAID-IN-CAPITAL-COMMON> 225,707,312
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<SHARES-COMMON-PRIOR> 1,184,070
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 478,886
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 448,796
<NUMBER-OF-SHARES-REDEEMED> 162,380
<SHARES-REINVESTED> 33,327
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<ACCUMULATED-GAINS-PRIOR> 736,164
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,662,147
<AVERAGE-NET-ASSETS> 17,898,000
<PER-SHARE-NAV-BEGIN> 13.01
<PER-SHARE-NII> 0.40
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<AVG-DEBT-OUTSTANDING> 0
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