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. 30 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
Amendment No. 28 /X/
OPPENHEIMER MULTIPLE STRATEGIES FUND
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
212-323-0200
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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:
/ Immediately upon filing pursuant to paragraph (b)
/ X /On January 23, 1998, 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.
<PAGE>
FORM N-1A
OPPENHEIMER MULTIPLE STRATEGIES 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
MULTIPLE STRATEGIES FUND
PROSPECTUS DATED JANUARY 23, 1998
Oppenheimer Multiple Strategies Fund is a mutual fund that seeks high total
investment return consistent with preservation of principal as its investment
objective. That means the Fund seeks current income and capital appreciation in
the value of its shares, consistent with preservation of principal. In seeking
this objective, the Fund may invest in different types of securities, including
common stocks and other equity securities, money market securities, and bonds
and other debt securities. The Fund may invest up to 35% of its total assets in
lower-rated, high yield debt securities commonly known as "junk bonds."
In seeking its objective, the Fund periodically allocates some or all of
its assets to invest in any one or more 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 its
Statement of Additional Information dated January 23, 1998. For a free copy,
call OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(OppenheimerFunds logo)
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT
GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-1-
<PAGE>
CONTENTS
ABOUT THE FUND
3 EXPENSES
6 A BRIEF OVERVIEW OF THE FUND
7 FINANCIAL HIGHLIGHTS
11 INVESTMENT OBJECTIVE AND POLICIES
12 INVESTMENT RISKS
15 INVESTMENT TECHNIQUES AND STRATEGIES
21 HOW THE FUND IS MANAGED
24 PERFORMANCE OF THE FUND
ABOUT YOUR ACCOUNT
28 HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares
42 SPECIAL INVESTOR SERVICES
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
45 HOW TO SELL SHARES
By Mail
By Telephone
47 HOW TO EXCHANGE SHARES
48 SHAREHOLDER ACCOUNT RULES AND POLICIES
50 DIVIDENDS, CAPITAL GAINS AND TAXES
A-1 APPENDIX A: SPECIAL SALES CHARGE ARRANGEMENTS
-2-
<PAGE>
ABOUT THE FUND
EXPENSES
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
operating expenses that you will bear indirectly.
o SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" starting on page
__ for an explanation of how and when these charges apply.
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- ------------------------------------------------------------------------------
Maximum Sales Charge on 5.75% None None
Purchases (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 None None None
Reinvested Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
Redemption Fee None None None
(1)If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page___) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares," below.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares Buying
Class C Shares," below for more information on the contingent deferred sales
charges.
o ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds 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 0.72% 0.72% 0.72%
- ------------------------------------------------------------------------------
12b-1 Plan Fees 0.18% 1.00% 1.00%
- ------------------------------------------------------------------------------
Other Expenses 0.26% 0.24% 0.25%
- ------------------------------------------------------------------------------
Total Fund Operating Expenses 1.16% 1.96% 1.97%
The numbers in the chart above are based upon the Fund's expenses in its
fiscal year ended September 30, 1997. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that year. The
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. The service fee for Class B and Class C
shares is 0.25% of average annual net assets of the class and the asset-based
sales charge for Class B and C shares is 0.75%. These plans are described in
greater detail in "How to Buy Shares."
o EXAMPLES. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and 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 $92 $118 $190
- ------------------------------------------------------------------------------
Class B Shares $70 $92 $126 $189
- ------------------------------------------------------------------------------
Class C Shares $30 $62 $106 $230
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 $92 $118 $190
- ------------------------------------------------------------------------------
Class B Shares $20 $62 $106 $189
- ------------------------------------------------------------------------------
Class C Shares $20 $62 $106 $230
*In the first example, expenses include the Class A initial sales charge and the
applicable Class B or Class C contingent deferred sales charge. In the second
example, Class A expenses include the initial sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. The Class B
expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the 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.
o WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment
objective is to seek high total investment return consistent with
preservation of principal.
o 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 __.
o 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 $75 billion in assets at December 31,
1997. 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.
o 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.
o HOW CAN I BUY SHARES? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page ___ for more
details.
o 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.
o HOW CAN I SELL MY SHARES? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How to Sell Shares" on page ___. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page __.
o 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 and expense ratios and other data based
on the Fund's average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended September 30, 1997, is included
in the Statement of Additional Information.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
----------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996(2) 1995 1994 1993
=========================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.09 $13.07 $11.52 $13.05 $11.63
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .50 .49 .52 .54 .44
Net realized and unrealized gain (loss) 2.88 .96 2.08 (.75) 1.43
------ ------ ------ ------ ------
Total income (loss) from investment
operations 3.38 1.45 2.60 (.21) 1.87
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.51) (.43) (.49) (.53) (.44)
Distributions from net realized gain (.79) -- (.56) (.79) (.01)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.30) (.43) (1.05) (1.32) (.45)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.17 $14.09 $13.07 $11.52 $13.05
====== ====== ====== ====== ======
=========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 25.46% 11.22% 22.79% (1.59)% 16.30%
=========================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $712,470 $264,359 $251,353 $237,771 $277,914
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $395,436 $256,765 $249,660 $260,767 $272,303
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.30% 4.73%(6) 3.97% 4.10% 3.58%
Expenses 1.16% 1.21%(6) 1.15% 1.09% 1.14%
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 51.0% 31.7% 28.5% 31.5% 32.7%
Average brokerage commission rate(8) $0.0244 $0.0336 $0.0350 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to December 31,
1993.
2. For the nine months ended September 30, 1996. 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.
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------------------------------- ----------------------------------------------
PERIOD
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1992 1991(4) 1990 1989 1988 1997 1996(2) 1995(3)
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$11.22 $10.19 $10.67 $9.78 $8.89 $14.01 $13.03 $13.28
- ----------------------------------------------------------------------------------------------------------------
.39 .40 .53 .49 .39 .45 .41 .17
.44 1.06 (.43) 1.17 1.09 2.78 .93 .41
------ ------ ------ ------ ------ ------ ------ ------
.83 1.46 .10 1.66 1.48 3.23 1.34 .58
- ----------------------------------------------------------------------------------------------------------------
(.42) (.43) (.52) (.48) (.40) (.41) (.36) (.27)
-- -- (.06) (.29) (.19) (.79) -- (.56)
------ ------ ------ ------ ------ ------ ------ ------
(.42) (.43) (.58) (.77) (.59) (1.20) (.36) (.83)
- ----------------------------------------------------------------------------------------------------------------
$11.63 $11.22 $10.19 $10.67 $9.78 $16.04 $14.01 $13.03
====== ====== ====== ====== ====== ====== ====== ======
================================================================================================================
7.54% 14.67% 0.93% 18.21% 15.88% 24.34% 10.37% 4.44%
================================================================================================================
$266,713 $276,800 $83,292 $81,194 $51,602 $67,916 $5,996 $1,265
- ----------------------------------------------------------------------------------------------------------------
$269,096 $192,870 $82,490 $68,134 $40,662 $25,113 $3,546 $520
- ----------------------------------------------------------------------------------------------------------------
3.41% 3.78% 5.14% 4.71% 4.30% 2.26% 3.69%(6) 2.62%(6)
1.17% 1.27% 1.36% 1.47% 1.50% 1.96% 2.12%(6) 2.27%(6)
- ----------------------------------------------------------------------------------------------------------------
60.3% 102.0% 71.3% 60.2% 185.5% 51.0% 31.7% 28.5%
-- -- -- -- -- $0.0244 $0.0336 $0.0350
</TABLE>
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, 1997 were $213,351,231 and $231,418,251, 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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED) CLASS C
---------------------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 1996(2) 1995 1994 1993(1)
=======================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.02 $13.01 $11.49 $13.05 $12.86
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .41 .40 .40 .44 (.97)
Net realized and unrealized gain (loss) 2.83 .96 2.07 (.77) 1.29
------ ------ ------ ------ ------
Total income (loss) from investment
operations 3.24 1.36 2.47 (.33) .32
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.35) (.39) (.44) (.12)
Distributions from net realized gain (.79) -- (.56) (.79) (.01)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.19) (.35) (.95) (1.23) (.13)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.07 $14.02 $13.01 $11.49 $13.05
====== ====== ====== ====== ======
=======================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 24.42% 10.55% 21.69% (2.50)% 2.51%
=======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $49,539 $21,087 $15,405 $9,182 $396
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $33,813 $17,898 $11,827 $5,601 $194
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.61% 3.84%(6) 3.08% 3.30% 2.19%(6)
Expenses 1.97% 2.07%(6) 1.99% 2.00% 2.50%(6)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 51.0% 31.7% 28.5% 31.5% 32.7%
Average brokerage commission rate(8) $0.0244 $0.0336 $0.0350 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to December 31,
1993.
2. For the nine months ended September 30, 1996. 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, 1997 were $213,351,231 and $231,418,251, 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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
-3-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
OBJECTIVE. The Fund seeks high total investment return consistent with
preservation of principal.
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.
o 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 generally treats the securities as "equity
securities."
o 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.
o 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.
o 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.
o 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.
o PORTFOLIO TURNOVER. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during its last fiscal year, its portfolio
turnover rate would have been 100%. Portfolio turnover affects brokerage costs
the Fund pays. The Fund may 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" table above, shows the Fund's portfolio
turnover rate during past fiscal years.
INVESTMENT RISKS.
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is known as "market risk")
or that the underlying issuer will experience financial difficulties and may
default on its 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.
o 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.
|X| 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.
|X| 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.
|X| 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.
|X| 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.
o 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.
o 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. The Fund will invest at
least 25% of its total assets in equity securities, including common stocks,
preferred stocks and securities convertible into common stock.
O 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 will invest at least 25% of its total
assets in fixed-income senior securities. Fixed-income securities include bonds
and notes. 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.
o 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.
o PARTICIPATION INTERESTS. The Fund may acquire participation interests in
loans that are made to U.S. or foreign companies. These interests are acquired
from banks or brokers that have made the loan or are members of the lending
syndicate. No more than 5% of the Fund's net assets can be invested in
participation interests of the same borrower. The value of loan participation
interests depends primarily upon the creditworthiness of the borrower, and its
ability to pay interest and repay the principal.
o 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.
o 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.
o 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.
o 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, and the derivative itself, may not perform the way the
Manager expected it to perform. The performance of derivative investments may
also be influenced by interest rate and stock market changes in the U.S. and
abroad. All of this can mean that the Fund will realize less principal or income
from the investment than expected. Certain derivative investments held by the
Fund may trade in the over-the-counter market and may be illiquid. Please see
"Illiquid and Restricted Securities", below.
o ILLIQUID AND RESTRICTED SECURITIES. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund
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 to
determine whether to sell any holdings to maintain adequate liquidity.
o 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.
o REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. They are 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.
O "WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
o 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.
o 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) , (4) foreign currencies and (5) commodities (these are referred
to as commodity futures). 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.
o PUT AND CALL OPTIONS. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to [ 35%] of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than [ 25% ]of the Fund's
net assets would have to be segregated to cover put options.
o FORWARD CURRENCY CONTRACTS. Forward Currency 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:
o The Fund cannot buy securities issued or guaranteed by any one issuer
(except the U.S. Government or any of its agencies or instrumentalities) if,
with respect to 75% of its total assets, more than 5% of the Fund's net assets
would be invested in securities of that issuer, or the Fund would then own more
than 10% of that issuer's voting securities.
o 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."
o 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).
o 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.
o 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.
o 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
the officers of the Fund and provides more information about them. Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses, which may be
different from the other classes. Therefore, 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
Investment Advisory Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success.
o 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.
o FEES AND EXPENSES. Under the Investment Advisory Agreement that became
effective June 27, 1994, and was amended per a resolution of the Board of
Trustees dated December 11, 1997 to reduce the fee on assets in excess of $1.5
billion, 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, 0.60% of the next $700 million,
and 0.58% of average annual net assets in excess of $1.5 billion. The Fund's
management fee for its last fiscal year was 0.72% 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.
o 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.
o THE TRANSFER AGENT. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for 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 of shares will usually be different as a result of the
different kinds of expenses each class bears. These returns measure the
performance of a hypothetical account in the Fund over various periods, and do
not show the performance of each shareholder's account (which will vary if
dividends are received in cash, or shares are sold or purchased). The Fund's
performance information may 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. This performance information is described below, but more detailed
information about how total returns are calculated is contained in the Statement
of Additional Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment performance
will vary over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
o TOTAL RETURNS. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, 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. Total
returns may also be quoted "at net asset value," without the sales charge, and
those returns would be reduced if sales charges were deducted. However, total
returns may also be shown based on the change in net asset value, without
considering the effect of the contingent deferred sales charge, 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 last fiscal year ended September 30, 1997, followed by a
graphical comparison of the Fund's performance to two appropriate broad-based
market indices.
o MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the Fund's fiscal year
ended September 30, 1997, its positive performance was affected principally by
the overall performance of the U.S. stock market and the Fund's June, 1997
merger with Oppenheimer Fund and Oppenheimer Strategic Income & Growth Fund,
which enabled the Fund to expand its portfolio. The Fund's assets were allocated
to stocks, bonds, cash and equivalents, with approximately 60% of the Fund's
total assets allocated to stocks at September 30, 1997. The Fund has focused its
stock investments in five areas: growth, value, contrarian, international and
high dividend yield, enabling the Fund to achieve broad diversification. The
Fund's approach to fixed-income investing is to diversify among U.S. Treasury
securities, high-yield corporate bonds and foreign bonds, which enabled it to
capture incrementally higher yields while generally reducing risks. The Fund's
portfolio and its portfolio manager's strategies are subject to change.
o COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until September 30, 1997. In the case of Class A shares,
performance is measured over a ten-year period; in the case of Class B shares,
from the 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 Multiple Strategies 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 9/30/97(1)
1 YEAR 5 YEAR 10 YEAR
18.25% 13.85% 10.40%
CLASS B SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments in
Oppenheimer Multiple Strategies 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 9/30/97(2)
1 YEAR LIFE OF CLASS
19.34% 17.63%
CLASS C SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments in
Oppenheimer Multiple Strategies 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 9/30/97(3)
1 YEAR LIFE OF CLASS
23.42% 14.28%
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 Fund's fiscal year has changed from 12/31 to 9/30.
1. The inception date of the Fund (Class A shares) was 4/24/87. Class A returns
are shown net of the current applicable 5.75% maximum initial sales charge.
2. Class B shares of the Fund were first publicly offered on 8/29/95. The
average annual total return are shown net of the applicable 5% and 3% contingent
deferred sales charge. The ending account value in the graph for the Fund is
shown net of the applicable 3% contingent deferred sales charge.
3. 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.
o CLASS A SHARES. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page___). 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 12 months of buying them (18 months if the shares were
purchased prior to May 1, 1997), you may pay a contingent deferred sales charge.
The amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares" below.
o CLASS B SHARES. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies, depending on how long you own your shares, as described in
"Buying Class B Shares" below.
o CLASS C SHARES. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares" below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, 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.
o HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or Class C
shares for which no initial sales charge is paid.
o INVESTING FOR THE SHORT TERM. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem within 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.
o INVESTING FOR THE LONGER TERM. If you are investing for the longer-term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect of the
expected lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because
some account features may not be available 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.
o HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the 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. The
Distributor may pay additional periodic compensation from its own resources to
securities dealers or financial institutions based upon the value of shares of
the Fund owned by the dealer or financial institution for its own account or for
its customers.
HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, 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.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the Distributor.
o HOW ARE SHARES PURCHASED? You can buy shares several ways--through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. WHEN YOU BUY
SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT
CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES.
o BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order
with the Distributor on your behalf.
o BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o PAYMENTS BY FEDERAL WIRE: Shares may be purchased by Federal Funds wire.
The minimum investment is $2,500. You must FIRST call the Distributor's Wire
Department at 1-800-525- 7041 to notify the Distributor of the wire, and receive
further instructions.
o BUYING SHARES THROUGH OPPENHEIMERFUNDS ACCOUNTLINK. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to PURCHASE SHARES, to have the Transfer
Agent SEND REDEMPTION PROCEEDS, 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.
o ASSET BUILDER PLANS. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o AT WHAT PRICE ARE SHARES SOLD? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
order. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity agent must receive your order by the time of
day The New York Stock Exchange closes, which is normally 4:00 P.M., New York
time, but may be earlier on some days (all references to time in this Prospectus
mean "New York time"). The net asset value of each class of shares is determined
as of that time 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 normally your order must be transmitted to the Distributor so
that it is received before the Distributor's close of business that day, which
is normally 4:00 P.M. THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY REJECT ANY
PURCHASE ORDER FOR THE FUND'S SHARES.
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange on a regular business day and transmit
it to the Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
BUYING CLASS A SHARES. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
FRONT-END SALES FRONT-END SALES COMMISSION
CHARGE AS A CHARGE AS A COMMISSION AS
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"); that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more;
o 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; or
o Purchases by a retirement plan qualified under Section 401(a) if the
retirement plan has total plan assets of $500,000 or more.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a Retirement Plan in which Oppenheimer
funds are also offered as investment options under a special arrangement with
the Distributor if the purchase occurs more than 30 days after the addition of
the Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within 18
months of the end of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales charge") may be
deducted from the redemption proceeds. A Class A contingent deferred sales
charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge 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 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will apply.
o SPECIAL ARRANGEMENTS WITH DEALERS. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
REDUCED SALES CHARGES FOR CLASS A SHARE PURCHASES. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o RIGHT OF ACCUMULATION. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o LETTER OF INTENT. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
the Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
o WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN
PURCHASERS. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor 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);
o employee benefit plans purchasing shares through a shareholder agent
which the Distributor has appointed as its agent to accept those purchase
orders;
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate
agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements were
consummated and share purchases commenced by December 31, 1996.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN
TRANSACTIONS. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the
Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 30 days from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid (this waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require evidence of
your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN
REDEMPTIONS. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agrees in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. 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:
CONTINGENT DEFERRED SALES CHARGE
YEARS SINCE BEGINNING OF MONTH IN ON REDEMPTIONS IN THAT YEAR
WHICH PURCHASE ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE)
- ------------------------------------------------------------------------------
0 - 1 5.0%
- ------------------------------------------------------------------------------
1 - 2 4.0%
- ------------------------------------------------------------------------------
2 - 3 3.0%
- ------------------------------------------------------------------------------
3 - 4 3.0%
- ------------------------------------------------------------------------------
4 - 5 2.0%
- ------------------------------------------------------------------------------
5 - 6 1.0%
- ------------------------------------------------------------------------------
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
o AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
o 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 "Buying Class C Shares - Distribution and Service Plans for Class B
and Class C Shares."
o 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 Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares and on Class C shares. The Distributor also receives an annual service
fee of 0.25% per year under each Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to dealers on a
quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. The Distributor may pay the Class C service fee
and asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. Therefore, those expenses may be
carried over and paid in future years. At September 30, 1997, the end of the
Class B and Class C Plan year, the Distributor had incurred unreimbursed
expenses in connection with sales of Class B shares of $2,459,920 for Class B
shares and $487,837 for Class C shares, equal to
3.62% of the Fund's net assets represented by Class B shares on that date, and
0.98% of the Fund's net assets represented by Class C shares on that date.
If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge and/or the service
fee to the Distributor for certain expenses it incurred before the plan was
terminated with respect to Class B or Class C shares sold before the respective
plan was terminated.
o WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are discussed in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent which conditions
apply.
WAIVERS FOR REDEMPTIONS OF SHARES IN CERTAIN CASES. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o to make distributions from retirement plans that qualify as
"substantially equal periodic payments" under Section 72(t) of the Internal
Revenue Code, provided the distributions do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the request; or
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies";
o distributions from OppenheimerFunds prototype 401(k) plans: and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a
party.
SPECIAL INVESTOR SERVICES
ACCOUNTLINK. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o USING ACCOUNTLINK TO BUY SHARES. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o PURCHASING SHARES. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o EXCHANGING SHARES. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer
fund account you have already established by calling the special PhoneLink
number. Please refer to "How to Exchange Shares," below, for details.
o SELLING SHARES. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
SHAREHOLDER TRANSACTIONS BY FAX. Beginning May 30, 1997, requests for certain
account transactions may be sent to the Transfer Agent by fax (telecopier).
Please call 1-800-525-7048 for information about which transactions are
included. Transaction requests submitted by fax are subject to the same rules
and restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o AUTOMATIC WITHDRAWAL PLANS. If your Fund account is $5,000 or more, you
can establish an Automatic Withdrawal Plan to receive payments of at least $50
on a monthly, quarterly, semi- annual or annual basis. The checks may be sent to
you or sent automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by telephone. You
should consult the Statement of Additional Information for more details.
o AUTOMATIC EXCHANGE PLANS. You can authorize the Transfer Agent to
exchange 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 fund account is $25. These exchanges are subject to the terms of the
exchange privilege, described below.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
RETIREMENT PLANS. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o INDIVIDUAL RETIREMENT ACCOUNTS including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(B)(7) CUSTODIAL PLANS for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAS (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR-SEP IRAs
o PENSION AND PROFIT-SHARING PLANS for self-employed persons and other
employers
o 401(K) PROTOTYPE RETIREMENT PLANS for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
HOW TO SELL SHARES
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value 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.
o RETIREMENT ACCOUNTS. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
o CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a
check
o The redemption check is not payable to all shareholders listed on
the account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different
owner or name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. IF YOU ARE SIGNING AS A FIDUCIARY 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
USE THE FOLLOWING ADDRESS FOR SEND COURIER OR EXPRESS MAIL
REQUESTS BY MAIL: REQUESTS TO:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
SELLING SHARES BY TELEPHONE. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. YOU MAY NOT REDEEM SHARES HELD IN AN OPPENHEIMERFUNDS
RETIREMENT PLAN OR UNDER A SHARE CERTIFICATE BY TELEPHONE.
o To redeem shares through a service representative, call
1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that bank account.
o TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
SELLING SHARES THROUGH YOUR DEALER. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements For
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you
purchase by exchange
o BEFORE EXCHANGING INTO A FUND, YOU SHOULD OBTAIN AND READ ITS
PROSPECTUS
SHARES OF A PARTICULAR CLASS OF THE FUND MAY BE EXCHANGED ONLY FOR SHARES
OF THE SAME CLASS IN THE OTHER OPPENHEIMER FUNDS. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be "Class A" shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o WRITTEN EXCHANGE REQUESTS. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
addresses listed in "How to Sell Shares."
o TELEPHONE EXCHANGE REQUESTS. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to 7 days if it determines it would be
disadvantaged by a same day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
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
o 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.
o THE OFFERING OF SHARES may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges 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.
o THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE TRANSFER
AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS BY
PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the
values of the securities in the Fund's portfolio fluctuate, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer, payment will
be forwarded within 3 business days. THE TRANSFER AGENT MAY DELAY FORWARDING A
CHECK OR PROCESSING A PAYMENT VIA ACCOUNTLINK FOR RECENTLY PURCHASED SHARES, BUT
ONLY UNTIL THE PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE AS MUCH AS 10
DAYS FROM THE DATE THE SHARES WERE PURCHASED. THAT DELAY MAY BE AVOIDED IF YOU
PURCHASE SHARES BY FEDERAL FUNDS WIRE, CERTIFIED CHECK OR ARRANGE WITH YOUR BANK
TO PROVIDE TELEPHONE OR WRITTEN ASSURANCE TO THE TRANSFER AGENT THAT YOUR
PURCHASE PAYMENT HAS CLEARED.
o INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund if the
account value has fallen below $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.
o UNDER UNUSUAL CIRCUMSTANCES, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o THE FUND DOES NOT CHARGE A REDEMPTION FEE, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How to Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800- 525-7048 to ask that copies of
those materials be sent personally to that shareholder.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS. The Fund declares dividends separately for Class A, Class B and Class
C shares 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' 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 OppenheimerFunds retirement
accounts, all distributions are reinvested. For other accounts, you have four
options:
o REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest
all dividends and long-term capital gains distributions in additional shares
of the Fund.
o REINVEST LONG-TERM CAPITAL GAINS ONLY. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
have them sent to your bank account on
AccountLink.
o RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent
to your bank on AccountLink.
o REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMER FUNDS ACCOUNT.
You can reinvest all distributions in the same class of shares of another
Oppenheimer fund account you have
established.
TAXES. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you 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. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "BUYING A DIVIDEND": If you buy shares on or just before the ex-dividend
date, or just before the Fund declares a capital gains distribution, you will
pay the full price for the shares and then receive a portion of the price back
as a taxable dividend or capital gain, respectively.
o TAXES ON TRANSACTIONS: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you received when you sold them.
o RETURNS OF CAPITAL: In certain cases, distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
-4-
<PAGE>
APPENDIX A
SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND
WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
The initial and contingent 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) Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Global Value 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) purchased by such shareholder by exchange of shares of other Oppenheimer
funds that were acquired pursuant to the merger of any of the Former Quest for
Value Funds into an Oppenheimer fund on November 24, 1995.
CLASS A SALES CHARGES
o REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST
SHAREHOLDERS
o PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT
PLANS. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
FRONT-END SALES FRONT-END SALES
NUMBER OF CHARGE AS A CHARGE AS A COMMISSION AS
ELIGIBLE EMPLOYEES PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement Plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
O WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of Funds
on February 28, 1991 and who acquired shares of any of the Former Quest for
Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
O WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN
TRANSACTIONS. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is 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.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE WAIVERS
O WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, 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.
O 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.
A-1
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
Graphic material included in Prospectus of Oppenheimer Multiple Strategies Fund:
"Comparison of Change in Value of $10,000 Investments in Oppenheimer Multiple
Strategies Fund, the S&P 500 Index, and The Lehman Brothers Aggregate Bond
Index".
Linear graphs will be included in the Prospectus of Oppenheimer Multiple
Strategies 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 a
ten-year fiscal year-end period through September 30, 1997; 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, 1997; 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, 1997. 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?"
FISCAL YEAR OPPENHEIMER LEHMAN BROTHERS
(PERIOD) MULTIPLE STRATEGIES FUND S&P AGGREGATE
ENDED CLASS A SHARES INDEX BOND INDEX
09/30/87 $ 9,425 $10,000 $10,000
12/31/87 $ 8,044 $ 7,747 $10,581
12/31/88 $ 9,321 $ 9,031 $11,416
12/31/89 $11,018 $11,887 $13,074
12/31/90 $11,120 $11,518 $14,246
12/31/91 $12,752 $15,019 $16,526
12/31/92 $13,713 $16,162 $17,749
12/31/93 $15,947 $17,787 $19,479
12/31/94 $15,695 $18,021 $18,911
12/31/95 $19,271 $24,785 $22,405
09/30/96 $21,433 $28,129 $22,542
09/30/97 $26,891 $39,501 $24,732
FISCAL YEAR OPPENHEIMER LEHMAN BROTHERS
(PERIOD) MULTIPLE STRATEGIES FUND S&P AGGREGATE
ENDED CLASS B SHARES INDEX BOND INDEX
08/29/95 $10,000 $10,000 $10,000
12/31/95 $10,444 $11,049 $10,528
09/30/96 $11,527 $12,540 $10,592
09/30/97 $14,031 $17,609 $11,621
<PAGE>
FISCAL YEAR OPPENHEIMER LEHMAN BROTHERS
(PERIOD) MULTIPLE STRATEGIES FUND S&P AGGREGATE
ENDED CLASS C SHARES 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
09/30/97 $16,676 $22,476 $12,765
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES 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 AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OPPENHEIMERFUNDS INTERNET WEB SITE:
http://www.oppenheimerfunds.com
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.
PR0240.001.198 Printed on recycled paper.
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 23, 1998
This Statement of Additional Information of Oppenheimer Multiple
Strategies Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus dated
January 23, 1998. It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at
P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the
toll-free number shown above.
CONTENTS
PAGE
ABOUT THE FUND
Investment Objective and Policies...................................... 2
Investment Policies and Strategies................................ 2
Other Investment Techniques and Strategies........................ 9
Other Investment Restrictions..................................... 22
How the Fund is Managed ............................................... 24
Organization and History.......................................... 24
Trustees and Officers of the Fund................................. 24
The Manager and Its Affiliates.................................... 30
Brokerage Policies of the Fund......................................... 32
Performance of the Fund................................................ 34
Distribution and Service Plans......................................... 36
ABOUT YOUR ACCOUNT
How To Buy Shares...................................................... 38
How To Sell Shares..................................................... 46
How To Exchange Shares................................................. 51
Dividends, Capital Gains and Taxes..................................... 53
Additional Information About the Fund.................................. 55
Independent Auditors' Report........................................... 56
Financial Statements................................................... 57
Appendix A: Industry Classifications................................... A-1
Appendix B: Description of Ratings Categories of Ratings Services...... B-1
-1-
<PAGE>
ABOUT THE FUND
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and 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.
o 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.
o 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
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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.
o EQUITY SECURITIES.
o 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.
o 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.
o CONVERTIBLE SECURITIES. While convertible securities are a form of debt
security, in many cases their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in the case of
non-convertible 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.
o WARRANTS AND RIGHTS. Warrants basically are options to purchase equity
securities at set prices valid for a specified period of time. The prices of
warrants do not necessarily move in a manner parallel to the prices of the
underlying securities. The price the Fund pays for a warrant will be lost unless
the warrant is exercised prior to its expiration. Rights are similar to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights, receive
no dividends and have no rights with respect to the assets
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of the issuer.
O 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.
o 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.
o 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.
o 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.
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o 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.
o 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.
o 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
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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.
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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.
o 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.
o 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.
o 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.
o COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS ("CMOS"). CMOs are
fully-collateralized
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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.
o 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
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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.
o MONEY MARKET SECURITIES.
o 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.
o 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
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Investment Techniques and Strategies - Hedging With Options and Futures
Contracts" below.
o 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,
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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.
o 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.
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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.
o WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. "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
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to attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently higher cash
yields.
o REPURCHASE AGREEMENTS. 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.
O 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. Illiquid securities include repurchase agreements maturing in
more than seven days, or certain participation interests other than those with
puts exercisable within seven days.
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O 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.
o 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
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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.
o 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
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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.
o 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.
o 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
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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.
o 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.
o 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.
o 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
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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
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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.
o 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.
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<PAGE>
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.
o REGULATORY ASPECTS OF HEDGING INSTRUMENTS. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is 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,
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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.
o TAX ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders will be taxed on the dividends and capital
gains they receive from the Fund.
Certain foreign currency exchange contracts (Forward Contracts) in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to- market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position(s)
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as an ordinary gain or loss. Currency gains and
losses are offset against market gains and losses before determining a net
"section 988" gain or loss under the Internal Revenue Code, which may increase
or decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
o RISKS OF HEDGING WITH 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
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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
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<PAGE>
outstanding shares are present, or (2) more than 50% of the outstanding
shares.
Under these additional restrictions, the Fund cannot:
o buy or sell real estate including futures contracts; however, the Fund
may invest in debt securities secured by real estate or interests therein;
o buy securities on margin, except that the Fund may make margin deposits
in connection with any of the hedging instruments which it may use;
o 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;
o buy the securities of any company for the purpose of acquiring control
or management thereof, except in connection with a merger, consolidation,
reorganization or acquisition of assets; or
o buy and retain securities of any issuer if officers and Trustees or
Directors of the Fund and the Manager individually owning more than 0.5% of the
securities of such issuer together own more than 5% of the securities of such
issuer.
In addition, as a matter of fundamental policy, the Fund may invest all of
its assets in the securities of a single open-end management investment company
for which the Manager or one of its subsidiaries or a successor is advisor or
sub-advisor, notwithstanding any other fundamental investment policy or
limitation; such other investment company must have substantially the same
fundamental investment objective, policies and limitations as the Fund.
In connection with the qualification of its shares in certain states, the
Fund had previously undertaken that in addition to the above, as a
non-fundamental policy, the Fund would not (i) invest in oil, gas or mineral
leases or (ii) invest in real estate limited partnership interests. In the event
the Fund's shares ceased to be qualified under such laws or if such
undertaking(s) otherwise cease to be operative, the Fund would not be subject to
such restrictions. Due to recent changes in federal securities laws, such state
regulatory limitations no longer apply, and the Fund hereby withdraws these
voluntary undertakings.
The percentage restrictions described above and in the Prospectus are
applicable only at the time of investment and require no action by the Fund as a
result of subsequent changes in value of the investments or the size of the
Fund.
For purposes of the Fund's policy not to concentrate its investments,
described in the Prospectus, the Fund has adopted the Industry Classifications
set forth in Appendix A to this Statement of Additional Information. This is not
a fundamental policy.
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<PAGE>
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 Global
Fund, Oppenheimer Enterprise Fund, Oppenheimer Growth Fund, Oppenheimer
Discovery Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer
International Growth Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer International Small
Company 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 Series Fund, Inc., 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
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<PAGE>
York-based Oppenheimer funds as with the Fund. As of December 30, 1997, the
Trustees and officers of the Fund as a group owned of record or beneficially
less than 1% of the outstanding shares of each class of the Fund. That statement
does not reflect shares held of record by an employee benefit plan for employees
of the Manager (for which plan a Trustee and an officer listed below, Ms.
Macaskill and Mr. Donohue, respectively, are trustees), other than the shares
beneficially owned under that plan by the officers of the Fund listed below.
LEON LEVY, CHAIRMAN OF THE BOARD OF TRUSTEES; AGE: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
ROBERT G. GALLI, TRUSTEE; AGE: 64
19750 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995 - December 1997); Vice President and Counsel
of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company;
Executive Vice President, General Counsel and a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and a
director of HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment adviser
subsidiaries of the Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager and an officer of other Oppenheimer funds.
BENJAMIN LIPSTEIN, TRUSTEE; AGE: 74
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers, Inc
(Publishers of Psychology Today and Mother Earth News) and of Spy Magazine, L.P.
BRIDGET A. MACASKILL, PRESIDENT AND TRUSTEE;*# Age: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager and Chief Executive Officer
(since September 1995); President and director (since June 1991) of HarbourView;
Chairman and a director of SSI (since August 1994), and SFSI (September 1995);
President (since September 1995) and a director (since October 1990) of OAC;
President (since September 1995) and a director (since November 1989) of
Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the
Manager; a director of Oppenheimer Real Asset Management, Inc. (since July
1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund manager subsidiary of the Manager ("OFIL")
and Oppenheimer Millennium Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director of the NASDAQ Stock Market, Inc.
and of Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the
- --------
*Trustee who is an "interested person" of the Fund.
#Not a Director of Oppenheimer Money Market Fund, Inc.
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<PAGE>
Manager.
ELIZABETH B. MOYNIHAN, TRUSTEE; AGE: 68
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),
National Building Museum; a member of the Trustees Council, Preservation League
of New York State, and of the Indo-U.S. Sub-Commission on Education and Culture.
KENNETH A. RANDALL, TRUSTEE; AGE: 70
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), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); 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: 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and GASB); formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.
RUSSELL S. REYNOLDS, JR., TRUSTEE; AGE: 65
8 Sound Shore Drive, Greenwich, Connecticut 06830
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 Greenwich Historical Society.
DONALD W. SPIRO, VICE CHAIRMAN AND TRUSTEE;* Age: 71
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
PAULINE TRIGERE, TRUSTEE; AGE: 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
CLAYTON K. YEUTTER, TRUSTEE; AGE: 66
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries,
Ltd. (tobacco and
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*Trustee who is an "interested person" of the Fund.
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<PAGE>
financial services), Caterpillar, Inc. (machinery), ConAgra, Inc. (food and
agricultural products), Farmers Insurance Company (insurance), FMC Corp.
(chemicals and machinery) and Texas Instruments, Inc. (electronics); formerly
(in descending chronological order) IMC Global Inc. (chemicals and animal feed),
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.
ANDREW J. DONOHUE, SECRETARY; AGE: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
RICHARD H. RUBINSTEIN, VICE PRESIDENT AND PORTFOLIO MANAGER; AGE: 49
Senior Vice President of the Manager (since July 1995); an officer of other
Oppenheimer funds (since June 1990).
GEORGE C. BOWEN, TREASURER; AGE: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
ROBERT J. BISHOP, ASSISTANT TREASURER; AGE: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other
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<PAGE>
Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual
Fund Accounting (April 1994-May 1996), and a Fund Controller for the Manager.
SCOTT T. FARRAR, ASSISTANT TREASURER; AGE: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
o REMUNERATION OF TRUSTEES. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. Mr. Galli received no salary or
fee prior to January 1, 1998. The remaining Trustees of the Fund received the
compensation shown below . The compensation from the Fund shown was paid during
the fiscal year ended September 30, 1997. The compensation from all of the New
York-based Oppenheimer funds includes the Fund and is compensation received as a
director, trustee, or member of a committee of the Board during the calendar
year 1997.
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as From All
From Part of Fund New York-based
NAME AND POSITION THE FUND EXPENSES OPPENHEIMERFUNDS(1)
Leon Levy, $831 ($5,843) $158,500
Chairman and
Trustee
Benjamin Lipstein, $718 ($5,051) $137,000
Study Committee
Chairman, Audit
Committee Member
and Trustee(2)
Elizabeth B. Moynihan, $506 ($3,557) $96,500
Study Committee
Member and Trustee
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<PAGE>
Kenneth A. Randall, $464 ($3,263) $88,500
Audit Committee
Chairman and Trustee
Edward V. Regan, $459 ($3,226) $87,500
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S. Reynolds, Jr., $343 ($2,415) $65,500
Proxy Committee
Member and Trustee
Pauline Trigere, $307 ($2,157) $58,500
Trustee
Clayton K. Yeutter, $343 ($2,415) $55,500
Proxy Committee
Member and Trustee
- ----------------------
(1)For the 1997 calendar year.
(2)Committee position held during a portion of the period shown.
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 those benefits cannot be
determined at this time, nor
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<PAGE>
can the Fund estimate the number of years of credited service that will be used
to determine those benefits. During the fiscal year ended September 30, 1997, a
credit of $29,188 was made for the Fund's projected benefit obligations, and
payments of $8,352 were made to retired Trustees, resulting in an accumulated
liability of $262,195 at September 30, 1997.
DEFERRED COMPENSATION PLAN. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of Trustees' fees under the plan will not materially
affect the Fund's assets, liabilities or net income per share. The plan will not
obligate the Fund to retain the services of any Trustee or to pay any particular
amount of compensation to any Trustee. Pursuant to any Order issued by the
Securities and Exchange Commission, the Fund may, invest in the funds selected
by the Trustee under the plan for the limited purpose of determining the value
of the Trustee's deferred fee account.
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.
o MAJOR SHAREHOLDERS. As of December 30, 1997, no person owned of record
or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B or Class C shares except Merrill Lynch Pierce
Fenner & Smith, Inc., 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida, 32246, which owned 177,665.204 Class C shares (approximately 5.12% 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.
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<PAGE>
o PORTFOLIO MANAGEMENT. The Portfolio Manager of the Fund is Richard
Rubinstein who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Rubinstein's background is described in the Prospectus
under "Portfolio Manager." Other members of the Manager's Equity Portfolio
Department, particularly Michael Levine, provide the Portfolio Manager with
counsel and support in managing the Fund's portfolio.
o THE INVESTMENT ADVISORY AGREEMENT. A management fee is payable monthly to
the Manager under the terms of the Investment Advisory Agreement between the
Manager and the Fund, and is computed on the aggregate net assets of the Fund as
of the close of business each day. The Investment Advisory Agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
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, 1995, September 30, 1996
and September 30, 1997, the management fees paid by the Fund to the Manager were
$1,943,505, $1,544,001 and $3,267,378, 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.
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<PAGE>
O THE DISTRIBUTOR. Under its General Distributor's Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares.
Expenses normally attributable to sales, excluding payments under 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, 1995,
September 30, 1996 and September 30, 1997, the aggregate amount of sales charges
on sales of the Fund's Class A shares was $348,120, $286,317 and $589,802 in
those respective years, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $138,846, $100,671 and $187,259, respectively. During
the Fund's fiscal years ended September 30, 1996 and 1997, contingent deferred
sales charges collected on the Fund's Class B shares totalled $1,119 and
$65,210, all of which the Distributor retained. During the fiscal years ended
December 31, 1995, September 30, 1996 and September 30, 1997, contingent
deferred sales charges collected on the Fund's Class C shares totaled $3,807,
$3,419 and $9,747, 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.
O THE TRANSFER AGENT. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
BROKERAGE POLICIES OF THE FUND
BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AGREEMENT. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions for the Fund. The 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.
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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
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<PAGE>
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, 1995, September 30, 1996
and September 30, 1997, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net trade basis)
amounted to $304,986, $262,222 and $424,443, respectively. Of that amount,
during the fiscal year ended September 30, 1997, $283,507 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 $143,718,397.
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.
O AVERAGE ANNUAL TOTAL RETURNS. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
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<PAGE>
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
O CUMULATIVE TOTAL RETURNS. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - 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-, five- and ten-year periods ended September 30, 1997, were 18.25%, 13.85%
and 10.40%, respectively. The "cumulative total return" on Class A shares for
the ten year period ended September 30, 1997 was 168.90%. The "average total
returns" on an investment in Class B shares of the Fund for the one-year period
ended September 30, 1997 and for the period from August 29, 1995 (inception of
Class B shares) to September 30, 1997, were 19.34% and 17.63%, respectively. The
"cumulative total return" on Class B shares for the period from August 29, 1995
(inception of Class B shares) to September 30, 1997 was 40.32%. The "average
total returns" on an investment in Class C shares of the Fund for the one-year
period ended September 30, 1997 and for the period from December 1, 1993
(inception of Class C shares) to September 30, 1997 , were 23.42% and 14.28%,
respectively. The "cumulative total return" on Class C shares for the period
from December 1, 1993 to September 30, 1997 was 66.76%.
O TOTAL RETURNS AT NET ASSET VALUE. From time to time the Fund may also
quote an "average annual total return at net asset value" or a "cumulative total
return at net asset value" for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
"cumulative total returns at net asset value" of the Fund's Class A shares for
the ten year period ended September 30, 1997 was 207.40%. For Class B shares,
the "cumulative total return at net asset value" for the period from August 29,
1995 through September 30, 1997 was 43.32%. For Class C shares, the
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<PAGE>
"cumulative total return at net asset value" for the period from December 1,
1993 through September
30, 1997 was 66.76%.
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 star
rankings of the performance of its Class A, Class B, Class C [or Class Y] shares
by Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
ranks mutual funds in broad investment categories, domestic stock funds,
international stock funds, taxable bond funds and municipal bond funds, based on
risk-adjusted total investment returns. The Fund is ranked among [category]
funds. Investment return measures a fund's or class's one, three, five and
ten-year average annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after considering the
fund's sales charges and expenses. Risk measures a fund's or class'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
the fund's category. Five stars is the "highest ranking (top 10%), four stars is
"above average" (next 22.5%), three stars is "average" '(next 35%), two stars is
"below average" (next 22.5%) and one star is "lowest" (bottom 10%). The current
star ranking is the fund's or class's 3-year ranking or its combined 3- and
5-year ranking (weighted 60%/40%, respectively), or its combined 3-, 5- and
10-year ranking (weighted 40%, 30% and 30%, respectively), depending on the
inception of the fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments style, rather than how a fund defines
its investment objective. Morningstar's four broad categories (domestic, equity,
international equity, municipal bond and taxable bond) are each further
subdivided into categories based on types of investments and investment styles.
Those comparisons by Morningstar are based on the same risk and return
measurements as its star rankings but do not consider the effect of sales
charges.
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
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<PAGE>
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.
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<PAGE>
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, 1997, payments under the Class A
Plan totaled $721,139, all of which was paid by the Distributor to Recipients,
including $59,946 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 fiscal year ended September 30, 1997, totaled $249,390, of which
$218,968 was retained by the Distributor and $1,286 was paid to an affiliate.
Payments made under the Class C Plan during the fiscal year ended September 30,
1997, totaled $337,442, of which $144,768 was retained by the Distributor, and
$11,217 was paid by the Distributor to an affiliate.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on such shares,
or to pay Recipients the service fee on a quarterly basis without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B and Class C Plans by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan and
the Class C Plan are subject to the limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund. Such payments are made in
recognition that the Distributor (i) pays sales commissions to authorized
brokers and dealers at the time of sale and pays service fees as described in
the Prospectus, (ii) may finance such commissions and/or the advance of the
service fee payment to Recipients under those Plans, or may provide such
financing from its own resources, or from an affiliate, (iii) employs personnel
to support distribution of shares, and (iv) may bear the costs of sales
literature, advertising and prospectuses (other than those furnished to current
shareholders), state "blue sky" registration fees and certain other distribution
expenses.
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<PAGE>
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
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<PAGE>
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 schedule (which is subject to change) states that
it will close New Year's Day, Martin Luther King Jr. 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 the Automated Quotation System ("NASDAQ") of
the Nasdaq Stock Market, Inc. for which last sale information is regularly
reported are valued at the last reported sale price on the principal exchange
for such security or NASDAQ that day (the "Valuation Date") or, in the absence
of sales that day, at the last reported sales price preceding the Valuation Date
if it is within the spread of the closing "bid" and "asked" prices on the
Valuation Date or, if not, the closing "bid" price on the Valuation Date; (ii)
equity securities traded on a foreign securities exchange are 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 if unavailable, at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active market makers
in the security on the basis of reasonable inquiry; (iii) a non-money market
fund will value (x) debt instruments that had a maturity of more than 397 days
when issued, (y) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity in excess of 60 days , and (z) non-money
market type debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of sixty days or less, at the mean between "bid"
and "asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or, if unavailable, obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (iv) money
market-type debt securities held by a non-money market fund that had a maturity
of less than 397 days when issued and have a remaining maturity of 60 days or
less, and debt instruments held by a money market fund that have a remaining
maturity of 397 days or less, shall be valued at cost, adjusted for amortization
of premiums and accretion of discount; and (v) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value determined under the Board's procedures.
If the Manager is unable to locate two market makers willing to give quotes
(see (ii) and (iii) above), the security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available) provided
that the Manager is satisfied that the firm rendering the quotes is reliable and
that the quotes reflect the current market value.
In the case of U.S. Government Securities, 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
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$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. Relations by virtue of a remarriage (step-children, step-parents, etc.)
are included.
o THE OPPENHEIMER FUNDS. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Oppenheimer MidCap Fund
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 Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income &
Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company
Fund
Oppenheimer Developing Markets Fund
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Real Asset Fund
Oppenheimer World Bond Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Champion Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government
Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
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Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Capital Value Fund, Inc.
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.
There is an initial sales charge on the purchase of Class A shares of each of
the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o LETTERS OF INTENT. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares 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
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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.
o TERMS OF ESCROW THAT APPLY TO LETTERS OF INTENT.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value 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.
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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 the
Fund to use those accounts for monthly automatic purchases of shares of up to
four other Oppenheimer funds. If you make payments from your bank account to
purchase shares of the Fund, your bank account will be automatically debited
normally four to five business days prior to the investment dates selected in
the Account Application. Neither the Distributor, Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares resulting from delays
in ACH transmissions.
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
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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 other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch
recordkeeping service agreement, the Retirement Plan has $3 million or
more in assets invested in mutual funds other than those advised or
managed
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by Merrill Lynch Asset Management, L.P. ("MLAM") that are made available
pursuant to a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor and in funds advised or managed by
MLAM (collectively, the "Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are
provided under a contract or arrangement between the Retirement Plan and
Merrill Lynch. On the date the plan sponsor signs the Merrill Lynch record
keeping service agreement, the Plan must have $3 million or more in
assets, excluding assets held in money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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
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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.
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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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of 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 as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o AUTOMATIC EXCHANGE PLANS. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange
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Plan. The minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the restrictions that apply
to exchanges as set forth in "How to Exchange Shares" in the Prospectus and
below in this Statement of Additional Information.
o AUTOMATIC WITHDRAWAL PLANS. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and 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.
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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.
o INVOLUNTARY REDEMPTIONS. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $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.
o PAYMENTS "IN KIND". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"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
-50-
<PAGE>
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. 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
-51-
<PAGE>
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
-52-
<PAGE>
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 that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on 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, those dividends will not qualify for the
deduction.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests relating to qualification which the Fund might not
meet those tests in a particular year. If it does not qualify, the Fund will be
treated for tax purposes as an ordinary corporation and receive no tax deduction
for payments of dividends and
-53-
<PAGE>
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, 1997, the Fund had available for federal income tax
purposes an unused capital loss carryover of approximately $445,000, which
expires in 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
-54-
<PAGE>
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.
-55-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
===============================================================================
The Board of Trustees and Shareholders of
Oppenheimer Multiple Strategies Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Multiple Strategies Fund (formerly Oppenheimer Asset
Allocation Fund) as of September 30, 1997, and the related statement of
operations for the year then ended, the statements of changes in net assets for
the year then ended and the nine-month period ended September 30, 1996, and the
financial highlights for the year ended September 30, 1997, the nine-month
period ended September 30, 1996 and each of the years in the four-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, 1997, 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 Multiple Strategies Fund as of September 30, 1997, the
results of its operations for the year then ended, the changes in its net assets
for the year then ended and the nine-month period ended September 30, 1996, and
the financial highlights for the year ended September 30, 1997, the nine-month
period ended September 30, 1996 and each of the years in the four-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, 1997
<PAGE>
FINANCIALS
- -------------------------------------------------------------------------------
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
==================================================================================================================
<S> <C> <C>
COMMON STOCKS--60.0%
- ------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--3.2%
- ------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.6%
Bayer AG, Sponsored ADR 144,000 $ 5,735,736
- ------------------------------------------------------------------------------------------------------------------
Ecolab, Inc.(1) 35,400 1,719,112
- ------------------------------------------------------------------------------------------------------------------
IMC Global, Inc. 82,300 2,901,075
- ------------------------------------------------------------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc. 40,000 3,140,000
------------
13,495,923
- ------------------------------------------------------------------------------------------------------------------
METALS--0.7%
Alumax, Inc.(2) 52,118 2,130,323
- ------------------------------------------------------------------------------------------------------------------
Brush Wellman, Inc. 130,000 3,339,375
- ------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp.(2) 1,999 28,361
------------
5,498,059
- ------------------------------------------------------------------------------------------------------------------
PAPER--0.9%
Aracruz Celulose SA, Sponsored ADR 121,000 2,488,062
- ------------------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 185,469 2,716,137
- ------------------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 4,900 72,275
- ------------------------------------------------------------------------------------------------------------------
Union Camp Corp. 30,000 1,850,625
------------
7,127,099
- ------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--10.5%
- ------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--0.6%
Champion Enterprises, Inc.(2) 70,000 1,338,750
- ------------------------------------------------------------------------------------------------------------------
Dana Corp. 38,000 1,876,250
- ------------------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 407,562 1,813,988
------------
5,028,988
- ------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--5.7%
Alaska Air Group, Inc.(1) 126,000 4,142,250
- ------------------------------------------------------------------------------------------------------------------
AMR Corp.(2) 43,000 4,759,562
- ------------------------------------------------------------------------------------------------------------------
Boston Chicken, Inc.(2) 160,000 2,360,000
- ------------------------------------------------------------------------------------------------------------------
Brunswick Corp. 33,000 1,163,250
- ------------------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A(1) 46,700 2,159,875
- ------------------------------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 120,000 3,885,000
- ------------------------------------------------------------------------------------------------------------------
Disney (Walt) Co.(1) 6,000 483,750
- ------------------------------------------------------------------------------------------------------------------
Gaylord Entertainment Co., Cl. A 83,000 2,142,437
- ------------------------------------------------------------------------------------------------------------------
International Game Technology(1) 202,000 4,595,500
- ------------------------------------------------------------------------------------------------------------------
Mattel, Inc. 1 50
- ------------------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(2) 55,000 1,656,875
- ------------------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 67,000 6,271,016
- ------------------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc.(1)(2) 81,000 2,237,625
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LEISURE & ENTERTAINMENT (CONTINUED)
Shangri-La Asia Ltd. 1,400,000 $ 1,438,260
- ------------------------------------------------------------------------------------------------------------------
Shimano, Inc. 165,000 3,826,720
- ------------------------------------------------------------------------------------------------------------------
Time Warner, Inc. 66,100 3,581,794
- ------------------------------------------------------------------------------------------------------------------
West Marine, Inc.(1)(2) 100,000 2,287,500
------------
46,991,464
- ------------------------------------------------------------------------------------------------------------------
MEDIA--1.3%
Comcast Corp., Cl. A Special(1) 130,000 3,347,500
- ------------------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc.(1) 42,600 1,991,550
- ------------------------------------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 2,800,000 2,550,877
- ------------------------------------------------------------------------------------------------------------------
U S West Media Group(2) 120,000 2,677,500
------------
10,567,427
- ------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--1.1%
Cone Mills Corp.(2) 422,000 3,507,875
- ------------------------------------------------------------------------------------------------------------------
Dayton Hudson Corp. 21,000 1,258,687
- ------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(2) 40,000 1,725,000
- ------------------------------------------------------------------------------------------------------------------
Neiman-Marcus Group, Inc. 84,500 2,704,000
------------
9,195,562
- ------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.8%
AutoZone, Inc.(2) 100,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------
Costco Cos., Inc.(1)(2) 58,100 2,186,012
- ------------------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc.(1)(2) 110,000 3,203,750
- ------------------------------------------------------------------------------------------------------------------
Gymboree Corp.(1)(2) 105,000 2,730,000
- ------------------------------------------------------------------------------------------------------------------
Toys 'R' Us, Inc.(2) 115,000 4,082,500
------------
15,202,262
- ------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--8.5%
- ------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.4%
Guinness plc 390,000 3,682,389
- ------------------------------------------------------------------------------------------------------------------
FOOD--1.4%
Chiquita Brands International, Inc. 181,000 2,918,625
- ------------------------------------------------------------------------------------------------------------------
Groupe Danone 18,748 2,954,947
- ------------------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 48,000 3,348,130
- ------------------------------------------------------------------------------------------------------------------
Sara Lee Corp.(1) 54,000 2,781,000
------------
12,002,702
- ------------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--3.9%
Abbott Laboratories(1) 50,000 3,196,875
- ------------------------------------------------------------------------------------------------------------------
American Home Products Corp. 55,000 4,015,000
- ------------------------------------------------------------------------------------------------------------------
Amgen, Inc.(2) 60,000 2,876,250
- ------------------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 180,000 3,323,461
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS(CONTINUED)
Bristol-Myers Squibb Co.(1) 18,500 $ 1,530,875
- ------------------------------------------------------------------------------------------------------------------
Genzyme Corp.(2) 3,225 31,444
- ------------------------------------------------------------------------------------------------------------------
Genzyme Corp. (General Division)(1)(2) 107,500 3,198,125
- ------------------------------------------------------------------------------------------------------------------
Johnson & Johnson 46,800 2,696,850
- ------------------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 160,000 3,590,000
- ------------------------------------------------------------------------------------------------------------------
Novartis AG 3,323 5,102,553
- ------------------------------------------------------------------------------------------------------------------
SmithKline Beecham plc, ADR 62,000 3,030,250
------------
32,591,683
- ------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--1.3%
HemaSure, Inc.(2) 132,500 513,437
- ------------------------------------------------------------------------------------------------------------------
Integrated Health Services, Inc. 55,000 1,839,062
- ------------------------------------------------------------------------------------------------------------------
MedPartners, Inc.(2) 108,000 2,315,250
- ------------------------------------------------------------------------------------------------------------------
United States Surgical Corp. 69,000 2,013,937
- ------------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(1)(2) 71,400 4,136,737
------------
10,818,423
- ------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.3%
Wella AG 3,100 2,204,523
- ------------------------------------------------------------------------------------------------------------------
Wella AG, Preference 350 266,931
------------
2,471,454
- ------------------------------------------------------------------------------------------------------------------
TOBACCO--1.2%
Imperial Tobacco Group plc 350,000 2,097,599
- ------------------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc.(1) 180,000 7,481,250
------------
9,578,849
- ------------------------------------------------------------------------------------------------------------------
ENERGY--5.6%
- ------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS--1.6%
Global Marine, Inc.(1) 78,000 2,593,500
- ------------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 25,200 1,973,475
- ------------------------------------------------------------------------------------------------------------------
Transocean Offshore, Inc. 68,000 3,259,750
- ------------------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc.(1)(2) 44,500 2,372,406
- ------------------------------------------------------------------------------------------------------------------
Western Atlas, Inc.(1) 36,000 3,168,000
------------
13,367,131
- ------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED--4.0%
Atlantic Richfield Co. 57,000 4,869,937
- ------------------------------------------------------------------------------------------------------------------
Elan Energy, Inc.(2) 385,000 2,839,987
- ------------------------------------------------------------------------------------------------------------------
Enron Corp. 55,000 2,117,500
- ------------------------------------------------------------------------------------------------------------------
Enterprise Oil plc 130,000 1,417,515
- ------------------------------------------------------------------------------------------------------------------
Kerr-McGee Corp. 22,000 1,513,875
- ------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 75,000 1,945,312
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL-INTEGRATED (CONTINUED)
Royal Dutch Petroleum Co., NY Shares 41,600 $ 2,308,800
- ------------------------------------------------------------------------------------------------------------------
Talisman Energy, Inc.(2) 60,000 2,065,445
- ------------------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR(1) 63,480 3,638,197
- ------------------------------------------------------------------------------------------------------------------
Unocal Corp.(1) 150,000 6,487,500
- ------------------------------------------------------------------------------------------------------------------
YPF SA, Cl. D, ADR 99,000 3,650,625
------------
32,854,693
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL--8.7%
- ------------------------------------------------------------------------------------------------------------------
BANKS--4.5%
Akbank T.A.S. 8,080,304 625,985
- ------------------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 157,711 1,703,596
- ------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New)(1) 140,000 16,520,000
- ------------------------------------------------------------------------------------------------------------------
NationsBank Corp. 200,000 12,375,000
- ------------------------------------------------------------------------------------------------------------------
Societe Generale 30,100 4,358,558
- ------------------------------------------------------------------------------------------------------------------
Wells Fargo & Co. 5,700 1,567,500
------------
37,150,639
- ------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--2.0%
American Express Co.(1) 50,100 4,101,938
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 80,000 2,820,000
- ------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.(1) 70,000 5,193,125
- ------------------------------------------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 77,900 4,211,469
------------
16,326,532
- ------------------------------------------------------------------------------------------------------------------
INSURANCE--2.2%
ACE Ltd.(1) 51,500 4,841,000
- ------------------------------------------------------------------------------------------------------------------
American International Group, Inc.(1) 3,000 309,563
- ------------------------------------------------------------------------------------------------------------------
Cigna Corp. 7,000 1,303,750
- ------------------------------------------------------------------------------------------------------------------
Conseco, Inc. 25,000 1,220,313
- ------------------------------------------------------------------------------------------------------------------
Equitable Cos., Inc.(1) 77,000 3,161,813
- ------------------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 67,000 2,995,467
- ------------------------------------------------------------------------------------------------------------------
UNUM Corp.(1) 90,000 4,106,250
------------
17,938,156
- ------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--6.0%
- ------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.4%
General Electric Co.(1) 59,000 4,015,688
- ------------------------------------------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A(1) 80,000 2,060,000
- ------------------------------------------------------------------------------------------------------------------
Rockwell International Corp. 44,000 2,769,250
- ------------------------------------------------------------------------------------------------------------------
Westinghouse Electric Corp. 116,500 3,152,781
------------
11,997,719
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL MATERIALS--1.1%
Equitable Bag, Inc.(2)(3) 1,861 $ 9,305
- ------------------------------------------------------------------------------------------------------------------
Owens Corning(1) 131,000 4,781,500
- ------------------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.(2) 139,000 4,361,125
------------
9,151,930
- ------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.2%
Calgon Carbon Corp. 138,500 1,809,156
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURING--1.6%
AGCO Corp. 115,200 3,650,400
- ------------------------------------------------------------------------------------------------------------------
Komatsu Ltd. 260,000 1,453,657
- ------------------------------------------------------------------------------------------------------------------
Tenneco, Inc. 121,000 5,792,875
- ------------------------------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 100,000 2,312,500
------------
13,209,432
- ------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.7%
Airborne Freight Corp.(1) 18,000 1,090,125
- ------------------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp.(1) 73,900 7,140,588
- ------------------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA 155,100 4,129,538
- ------------------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 67,050 1,944,450
------------
14,304,701
- ------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--15.6%
- ------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.4%
Lockheed Martin Corp. 32,000 3,412,000
- ------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.7%
Cabletron Systems, Inc.(1)(2) 95,000 3,040,000
- ------------------------------------------------------------------------------------------------------------------
Canon, Inc. 81,000 2,368,342
- ------------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 71,000 4,938,938
- ------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 80,000 8,475,000
- ------------------------------------------------------------------------------------------------------------------
Moore Corp. Ltd. 70,000 1,330,000
- ------------------------------------------------------------------------------------------------------------------
Xerox Corp.(1) 123,000 10,355,063
------------
30,507,343
- ------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--4.0%
America Online, Inc.(1)(2) 60,000 4,526,250
- ------------------------------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR(2) 83,500 845,438
- ------------------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.(1) 120,450 8,649,816
- ------------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(1)(2) 87,000 3,360,375
- ------------------------------------------------------------------------------------------------------------------
First Data Corp. 38,400 1,442,400
- ------------------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A(2) 160,000 960,000
- ------------------------------------------------------------------------------------------------------------------
Novell, Inc.(2) 394,000 3,533,688
- ------------------------------------------------------------------------------------------------------------------
Rational Software Corp.(1)(2) 130,500 2,088,000
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Sabre Group Holdings, Inc.(2) 71,000 $ 2,542,688
- ------------------------------------------------------------------------------------------------------------------
Symantec Corp.(1)(2) 142,842 3,249,656
- ------------------------------------------------------------------------------------------------------------------
Transition Systems, Inc.(2) 97,300 1,994,650
------------
33,192,961
- ------------------------------------------------------------------------------------------------------------------
ELECTRONICS--5.6%
CAE, Inc. 164,800 1,382,517
- ------------------------------------------------------------------------------------------------------------------
General Motors Corp., Cl. H 40,000 2,645,000
- ------------------------------------------------------------------------------------------------------------------
Input/Output, Inc.(1)(2) 233,000 6,902,625
- ------------------------------------------------------------------------------------------------------------------
Intel Corp.(1) 280,000 25,847,500
- ------------------------------------------------------------------------------------------------------------------
Keyence Corp. 14,800 2,071,730
- ------------------------------------------------------------------------------------------------------------------
LSI Logic Corp.(1)(2) 84,000 2,698,500
- ------------------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR(1) 21,000 1,970,063
- ------------------------------------------------------------------------------------------------------------------
Novellus Systems, Inc.(1)(2) 6,300 793,800
- ------------------------------------------------------------------------------------------------------------------
SGS-Thomson Microelectronics NV(1) 27,000 2,534,625
------------
46,846,360
- ------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY--1.9%
Airtouch Communications, Inc.(1)(2) 127,300 4,511,194
- ------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1)(2) 66,870 4,885,689
- ------------------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd.(1) 114,400 3,703,700
- ------------------------------------------------------------------------------------------------------------------
Newbridge Networks Corp.(1)(2) 49,000 2,933,875
------------
16,034,458
- ------------------------------------------------------------------------------------------------------------------
UTILITIES--1.9%
- ------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.3%
Allegheny Power System, Inc. 27,000 816,750
- ------------------------------------------------------------------------------------------------------------------
Houston Industries, Inc. 90,000 1,957,500
- ------------------------------------------------------------------------------------------------------------------
PacifiCorp 106,400 2,380,700
- ------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 82,000 2,111,500
- ------------------------------------------------------------------------------------------------------------------
Southern Co. 100,000 2,256,250
- ------------------------------------------------------------------------------------------------------------------
Union Electric Co. 26,500 1,018,594
------------
10,541,294
- ------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--0.6%
SBC Communications, Inc. 29,000 1,779,875
- ------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA 4,990,000 571,610
- ------------------------------------------------------------------------------------------------------------------
U S West Communications Group 74,000 2,849,000
------------
5,200,485
------------
Total Common Stocks (Cost $296,556,534) 498,097,274
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
==================================================================================================================
<S> <C> <C>
PREFERRED STOCKS--0.1%
- ------------------------------------------------------------------------------------------------------------------
California Federal Bank, 11.50% Non-Cum., Non-Vtg. 2,000 $ 228,125
- ------------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 12,000 291,000
- ------------------------------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc.,
14.25% Cum. Sr. Exchangeable Preferred Stock, Non-Vtg.(4) 400 419,000
------------
Total Preferred Stocks (Cost $929,000) 938,125
<CAPTION>
UNITS
==================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99(3) 2,000 20
- ------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(3) 300 16,500
- ------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(3) 550 22,275
- ------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 300 --
- ------------------------------------------------------------------------------------------------------------------
Venezuela Government Wts., Exp. 4/20 2,500 --
Total Rights, Warrants and Certificates (Cost $0) 38,795
<CAPTION>
FACE
AMOUNT(5)
==================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--4.3%
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 $ 1,000,000 1,086,883
Interest-Only Stripped Mtg.-Backed Security, Series 177,
Cl. B, 10.58%, 7/1/26(6) 1,518,103 495,281
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
7.50%, 10/1/27(7) 5,000,000 5,082,800
11.50%, 7/1/11 131,248 146,078
11.75%, 1/1/16 121,572 140,417
- ------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%, 3/20/26 1,214,769 1,247,423
7%, 4/15/26 4,248,351 4,252,175
7.50%, 5/15/27 19,638,584 19,990,901
9%, 11/15/08 221,439 238,436
9%, 2/15/09 192,254 207,237
9%, 5/15/09 46,711 50,352
- ------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. F, 7.51%, 2/15/28(3)(8) 97,137 72,458
- ------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(4) 400,000 381,250
- ------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 262,477 264,036
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980 255,253
Series 1994-C2, Cl. E, 8%, 4/25/25 783,747 793,422
Series 1994-C2, Cl. G, 8%, 4/25/25 190,036 190,586
Series 1991-M6, Cl. B4, 7.174%, 6/25/21(8) 4,884 4,853
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS(CONTINUED)
Salomon Brothers Mortgage Securities VII:
Series 1996-CL, Cl. F, 9.186%, 1/20/28(8) $ 250,000 $ 212,812
Series 1996-B, Cl. 1, 7.136%, 4/25/26 295,645 203,626
- ------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.804%, 6/25/26(3)(8) 27,688 28,475
------------
Total Mortgage-Backed Obligations (Cost $34,628,169) 35,344,754
==================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--8.6%
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6%, 2/15/26 500,000 469,844
6.50%, 11/15/26 360,000 362,363
STRIPS, Zero Coupon, 7.10%, 11/15/18(9) 17,000,000 4,313,034
STRIPS, Zero Coupon, 7.64%, 8/15/19(9) 18,700,000 4,509,318
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6.25%, 2/15/03 6,330,000 6,393,306
6.25%, 2/15/07 5,800,000 5,832,630
7.25%, 2/15/98 14,700,000 14,796,476
7.50%, 5/15/02 327,000 346,722
8.25%, 7/15/98 16,000,000 16,325,007
8.50%, 2/15/00 5,500,000 5,817,971
8.875%, 11/15/98 950,000 982,360
9.25%, 8/15/98 9,450,000 9,736,457
10.75%, 5/15/03 1,190,000 1,452,916
------------
Total U.S. Government Obligations (Cost $70,080,074) 71,338,404
==================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--10.7%
- ------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
Series I, 5.625%, 4/1/01(8) 473,645 460,126
- ------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Floating Rate Bonds,
Series L, 6.688%, 3/31/05(8) 10,437,200 9,962,307
- ------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Nts., 11.75%, 2/12/07(4) (ARP) 650,000 735,612
- ------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Par Bonds, 5.50%, 3/31/23(11) 13,000,000 9,847,500
- ------------------------------------------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior SNC International
Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06 110,000 126,362
- ------------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 23.149%, 12/31/97(9) (MXP) 5,386,170 661,890
- ------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Eligible Interest Bonds, 6.875%, 4/15/06(8) 1,039,500 977,780
- ------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Par Bonds, 5.25%, 4/15/24(11) 6,500,000 4,801,875
- ------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Interest Arrears Bonds, 6.688%, 7/28/11(8) 170,000 137,275
- ------------------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
11.75%, 2/1/03 (CAD) 290,000 272,150
6.50%, 6/1/04 (CAD) 13,320,000 10,186,755
7%, 12/1/06 (CAD) 60,000 47,352
8.75%, 12/1/05 (CAD) 495,000 430,072
9.75%, 12/1/01 (CAD) 6,260,000 5,303,706
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
Canada (Government of) Bonds:
9.75%, 6/1/01 (CAD) 3,270,000 $ 2,732,936
Series A-33, 11.50%, 9/1/00 (CAD) 585,000 498,113
- ------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 3/15/06 (DKK) 21,900,000 3,723,939
- ------------------------------------------------------------------------------------------------------------------
Eskom Depositary Receipts, Series E168, 11%, 6/1/08 (ZAR) 6,430,000 1,141,418
- ------------------------------------------------------------------------------------------------------------------
Eskom Sec. Bonds, 11%, 6/1/08 (ZAR) 3,000,000 532,544
- ------------------------------------------------------------------------------------------------------------------
Finland (Republic of) Bonds, 9.50%, 3/15/04 (FIM) 4,000,000 921,567
- ------------------------------------------------------------------------------------------------------------------
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24 (DEM) 2,665,000 1,527,309
- ------------------------------------------------------------------------------------------------------------------
Hellenic Republic Treasury Bills, Zero Coupon,
10.65%, 2/5/98(9) (GRD) 260,000,000 901,434
- ------------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
10.50%, 4/1/00 (ITL) 200,000,000 129,209
10.50%, 7/15/00 (ITL) 1,270,000,000 830,816
9%, 10/1/03 (ITL) 195,000,000 130,922
9.50%, 2/1/01 (ITL) 405,000,000 263,132
9.50%, 5/1/01 (ITL) 195,000,000 127,566
- ------------------------------------------------------------------------------------------------------------------
New Zealand (Government of) Bonds:
10%, 3/15/02 (NZD) 1,085,000 781,219
8%, 11/15/06 (NZD) 345,000 241,321
8%, 2/15/01 (NZD) 7,460,000 4,949,809
- ------------------------------------------------------------------------------------------------------------------
Norway (Government of) Bonds, 9.50%, 10/31/02 (NOK) 880,000 147,494
- ------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Bonds, 8.60%, 6/15/27 1,500,000 1,505,026
- ------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Par Bonds, Series B, 6.25%, 12/1/17(3)(11) 1,675,000 1,453,063
- ------------------------------------------------------------------------------------------------------------------
Poland (Republic of) Bonds:
12%, 6/12/01 (PLZ) 18,000,000 4,093,267
16%, 2/12/99 (PLZ) 940,000 252,044
16%, 6/12/98 (PLZ) 300,000 82,787
- ------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
10.50%, 5/15/03 (AUD) 2,590,000 2,287,690
8%, 8/14/01 (AUD) 615,000 482,919
- ------------------------------------------------------------------------------------------------------------------
South Africa (Republic of) Bonds, 12.50%, 12/21/06 (ZAR) 800,000 157,898
- ------------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
10.25%, 11/30/98 (ESP) 25,800,000 183,131
10.30%, 6/15/02 (ESP) 39,150,000 316,399
10.50%, 10/30/03 (ESP) 22,100,000 185,977
12.25%, 3/25/00 (ESP) 31,600,000 247,205
- ------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA Medium-Term Nts., 11.437%,
12/9/99(3)(8) 10,000 10,600
- ------------------------------------------------------------------------------------------------------------------
Telkom SA Ltd. Bonds, Series TK05, 12%, 3/31/98 (ZAR) 699,000 147,784
- ------------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 (AUD) 1,500,000 1,213,831
- ------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Bonds:
10%, 9/8/03 (GBP) 325,000 613,436
7%, 6/7/02 (GBP) 2,415,000 3,981,658
7.25%, 12/7/07 (GBP) 2,400,000 4,105,948
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
United Kingdom Treasury Nts.:
12.50%, 11/21/05 (GBP) 62,000 $ 129,888
13%, 7/14/00 (GBP) 1,050,000 1,955,898
9.75%, 8/27/02 (GBP) 55,000 100,508
- ------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds:
10.375%, 1/29/03 (DEM) 150,000 97,456
16.50%, 9/1/08(3) (GBP) 35,000 87,636
- ------------------------------------------------------------------------------------------------------------------
United Mexican States, Collateralized Fixed Rate Par Bonds,
Series B, 6.25%, 12/31/19 250,000 208,125
- ------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Disc. Bonds, Series DL, 6.75%, 12/18/07(8) 500,000 478,438
- ------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) New Money Bonds, Series A, 6.875%,
12/18/05(8) 250,000 240,625
- ------------------------------------------------------------------------------------------------------------------
Wijaya Karya Negotiable Promissory Nts., Zero Coupon,
15.09%, 12/9/97(9) (IDR) 2,000,000,000 586,589
------------
Total Foreign Government Obligations (Cost $82,585,430) 88,737,336
==================================================================================================================
LOAN PARTICIPATIONS--0.1%
- ------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989-1990 Integrated Loan
Facility Bonds, 6.937%, 7/1/01(3)(8) 232,669 225,108
- ------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.812%, 1/1/09(8) 665,000 624,061
------------
Total Loan Participations (Cost $813,198) 849,169
==================================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--7.9%
- ------------------------------------------------------------------------------------------------------------------
Adelphia Communications Corp., 10.50% Sr. Nts., 7/15/04(4) 500,000 533,125
- ------------------------------------------------------------------------------------------------------------------
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 1,150,000 1,220,437
- ------------------------------------------------------------------------------------------------------------------
Alliance & Leicester Building Society,
8.75% Unsec. Sub. Nts., 12/7/06 (GBP) 60,000 106,011
- ------------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10.25% Sr. Sub. Nts., 12/1/06 425,000 466,438
- ------------------------------------------------------------------------------------------------------------------
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 510,000 548,250
- ------------------------------------------------------------------------------------------------------------------
American International Group, Inc.,
11.70% Unsec. Unsub. Bonds, 12/4/01 (ITL) 95,000,000 67,280
- ------------------------------------------------------------------------------------------------------------------
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 360,000 383,400
- ------------------------------------------------------------------------------------------------------------------
Amresco, Inc., 10% Sr. Sub. Nts., Series 97-A, 3/15/04 200,000 209,500
- ------------------------------------------------------------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 500,000 511,875
- ------------------------------------------------------------------------------------------------------------------
Aracruz Celulose SA, 10.375% Debs., 1/31/02 320,000 336,800
- ------------------------------------------------------------------------------------------------------------------
Asia Pulp & Paper International Finance Co.,
Zero Coupon Asian Currency Nts., 14.91%, 1/23/98(9) (IDR) 130,000,000 36,913
- ------------------------------------------------------------------------------------------------------------------
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 50,000 50,254
- ------------------------------------------------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 300,000 324,000
- ------------------------------------------------------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07(4) 1,000,000 1,012,500
- ------------------------------------------------------------------------------------------------------------------
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs.,
Series B, 3/1/05(12) 250,000 211,250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES (CONTINUED)
Bell Cablemedia plc, 0%/11.95% Sr. Disc. Nts., 7/15/04(3)(12) $ 500,000 $ 467,500
- ------------------------------------------------------------------------------------------------------------------
Blue Bell Funding, Inc., 11.85% Sec. Extendible
Adjustable Rate Nts., 5/1/99 396,000 407,880
- ------------------------------------------------------------------------------------------------------------------
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 50,000 51,875
- ------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
10.50% Sr. Sub. Debs., 5/15/16 250,000 285,000
9.875% Sr. Sub. Debs., 2/15/13 250,000 271,250
- ------------------------------------------------------------------------------------------------------------------
CalEnergy, Inc., 9.50% Sr. Nts., 9/15/06 30,000 32,288
- ------------------------------------------------------------------------------------------------------------------
California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 450,000 487,125
- ------------------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(12) 200,000 181,000
- ------------------------------------------------------------------------------------------------------------------
Calpine Corp.:
10.50% Sr. Nts., 5/15/06(3) 225,000 246,938
8.75% Sr. Nts., 7/15/07(4) 650,000 664,625
9.25% Sr. Nts., 2/1/04 655,000 676,288
- ------------------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(4) 500,000 525,000
- ------------------------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 400,000 412,000
- ------------------------------------------------------------------------------------------------------------------
Casino America, Inc., 12.50% Sr. Nts., 8/1/03 250,000 268,750
- ------------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(3)(12) 350,000 337,750
- ------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.23%, 8/15/00(9) 500,000 387,500
- ------------------------------------------------------------------------------------------------------------------
Cityscape Financial Corp., 12.75% Sr. Nts., 6/1/04(4) 230,000 201,825
- ------------------------------------------------------------------------------------------------------------------
CMI Industries, Inc., 9.50% Sr. Sub. Nts., 10/1/03(3) 40,000 39,400
- ------------------------------------------------------------------------------------------------------------------
Coleman Escrow Corp., Zero Coupon
Sr. First Priority Disc. Nts., 11.13%, 5/15/01(4)(9) 700,000 479,500
- ------------------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 200,000 229,750
- ------------------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(12) 850,000 671,500
- ------------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc.,
12% Sr. Sub. Nts., Series B, 8/1/05 1,300,000 1,446,250
- ------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred
Coupon Bonds, 11/15/03(12) 300,000 234,000
- ------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 8.125% Sr. Nts., 2/15/03 1,000,000 1,056,786
- ------------------------------------------------------------------------------------------------------------------
Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 500,000 540,000
- ------------------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc,
0%/11.75% Sr. Disc. Nts., 12/15/05(12) 300,000 226,500
- ------------------------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 100,000 101,250
- ------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(12) 50,000 45,312
- ------------------------------------------------------------------------------------------------------------------
EchoStar Satellite Broadcasting Corp.,
0%/13.125% Sr. Sec. Disc. Nts., 3/15/04(12) 500,000 420,000
- ------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 250,000 277,500
- ------------------------------------------------------------------------------------------------------------------
Empresas ICA Sociedad Controladora SA de CV, 11.875% Nts., 5/30/01 30,000 33,525
- ------------------------------------------------------------------------------------------------------------------
First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 700,000 775,250
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES (CONTINUED)
First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16(3) $ 625,000 $ 665,625
- ------------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(4) 1,150,000 1,207,500
- ------------------------------------------------------------------------------------------------------------------
Fletcher Challenge Ltd.:
10% Cv. Unsec. Sub. Nts., 4/30/05 (NZD) 35,000 24,668
10.75% Cv. Sub. Nts., 12/15/97 (NZD) 35,000 22,493
14.50% Cv. Sub. Nts., 9/30/00 (NZD) 35,000 26,048
- ------------------------------------------------------------------------------------------------------------------
Global Marine, Inc., 12.75% Sr. Sec. Nts., 12/15/99(3) 400,000 412,000
- ------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 500,000 532,500
- ------------------------------------------------------------------------------------------------------------------
Grupo Posadas SA de CV, 10.375% Bonds, 2/13/02(3) 25,000 26,250
- ------------------------------------------------------------------------------------------------------------------
Harris Chemical North America, Inc., 10.75% Gtd. Sr. Sub. Nts., 10/15/03 100,000 103,750
- ------------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 200,000 224,750
- ------------------------------------------------------------------------------------------------------------------
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts.,
Series B, 11/1/03(8) 200,000 211,500
- ------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.875% Sr. Nts., 7/15/07(4) 1,250,000 1,289,062
- ------------------------------------------------------------------------------------------------------------------
Hovnanian K. Enterprises, Inc., 11.25% Gtd. Sub. Nts., 4/15/02 725,000 766,687
- ------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(12) 470,000 352,500
0%/13.50% Sr. Disc. Nts., 9/15/05(12) 250,000 202,500
- ------------------------------------------------------------------------------------------------------------------
Imax Corp., 10% Sr. Nts., 3/1/01 320,000 338,800
- ------------------------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., 6/1/05(4) 500,000 548,750
- ------------------------------------------------------------------------------------------------------------------
ISP Holdings, Inc., 9% Sr. Nts., Series B, 10/15/03 85,000 89,250
- ------------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 1,000,000 1,047,500
- ------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 500,000 541,875
- ------------------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 1,000,000 1,055,000
- ------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 9.625% Sr. Sub. Nts., 12/1/06 100,000 106,000
- ------------------------------------------------------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(4) 500,000 506,250
- ------------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 900,000 990,000
- ------------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 1,070,000 1,183,688
- ------------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc., 0%/10.50% Sr. Disc. Nts., 3/1/07(12) 500,000 357,500
- ------------------------------------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12.75% Bonds, 12/30/99 38,000 38,570
- ------------------------------------------------------------------------------------------------------------------
Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06 1,000,000 1,156,250
- ------------------------------------------------------------------------------------------------------------------
Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 400,000 450,000
- ------------------------------------------------------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts., 6/1/06(12) 1,000,000 780,000
- ------------------------------------------------------------------------------------------------------------------
Navigator Gas Transport plc,
10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 500,000 537,500
- ------------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.50% Sr. Nts., 2/15/05 1,000,000 1,079,222
- ------------------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 113,000 125,147
- ------------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03(3) 500,000 563,750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES (CONTINUED)
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 $ 300,000 $ 312,000
11.625% Sr. Nts., Series A, 8/15/06 525,000 546,000
- ------------------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 155,000 161,975
- ------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Sub. Nts., 6/15/07(4) 900,000 942,750
- ------------------------------------------------------------------------------------------------------------------
Panamsat International Systems LP, 12.75% Debs., 4/15/05(10) 271,000 327,910
- ------------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(3)(12) 750,000 734,527
- ------------------------------------------------------------------------------------------------------------------
Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(3) 1,000,000 975,000
- ------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07(4) 1,000,000 1,015,000
- ------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(12) 1,000,000 1,017,500
0%/14% Sr. Sub. Disc. Nts., 11/15/01(12) 500,000 560,000
- ------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 500,000 530,271
- ------------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04 1,375,000 1,512,500
- ------------------------------------------------------------------------------------------------------------------
Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(4) 1,600,000 1,620,000
- ------------------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 9.063% First Priority Sr. Sec. Nts., 7/15/00(8) 600,000 594,000
- ------------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.875% Second Priority Sr. Nts., 5/1/06 1,725,000 1,875,937
- ------------------------------------------------------------------------------------------------------------------
Revlon Worldwide Corp.,
Zero Coupon Sr. Sec. Disc. Nts., 10.09%, 3/15/01(9) 1,000,000 727,500
- ------------------------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 9.50% Gtd. Sr. Sub. Nts., 4/15/07 250,000 265,625
- ------------------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.625% Sr. Nts., 8/1/07(4) 550,000 577,500
- ------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 1,300,000 1,430,000
- ------------------------------------------------------------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 575,000 661,250
- ------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 300,000 323,250
- ------------------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Sec. Nts., 6/30/05(3) 500,000 526,250
- ------------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 1,000,000 1,137,500
- ------------------------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina Finance Corp.,
13.50% First Mtg. Nts., Series B, 3/15/03 400,000 462,000
- ------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 9% Sr. Sub. Nts., 7/15/07(4) 450,000 448,875
- ------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06(12) 295,000 224,938
- ------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 9% Sr. Sub. Nts., 7/1/04(4) 500,000 515,625
- ------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 10.125% Sr. Sub. Nts., 3/15/06 500,000 508,750
- ------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 11.75% Sr. Unsec. Sub. Nts., 8/15/06 325,000 359,937
- ------------------------------------------------------------------------------------------------------------------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 396,551 407,074
9.50% Sr. Sec. Nts., 12/28/08(4) 79,310 81,415
- ------------------------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(4) 600,000 621,000
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES (CONTINUED)
Synthetic Industries, Inc., 9.25% Sr. Sub. Nts., 2/15/07 $ 50,000 $ 51,750
- ------------------------------------------------------------------------------------------------------------------
TCI Satellite Entertainment, Inc., 10.875% Sr. Sub. Nts., 2/15/07(4) 295,000 311,225
- ------------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc., 0%/11.125%
Sr. Disc. Nts., 7/1/07(12) 500,000 392,500
- ------------------------------------------------------------------------------------------------------------------
Telewest Communications plc, 0%/11% Sr. Disc. Debs., 10/1/07(12) 1,000,000 755,000
- ------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,400,000 1,554,766
- ------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375%
Sr. Disc. Nts., Series B, 12/15/03(12) 1,000,000 872,500
- ------------------------------------------------------------------------------------------------------------------
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 100,000 97,375
- ------------------------------------------------------------------------------------------------------------------
TV Azteca SA de CV, 10.50% Gtd. Sr. Nts., Series B, 2/15/07 200,000 212,750
- ------------------------------------------------------------------------------------------------------------------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03(3) 500,000 518,750
- ------------------------------------------------------------------------------------------------------------------
Universal Outdoor, Inc., 9.75% Sr. Sub. Nts., Series B, 10/15/06 500,000 535,000
- ------------------------------------------------------------------------------------------------------------------
Western Financial Bank, 8.875% Sub. Bonds, 8/1/07 450,000 448,305
- ------------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 8.75% Sr. Sub. Debs., 6/15/07 900,000 882,000
------------
Total Non-Convertible Corporate Bonds and Notes (Cost $61,750,443) 64,697,815
==================================================================================================================
CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- ------------------------------------------------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts., 2/1/99(3) 50,000 51,750
- ------------------------------------------------------------------------------------------------------------------
Banco Nacional de Mexico SA,
11% Sub. Exchangeable Capital Debs., 7/15/03 100,000 107,750
- ------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.,
6.75% Cv. Gtd. Sr. Sub. Nts., 9/15/03 110,000 128,150
------------
Total Convertible Corporate Bonds and Notes (Cost $259,847) 287,650
==================================================================================================================
STRUCTURED INSTRUMENTS--0.1%
- ------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale (New York Branch)
Canada Banker's Acceptance Indexed Yield Nts., 8.405%, 5/22/98 250,000 248,325
- ------------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce (New York Branch)
Three Month British Pound LIBOR Forward Linked Nts., 5.79%, 5/22/98 160,000 158,592
- ------------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, U.S. Dollar/Japanese
Yen Basis Arbitrage Nts., 10.379%, 4/14/98(3)(8) 75,000 75,000
- ------------------------------------------------------------------------------------------------------------------
ING (U.S.) Financial Holdings Corp. Zero Coupon Czech Koruna
Linked Promissory Nts., 10.98%, 11/17/97(3)(9) CZK 4,462,296 133,577
- ------------------------------------------------------------------------------------------------------------------
ING (U.S.) Financial Holdings Corp. Zero Coupon
Czech Koruna/U.S. Dollar Linked Nts., 10.881%, 3/4/98(9) 75,000 61,868
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. Greek Drachma/Swiss Franc
Linked Nts., Zero Coupon, 14.71%, 1/15/98(9) 50,000 50,900
- ------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, Japanese
Government Bond 193 Currency Protected Bank Nts., 8.14%, 4/29/98 75,000 57,075
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS (CONTINUED)
Salomon, Inc. Russian S-Account Credit Linked Nts.,
Zero Coupon, 13.71%, 4/3/98(9) $ 150,000 $ 141,735
- ------------------------------------------------------------------------------------------------------------------
SPARC EM Ltd., Russian GKO Linked/U.S. Dollar Nts.,
Zero Coupon, 12.24%, 10/15/97(9) 40,000 39,858
------------
Total Structured Instruments (Cost $1,021,041) 966,930
==================================================================================================================
REPURCHASE AGREEMENTS--8.9%
- ------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 6.125%, dated 9/30/97, to be
repurchased at $74,112,607 on 10/1/97, collateralized by U.S. Treasury Nts.,
5.875%-7.25%, 5/31/99-8/15/04,
with a value of $75,658,209 (Cost $74,100,000) 74,100,000 74,100,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $622,723,736) 100.7% 835,396,252
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.7) (5,470,877)
------------ ------------
NET ASSETS 100.0% $829,925,375
============ ============
</TABLE>
1. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
SHARES EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACE Ltd. 10,000 2/98 $ 90 $ 42,199 $ 83,750
- ---------------------------------------------------------------------------------------------------------------------------
Abbott Laboratories 10,000 11/97 65 25,949 25,000
- ---------------------------------------------------------------------------------------------------------------------------
Airborne Freight Corp. 18,000 11/97 40 43,334 378,000
- ---------------------------------------------------------------------------------------------------------------------------
Airtouch Communications, Inc. 24,000 1/98 40 35,279 25,500
- ---------------------------------------------------------------------------------------------------------------------------
Alaska Air Group, Inc. 24,000 1/98 35 31,209 54,000
- ---------------------------------------------------------------------------------------------------------------------------
America Online, Inc. 12,600 10/97 60 33,090 193,725
- ---------------------------------------------------------------------------------------------------------------------------
American Express Co. 13,000 10/97 75 28,859 95,875
- ---------------------------------------------------------------------------------------------------------------------------
American International
Group, Inc. 2,000 11/97 87 16,939 51,000
- ---------------------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 18,500 12/97 70 75,755 277,500
- ---------------------------------------------------------------------------------------------------------------------------
Burlington Northern
Santa Fe Corp. 16,200 10/97 90 23,813 113,400
- ---------------------------------------------------------------------------------------------------------------------------
Cabletron Systems, Inc. 12,800 10/97 40 52,414 800
- ---------------------------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 10,500 10/97 40 21,997 65,625
- ---------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 26,000 3/98 125 181,214 182,000
- ---------------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. 13,200 10/97 75 39,203 23,100
- ---------------------------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 41,000 1/98 20 35,054 240,875
- ---------------------------------------------------------------------------------------------------------------------------
Computer Associates
International, Inc. 24,000 1/98 80 89,277 84,000
- ---------------------------------------------------------------------------------------------------------------------------
Costco Cos., Inc. 28,000 10/97 35 35,284 77,000
- ---------------------------------------------------------------------------------------------------------------------------
Costco Cos., Inc. 20,000 4/98 40 86,897 95,000
- ---------------------------------------------------------------------------------------------------------------------------
Disney (Walt) Co. 2,000 1/98 90 2,690 3,000
- ---------------------------------------------------------------------------------------------------------------------------
Disney (Walt) Co. 4,000 10/97 85 12,380 2,000
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
- -------------------------------------------------------------------------------
1. Outstanding written call options (continued)
<TABLE>
<CAPTION>
SHARES EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dow Jones & Co., Inc. 26,800 12/97 $ 45 $ 55,307 $ 97,150
- ---------------------------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd. 22,000 2/98 35 51,588 49,500
- ---------------------------------------------------------------------------------------------------------------------------
Ecolab, Inc. 7,000 10/97 45 12,040 26,250
- ---------------------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 28,400 12/97 35 105,644 166,850
- ---------------------------------------------------------------------------------------------------------------------------
Equitable Cos., Inc. 15,000 1/98 35 29,549 106,875
- ---------------------------------------------------------------------------------------------------------------------------
General Electric Co. 17,600 12/97 60 44,834 184,800
- ---------------------------------------------------------------------------------------------------------------------------
General Electric Co. 17,600 3/98 80 47,870 35,200
- ---------------------------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc. 18,000 10/97 25 21,959 74,250
- ---------------------------------------------------------------------------------------------------------------------------
Genzyme Corp. (General Division) 20,000 4/98 35 61,898 43,750
- ---------------------------------------------------------------------------------------------------------------------------
Global Marine, Inc. 15,600 1/98 25 38,531 138,450
- ---------------------------------------------------------------------------------------------------------------------------
Global Marine, Inc. 15,600 4/98 35 58,030 66,300
- ---------------------------------------------------------------------------------------------------------------------------
Gymboree Corp. 23,000 10/97 30 26,622 1,438
- ---------------------------------------------------------------------------------------------------------------------------
Input/Output, Inc. 46,000 2/98 30 90,617 132,250
- ---------------------------------------------------------------------------------------------------------------------------
Intel Corp. 33,000 1/98 98 104,689 226,875
- ---------------------------------------------------------------------------------------------------------------------------
Intel Corp. 39,000 10/97 85 148,098 341,250
- ---------------------------------------------------------------------------------------------------------------------------
International Game Technology 40,000 4/98 25 63,798 95,000
- ---------------------------------------------------------------------------------------------------------------------------
LSI Logic Corp. 15,400 10/97 45 88,085 963
- ---------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 5,200 1/98 60 14,793 86,450
- ---------------------------------------------------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A 16,000 4/98 30 17,519 28,000
- ---------------------------------------------------------------------------------------------------------------------------
Newbridge Networks Corp. 12,800 12/97 45 55,614 201,600
- ---------------------------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares,
Sponsored ADR 12,000 1/98 85 86,637 165,000
- ---------------------------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares,
Sponsored ADR 9,000 10/97 70 33,479 213,750
- ---------------------------------------------------------------------------------------------------------------------------
Novellus Systems, Inc. 2,800 12/97 85 35,615 119,000
- ---------------------------------------------------------------------------------------------------------------------------
Novellus Systems, Inc. 2,500 3/98 115 56,798 59,375
- ---------------------------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 16,200 11/97 25 28,876 50,625
- ---------------------------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 16,200 2/98 30 29,068 25,312
- ---------------------------------------------------------------------------------------------------------------------------
Owens Corning 18,300 12/97 45 52,062 4,575
- ---------------------------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 25,000 12/97 55 25,812 3,125
- ---------------------------------------------------------------------------------------------------------------------------
Rational Software Corp. 26,000 10/97 25 22,229 1,625
- ---------------------------------------------------------------------------------------------------------------------------
SGS-Thomson
Microelectronics NV 5,400 4/98 100 48,436 48,600
- ---------------------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 14,800 10/97 45 19,905 96,200
- ---------------------------------------------------------------------------------------------------------------------------
Symantec Corp. 33,400 1/98 20 103,370 154,475
- ---------------------------------------------------------------------------------------------------------------------------
Symantec Corp. 33,400 10/97 18 40,747 175,350
- ---------------------------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR 13,800 11/97 45 19,663 170,775
- ---------------------------------------------------------------------------------------------------------------------------
UNUM Corp. 11,600 12/97 45 51,850 33,350
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
1. Outstanding written call options (continued)
<TABLE>
<CAPTION>
SHARES EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unocal Corp. 25,000 10/97 $45 $ 46,123 $ 18,750
- ---------------------------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc. 10,000 3/98 50 23,137 77,500
- ---------------------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc. 4,200 1/98 50 22,973 40,950
- ---------------------------------------------------------------------------------------------------------------------------
West Marine, Inc. 20,000 1/98 30 29,399 5,000
- ---------------------------------------------------------------------------------------------------------------------------
Western Atlas, Inc. 7,000 3/98 85 39,164 54,250
- ---------------------------------------------------------------------------------------------------------------------------
Xerox Corp. 27,400 10/97 70 65,961 397,300
---------- ----------
$2,931,225 $6,089,238
========== ==========
</TABLE>
2. Non-income producing security.
3. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $15,686,764 or 1.89% of the Fund's net
assets, at September 30, 1997.
5. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C>
ARP -- Argentine Peso GRD -- Greek Drachma
AUD -- Australian Dollar IDR -- Indonesian Rupiah
CAD -- Canadian Dollar ITL -- Italian Lira
CZK -- Czech Koruna MXP -- Mexican Peso
DEM -- German Mark NOK -- Norwegian Krone
DKK -- Danish Krone NZD -- New Zealand Dollar
ESP -- Spanish Peseta PLZ -- Polish Zloty
FIM -- Finnish Markka ZAR -- South African Rand
GBP -- British Pound Sterling
</TABLE>
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
7. When-issued security to be delivered and settled after September 30, 1997.
8. Represents the current interest rate for a variable rate security.
9. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
10. Interest or dividend is paid in kind.
11. Represents the current interest rate for an increasing rate security.
12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1997
<TABLE>
<S> <C>
==============================================================================================================
ASSETS
Investments, at value (cost $622,723,736)--see accompanying statement $835,396,252
- --------------------------------------------------------------------------------------------------------------
Cash 236,102
- --------------------------------------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns 5,011,963
Investments sold 1,488,529
Shares of beneficial interest sold 720,371
- --------------------------------------------------------------------------------------------------------------
Other 22,015
-------------
Total assets 842,875,232
==============================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 319
- --------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $2,931,225)--
see accompanying statement--Note 6 6,089,238
- --------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 5,226,160
Shares of beneficial interest redeemed 574,386
Distribution and service plan fees 390,449
Trustees' fees--Note 1 268,376
Shareholder reports 132,506
Transfer and shareholder servicing agent fees 74,890
Other 193,533
-------------
Total liabilities 12,949,857
==============================================================================================================
NET ASSETS $829,925,375
=============
==============================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $565,496,117
- --------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,488,298
- --------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 53,451,616
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 209,489,344
-------------
Net assets $829,925,375
=============
</TABLE>
<PAGE>
<TABLE>
==============================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $712,470,073 and 44,059,355 shares of beneficial interest outstanding) $16.17
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $17.16
- --------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $67,916,052 and 4,234,638 shares of beneficial interest outstanding) $16.04
- --------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $49,539,250 and 3,082,083 shares of beneficial interest outstanding) $16.07
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended September 30, 1997
<TABLE>
==============================================================================================================
<S> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $57,272) $ 16,298,110
- --------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $10,725) 3,947,066
-------------
Total income 20,245,176
==============================================================================================================
EXPENSES
Management fees--Note 4 3,267,378
- --------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 721,139
Class B 249,390
Class C 337,442
- --------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 533,884
- --------------------------------------------------------------------------------------------------------------
Shareholder reports 325,700
- --------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 115,622
- --------------------------------------------------------------------------------------------------------------
Legal and auditing fees 94,601
- --------------------------------------------------------------------------------------------------------------
Registration and filing fees 53,970
- --------------------------------------------------------------------------------------------------------------
Insurance expenses 14,719
- --------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 4,152
- --------------------------------------------------------------------------------------------------------------
Other 15,397
-------------
Total expenses 5,733,394
==============================================================================================================
NET INVESTMENT INCOME 14,511,782
==============================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments 53,944,505
Closing of futures contracts 194,802
Expiration of option contracts written--Note 6 1,074,688
Foreign currency transactions (716,935)
-------------
Net realized gain 54,497,060
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 42,324,101
Translation of assets and liabilities denominated in foreign currencies (4,647,165)
-------------
Net change 37,676,936
-------------
Net realized and unrealized gain 92,173,996
==============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $106,685,778
=============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996(1)
========================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 14,511,782 $ 9,695,717
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain 54,497,060 15,544,485
- ------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 37,676,936 4,393,283
-------------- --------------
Net increase in net assets resulting from operations 106,685,778 29,633,485
========================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment
income:
Class A (12,706,372) (8,029,426)
Class B (600,770) (114,496)
Class C (936,710) (478,886)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (14,621,660) --
Class B (435,849) --
Class C (1,359,035) --
========================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS Net increase (decrease) in net assets resulting
from beneficial interest transactions--Note 2:
Class A 382,443,207 (6,428,157)
Class B 56,924,508 4,480,009
Class C 23,090,531 4,355,405
========================================================================================================================
NET ASSETS
Total increase 538,483,628 23,417,934
- ------------------------------------------------------------------------------------------------------------------------
Beginning of period 291,441,747 268,023,813
-------------- --------------
End of period (including undistributed net investment
income of $1,488,298 and $615,057, respectively) $829,925,375 $291,441,747
============== ==============
</TABLE>
1. For the nine months ended September 30, 1996. The Fund changed its fiscal
year end from December 31 to September 30.
See accompanying Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 1996(2) 1995 1994 1993
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.09 $13.07 $11.52 $13.05 $11.63
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .50 .49 .52 .54 .44
Net realized and unrealized
gain (loss) 2.88 .96 2.08 (.75) 1.43
------- ------- ------- ------- -------
Total income (loss) from
investment operations 3.38 1.45 2.60 (.21) 1.87
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.51) (.43) (.49) (.53) (.44)
Distributions from net realized gain (.79) -- (.56) (.79) (.01)
------- ------- ------- ------- -------
Total dividends and distributions
to shareholders (1.30) (.43) (1.05) (1.32) (.45)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.17 $14.09 $13.07 $11.52 $13.05
======= ======= ======= ======= =======
=====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 25.46% 11.22% 22.79% (1.59)% 16.30%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $712,470 $264,359 $251,353 $237,771 $277,914
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $395,436 $256,765 $249,660 $260,767 $272,303
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.30% 4.73%(5) 3.97% 4.10% 3.58%
Expenses 1.16% 1.21%(5) 1.15% 1.09% 1.14%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 51.0% 31.7% 28.5% 31.5% 32.7%
Average brokerage
commission rate(7) $0.0244 $0.0336 $0.0350 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to December 31,
1993.
2. For the nine months ended September 30, 1996. 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. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ----------- ----------------------------------- ---------------------------------------------------------------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, DEC. 31, YEAR ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1992 1997 1996(2) 1995(3) 1997 1996(2) 1995 1994 1993(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$11.22 $14.01 $13.03 $13.28 $14.02 $13.01 $11.49 $13.05 $12.86
- ---------------------------------------------------------------------------------------------------------------------------
.39 .45 .41 .17 .41 .40 .40 .44 (.97)
.44 2.78 .93 .41 2.83 .96 2.07 (.77) 1.29
------- ------- ------- ------- ------- ------- ------- ------- -------
.83 3.23 1.34 .58 3.24 1.36 2.47 (.33) .32
- ---------------------------------------------------------------------------------------------------------------------------
(.42) (.41) (.36) (.27) (.40) (.35) (.39) (.44) (.12)
-- (.79) -- (.56) (.79) -- (.56) (.79) (.01)
------- ------- ------- ------- ------- ------- ------- ------- -------
(.42) (1.20) (.36) (.83) (1.19) (.35) (.95) (1.23) (.13)
- ---------------------------------------------------------------------------------------------------------------------------
$11.63 $16.04 $14.01 $13.03 $16.07 $14.02 $13.01 $11.49 $13.05
======= ======= ======= ======= ======= ======= ======= ======= =======
===========================================================================================================================
7.54% 24.34% 10.37% 4.44% 24.42% 10.55% 21.69% (2.50)% 2.51%
===========================================================================================================================
$266,713 $67,916 $5,996 $1,265 $49,539 $21,087 $15,405 $9,182 $396
- ---------------------------------------------------------------------------------------------------------------------------
$269,096 $25,113 $3,546 $ 520 $33,813 $17,898 $11,827 $5,601 $194
- ---------------------------------------------------------------------------------------------------------------------------
3.41% 2.26% 3.69%(5) 2.62%(5) 2.61% 3.84%(5) 3.08% 3.30% 2.19%(5)
1.17% 1.96% 2.12%(5) 2.27%(5) 1.97% 2.07%(5) 1.99% 2.00% 2.50%(5)
- ---------------------------------------------------------------------------------------------------------------------------
60.3% 51.0% 31.7% 28.5% 51.0% 31.7% 28.5% 31.5% 32.7%
-- $0.0244 $0.0336 $0.0350 $0.0244 $0.0336 $0.0350 -- --
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1997 were $213,351,231 and $231,418,251, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Multiple Strategies Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek high
total investment return (current income and capital appreciation in the value of
its shares). The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to that class and exclusive voting rights with respect to matters
affecting that class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
- -------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading date
if it is within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid is used.
<PAGE>
- -------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the 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.
- -------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- -------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At September 30, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $445,000, which expires in 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 year ended
September 30, 1997, a credit of $29,188 was made for the Fund's projected
benefit obligations, and payments of $8,352 were made to retired trustees,
resulting in an accumulated liability of $262,195 at September 30, 1997.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
because of the recognition of certain foreign currency gains (losses) as
ordinary income (loss) for tax purposes. The character of the distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended September 30, 1997, amounts have been reclassified to reflect an
increase in undistributed net investment income of $605,311, a decrease in
accumulated net realized gain on investments of $301,073, and a decrease in
paid-in capital of $304,238.
- -------------------------------------------------------------------------------
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>
===============================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest for each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996(1)
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 2,219,229 $ 32,694,783 860,353 $ 11,689,114
Dividends reinvested 1,707,937 24,639,919 524,674 7,190,397
Issued in connection with
the acquisition of:
Oppenheimer Fund--Note 8 21,161,450 321,019,207 -- --
Oppenheimer Strategic
Income & Growth Fund--Note 8 3,530,859 53,563,143 -- --
Redeemed (3,316,554) (49,473,845) (1,862,109) (25,307,668)
---------- ------------ ---------- ------------
Net increase (decrease) 25,302,921 $382,443,207 (477,082) $ (6,428,157)
========== ============ ========== ============
- -------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,162,177 $ 17,259,750 366,656 $ 4,968,484
Dividends reinvested 60,758 888,166 6,864 93,829
Issued in connection with
the acquisition of:
Oppenheimer Fund--Note 8 233,975 3,521,330 -- --
Oppenheimer Strategic
Income & Growth Fund--Note 8 2,758,332 41,512,900 -- --
Redeemed (408,734) (6,257,638) (42,546) (582,304)
---------- ------------ ---------- ------------
Net increase 3,806,508 $ 56,924,508 330,974 $ 4,480,009
========== ============ ========== ============
- -------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,211,432 $ 17,627,875 448,796 $ 6,095,106
Dividends reinvested 151,633 2,159,025 33,327 455,037
Issued in connection with
the acquisition of:
Oppenheimer Fund--Note 8 350,467 5,285,049 -- --
Oppenheimer Strategic
Income & Growth Fund--Note 8 246,193 3,712,604 -- --
Redeemed (381,455) (5,694,022) (162,380) (2,194,738)
---------- ------------ ---------- ------------
Net increase 1,578,270 $ 23,090,531 319,743 $ 4,355,405
========== ============ ========== ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to September 30.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS AND OPTIONS WRITTEN
At September 30, 1997, net unrealized appreciation on investments and options
written of $209,514,503 was composed of gross appreciation of $223,024,323, and
gross depreciation of $13,509,820.
===============================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager are in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% on the first
$200 million of average annual net assets, 0.72% on the next $200 million, 0.69%
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.
For the year ended September 30, 1997, commissions (sales charges paid
by investors) on sales of Class A shares totaled $589,802, of which $187,259 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 $585,932 and $164,027, respectively, of which $42,232 and
$2,018, respectively, was paid to an affiliated broker/dealer. During the year
ended September 30, 1997, OFDI received contingent deferred sales charges of
$65,210 and $9,747, 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 shareholder accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly for
providing personal service and maintaining accounts of their customers that hold
Class A shares. During the year ended September 30, 1997, OFDI paid $59,946 to
an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
<PAGE>
===============================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares and Class C
shares, as compensation for sales commissions paid from its own resources at the
time of sale and associated financing costs. OFDI also receives a service fee of
0.25% per year as compensation for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other financial
institutions. Both fees are computed on the average annual net assets of Class B
and Class C shares, determined as of the close of each regular business day.
During the year ended September 30, 1997, OFDI paid $1,286 and $11,217 to an
affiliated broker/dealer as compensation for Class B and Class C personal
service and maintenance expenses and retained $218,968 and $144,768,
respectively, as compensation for Class B and Class C sales commissions and
service fee advances, as well as financing costs. If either Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to OFDI for distributing shares before the Plan was
terminated. At September 30, 1997, OFDI had incurred unreimbursed expenses of
$2,459,920 for Class B and $487,837 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
5. FORWARD CONTRACTS (Continued)
At September 30, 1997, the Fund had outstanding forward currency exchange
contracts as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE AMOUNT (000S) SEPTEMBER 30, 1997 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAPANESE YEN (JPY) 10/1/97 20,199 JPY $167,305 $319
</TABLE>
===============================================================================
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.
<PAGE>
===============================================================================
Written option activity for the year ended September 30, 1997 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
----------------------------------- ---------------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS PREMIUMS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
September 30, 1996 1,728 $ 552,194 -- $ --
Options written 11,114 2,746,062 -- --
Options acquired in connection
with acquisition of:
Oppenheimer Fund 8,071 1,976,169 -- --
Oppenheimer Strategic Income
& Growth Fund 200,000 1,440 200 4,800
Options closed or expired (205,814) (1,378,828) (200) (4,800)
Options exercised (4,121) (965,812) -- --
----------- ----------- ----------- -----------
Options outstanding at
September 30, 1997 10,978 $ 2,931,225 -- $ --
=========== =========== =========== ===========
</TABLE>
===============================================================================
7. ILLIQUID AND RESTRICTED SECURITIES
At September 30, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily-available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at September 30, 1997 was $7,699,507, which
represents 0.93% of the Fund's net assets.
===============================================================================
8. ACQUISITION OF OPPENHEIMER FUND AND OPPENHEIMER STRATEGIC INCOME & GROWTH
FUND
On June 20, 1997, the Fund acquired all the net assets of Oppenheimer Fund,
pursuant to an agreement and plan of reorganization approved by the Oppenheimer
Fund shareholders on October 10, 1996. The Fund issued 21,161,450, 233,975 and
350,467 shares of beneficial interest for Class A, Class B, and Class C,
respectively, valued at $321,019,208, $3,521,330, and $5,285,049, in exchange
for the net assets, resulting in combined Class A net assets of $675,300,917,
Class B net assets of $60,510,384 and Class C net assets of $45,364,088 on June
20, 1997. The net assets acquired included net unrealized appreciation of
$114,271,242. The exchange qualified as a tax-free reorganization for federal
income tax purposes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
8. ACQUISITION OF OPPENHEIMER FUND AND OPPENHEIMER STRATEGIC INCOME &
GROWTH FUND (CONTINUED)
On June 20, 1997, the Fund acquired all the net assets of Oppenheimer Strategic
Income & Growth Fund, pursuant to an agreement and plan of reorganization
approved by the Oppenheimer Strategic Income & Growth Fund shareholders on March
10, 1997. The Fund issued 3,530,859, 2,758,332 and 246,193 shares of beneficial
interest for Class A, Class B, and Class C, respectively, valued at $53,563,143,
$41,512,901, and $3,712,604, in exchange for the net assets, resulting in
combined Class A net assets of $675,300,917, Class B net assets of $60,510,384
and Class C net assets of $45,364,088 on June 20, 1997. The net assets acquired
included net unrealized appreciation of $8,093,961. The exchange qualified as a
tax-free reorganization for federal income tax purposes.
===============================================================================
9. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended September
30, 1997.
<PAGE>
<PAGE>
APPENDIX A
CORPORATE INDUSTRY CLASSIFICATIONS
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-1
<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.
B-2
<PAGE>
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
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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.
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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,
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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.
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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
PX0240.198
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OPPENHEIMER MULTIPLE STRATEGIES 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 at 9/30/97 (See Part B): Filed herewith.
(4) Statement of Assets and Liabilities at 9/30/97 (See Part B): Filed
herewith.
(5) Statement of Operations at 9/30/97 (See Part B): Filed herewith.
(6) Statements of Changes in Net Assets for the year ended 9/30/97 (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 3/6/97: Previously filed
with Post-Effective Amendment No. 29, 11/24/97, to Registrant's Registration
Statement, and incorporated herein by reference.
2. By-Laws, amended as of 8/6/87: Previously 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: Previously filed
with Post-Effective Amendment No. 29, 11/24/97, to Registrant's Registration
Statement, and
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incorporated herein by reference.
(ii) Specimen Class B Share Certificate of Registrant: Previously filed
with Post-Effective Amendment No. 29, 11/24/97, to Registrant's Registration
Statement, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate of Registrant: Previously filed
with Post-Effective Amendment No. 29, 11/24/97, to Registrant's Registration
Statement, and incorporated herein by reference.
5. Amended and Restated
Investment Advisory Agreement dated 12/11/97: Filed herewith.
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.
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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) Amended and Restated Distribution and Service Plan and Agreement
dated 1/23/98 for Class B Shares pursuant to Rule 12b-1: Filed herewith.
(iii) Amended and Restated Distribution and Service Plan and Agreement
dated 1/23/98 for Class C Shares pursuant to Rule 12b-1: Filed herewith.
16. Performance Data Calculation Schedule: Filed herewith.
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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 30, 1997
Class A Shares of Beneficial Interest 43,053
Class B Shares of Beneficial Interes 5,344
Class C Shares of Beneficial Ineterest 2,881
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
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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 AND CURRENT POSITION WITH OTHER BUSINESS AND CONNECTIONS
OPPENHEIMERFUNDS, INC. ("OFI") 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 Asset
Management Corporation ("HarbourView");
prior to
March, 1996 he was the senior equity
portfolio manager
for the Panorama Series Fund, Inc. (the
"Company") and
other mutual funds and pension funds
managed by G.R.
Phelps & Co. Inc. ("G.R. Phelps"), the
Company's
former investment adviser, which was a
subsidiary of
Connecticut Mutual Life Insurance
Company; was also
responsible for managing the common
stock department
and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a Vice
President and
Senior Portfolio Manager at First of
America Investment Corp.
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Beichert, Kathleen
Vice President None.
Rajeev Bhaman,
Vice President Formerly Vice President (January 1992 -
February,
1996) of Asian Equities for Barclays de
Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund
Accounting (since May
1996); an officer of other Oppenheimer
funds; formerly
an Assistant Vice President of
OFI/Mutual Fund
Accounting (April 1994-May 1996), and a
Fund Controller for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and
Treasurer (since
March 1985) of OppenheimerFunds
Distributor, Inc.
(the "Distributor"); Vice President
(since October 1989)
and Treasurer (since April 1986) of
HarbourView;
Senior Vice President (since February
1992), Treasurer
(since July 1991)and a director (since
December 1991)
of Centennial; President, Treasurer
and a director of
Centennial Capital Corporation (since
June 1989); Vice
President and Treasurer (since August
1978) and
Secretary (since April 1981) of
Shareholder Services,
Inc. ("SSI"); Vice President, Treasurer
and Secretary of
Shareholder Financial Services, Inc.
("SFSI") (since
November 1989); Treasurer of
Oppenheimer Acquisition
Corp. ("OAC") (since June 1990);
Treasurer of
Oppenheimer Partnership Holdings, Inc.
(since
November 1989); Vice President and
Treasurer of
ORAMI (since July 1996); Chief
Executive Officer,
Treasurer and a director of
MultiSource Services, Inc.,
a broker-dealer (since December 1995);
an officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of
Rochester Fund
Services, Inc.
Michael Carbuto,
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Vice President An officer and/or portfolio manager of
certain
Oppenheimer funds; Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President & Director An officer
and/or portfolio manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and
a director (since January 1992) of the
Distributor;
Executive Vice President, General
Counsel and a
director of HarbourView, SSI, SFSI and
Oppenheimer
Partnership Holdings, Inc. since
(September 1995) and
MultiSource Services, Inc. (a
broker-dealer) (since December 1995);
President and a director of Centennial
(since September 1995); President and a
director of ORAMI (since July 1996);
General Counsel (since May 1996) and
Secretary (since April 1997) of OAC; Vice
President of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
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Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds
plc (since October 1997); an officer of
other
Oppenheimer funds; formerly an
Assistant Vice
President of OFI/Mutual Fund Accounting
(April 1994-
May 1996), and a Fund Controller for
OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor;
Secretary of HarbourView, MultiSource
and Centennial;
Secretary, Vice President and Director
of Centennial
Capital Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain
Oppenheimer funds; Presently he holds
the following
other positions: Director (since 1995)
of ICI Mutual
Insurance Company; Governor (since
1994) of St. John's
College; Director (since 1994 -
present) of International
Museum of Photography at George Eastman
House;
Director (since 1986) of GeVa Theatre.
Formerly he
held the following positions: formerly,
Chairman of the
Board and Director of Rochester Fund
Distributors, Inc.
("RFD"); President and Director of
Fielding
Management Company, Inc. ("FMC");
President and
Director of Rochester Capital Advisors,
Inc. ("RCAI");
Managing Partner of Rochester Capital
Advisors, L.P.,
President and Director of Rochester
Fund Services, Inc.
("RFS"); President and Director of
Rochester Tax
Managed Fund, Inc.; Director (1993 -
1997) of VehiCare
Corp.; Director (1993 - 1996) of
VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds (May, 1993 - January,
1996); Secretary of Rochester Capital
Advisors, Inc. and General Counsel
(June, 1993 - January 1996) of
Rochester Capital Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
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Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996)
for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds.
Formerly Vice President and General
Counsel of Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for Schroder
Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and
Fellow of the Institute of Chartered
Accountants; formerly an accountant for
Arthur Young (London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for
Bankers Trust
Company (1993-1996); Steering Committee
Member, Subcommittee Chairman for American
Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Vice
President of Fixed
Income Portfolio Management at Bankers
Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September,
1989 - January, 1997) of Bankers Trust
Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
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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.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and
Portfolio Manager
for Warburg, Pincus Counsellors, Inc.
(1993-1997), Co-
manager of Warburg, Pincus Emerging
Markets Fund (12/94 - 10/97), Co-manager
Warburg, Pincus Institutional Emerging
Markets Fund Emerging Markets Portfolio
(8/96 - 10/97), Warburg Pincus Japan OTC
Fund, Associate Portfolio Manager of
Warburg Pincus International Equity Fund,
Warburg Pincus Institutional Fund -
Intermediate Equity Portfolio, and Warburg
Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate
General Counsel at Prudential Securities,
Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Managing Director of Global Equities
at Paine Webber's Mitchell Hutchins
division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994
- 1996) of Van Eck Global.
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Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96), Chinese
Finance Society;
formerly, Chairman (11/94-2/96),
Chinese Finance
Society; and Director (6/94-6/95),
Greater China Business Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a
Vice President of HarbourView; prior to
March 1996,
the senior bond portfolio manager for
Panorama Series Fund Inc., other mutual
funds and pension accounts managed by G.R.
Phelps; also responsible for managing the
public fixed-income securities department
at Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since
September 1995);
President and director (since June
1991) of
HarbourView; Chairman and a director of
SSI (since
August 1994), and SFSI (September
1995); President
(since September 1995) and a director
(since October
1990) of OAC; President (since
September 1995) and a
director (since November 1989) of
Oppenheimer
Partnership Holdings, Inc., a holding
company
subsidiary of OFI; a director of ORAMI
(since July
C-11
<PAGE>
1996) ; President and a director (since
October 1997) of OFIL, an offshore fund
manager subsidiary of OFI and Oppenheimer
Millennium Funds plc (since October 1997);
President and a director of other
Oppenheimer funds; a director of the
NASDAQ Stock Market, Inc. and of Hillsdown
Holdings plc (a U.K. food company);
formerly an Executive Vice President of
OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995
- June, 1996) of
Manufacturers Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 - present)
for the Martin Luther King Multi-Purpose
Center (non-profit community
organization); Formerly Vice President
(January, 1995 - April, 1996) for
Lockheed Martin IMS.
Tanya Mrva,
Assistant 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 (August, 1989 -
August, 1995) with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase Investment
Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
C-12
<PAGE>
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane
Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for Prudential
Insurance on behalf
of the General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds; Formerly, Vice
President (June, 1983 - January, 1996) of
RFS, President and Director of RFD; Vice
President and Director of FMC; Vice
C-13
<PAGE>
President and director of RCAI; General
Partner of RCA; Vice President and
Director of Rochester Tax Managed Fund
Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Vice
President and
Portfolio Manager/Security Analyst for
Oppenheimer
Capital Corp., an investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp
Investment Services.
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and
Trustee of the New York-based Oppenheimer
Funds; formerly Chairman of the Manager
and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995)
of Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
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<PAGE>
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy
and Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a
Vice President of HarbourView; prior to
March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc.
and other mutual funds and pension
accounts managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director of Centennial; formerly
President and Director of OAMC, and
Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Managing Director of Buckingham
Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income
Oppenheimer funds; Formerly, Managing
Director and
Chief Fixed Income Strategist at
Prudential Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
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<PAGE>
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice
President of HarbourView; prior to
March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc.
and other mutual funds and pension
funds managed by G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial; Vice
President, Finance and Accounting and
member of the
Board of Directors of the Junior League
of Denver, Inc.;
Point of Contact: Finance Supporters of
Children;
Member of the Oncology Advisory Board
of the Childrens Hospital; Member of the
Board of Directors of
the Colorado Museum of Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May
1985), and SFSI
(since November 1989); Assistant
Secretary of
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set
forth below:
NEW YORK-BASED OPPENHEIMER FUNDS
Oppenheimer California Municipal Fund
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<PAGE>
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
QUEST/ROCHESTER FUNDS
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
DENVER-BASED OPPENHEIMER FUNDS
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
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<PAGE>
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln Street,
Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
ITEM 29. PRINCIPAL UNDERWRITER
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
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<PAGE>
NAME & PRINCIPAL POSITIONS & OFFICES POSITIONS & OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President None
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
C-19
<PAGE>
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President None
C-20
<PAGE>
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
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<PAGE>
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
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
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
C-22
<PAGE>
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd. #123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
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<PAGE>
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Englewood, Colorado 80112.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-24
<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 20th day of January, 1998.
OPPENHEIMER MULTIPLE STRATEGIES FUND
/s/ Bridget A. Macaskill
By:_______________________________*
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 20, 1998
______________________* Board of Trustees
Leon Levy
President,
/s/ Bridget A. Macaskill Principal Executive January 20, 1998
______________________* Officer and Trustee
Bridget A. Macaskill
/s/ George Bowen Treasurer & Principal January 20, 1998
______________________* Financial & Accounting
George Bowen Officer
/s/ Robert G. Galli Trustee January 20, 1998
_____________________*
Robert G. Galli
/s/ Benjamin Lipstein Trustee January 20, 1998
______________________*
Benjamin Lipstein
/s/ Elizabeth Moynihan Trustee January 20, 1998
______________________*
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee January 20, 1998
______________________*
Kenneth A. Randall
/s/ Edward V. Regan Trustee January 20, 1998
______________________*
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee January 20, 1998
______________________*
Russell S. Reynolds, Jr.
/s/ Donald W. Spiro Trustee January 20, 1998
______________________*
Donald W. Spiro
<PAGE>
/a/ Pauline Trigere Trustee January 20, 1998
______________________*
Pauline Trigere
/s/ Clayton K. Yeutter Trustee January 20, 1998
______________________*
Clayton K. Yeutter
/s/ Robert G. Zack
*By:_________________________________
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER MULTIPLE STRATEGIES FUND
Registration No.2-86903
Post-Effective Amendment No. 30
EXHIBIT INDEX
FORM N-1A
ITEM NO. DESCRIPTION
24(b)5 Amended and Restated Investment Advisory Agreement
24(b)11 Independent Auditors'
Consent
24(b)15(ii) Amended and Restated Distribution and Service Plan and
Agreement for Class B Shares
24(b)15(iii) Amended and Restated Distribution and Service Plan and
Agreement for Class C Shares
24(b)16 Performance Data Computation 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
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT made as of the 11th day of December, 1997,
by and between OPPENHEIMER MULTIPLE STRATEGIES FUND, formerly named Oppenheimer
Asset Allocation Fund (hereinafter referred to as the "Fund"), and
OPPENHEIMERFUNDS, INC. formerly named Oppenheimer Management Corp. (hereinafter
referred to as "OFI").
WHEREAS, the Fund is an open-end, diversified management investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), and OFI is a registered investment adviser;
WHEREAS, the Fund and OFI have agreed, per a resolution dated December 11, 1997
of the Fund's Board of Trustees, to reduce the Fund's management fee on assets
in excess of $1.5 billion;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISION.
a. The Fund hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Fund such other
duties and functions as are hereinafter set forth. OFI shall, in all
matters, give to the Fund and its Board of Trustees the benefit of its
best judgment, effort, advice and recommendations and shall at all times
conform to, and use its best efforts to enable the Fund to conform to: (i)
the provisions of the Investment Company Act and any rules or regulations
thereunder; (ii) any other applicable provisions of state or federal law;
(iii) the provisions of the Declaration of Trust and ByLaws of the Fund as
amended from time to time; (iv) policies and determinations of the Board
of Trustees of the Fund; (v) the fundamental policies and investment
restrictions of the Fund as reflected in the Fund's registration statement
under the Investment Company Act or as such policies may, from time to
time, be amended by the Fund's shareholders; and (vi) the Prospectus and
Statement of Additional Information of the Fund in effect from time to
time. The appropriate officers and employees of OFI shall be available
upon reasonable notice for consultation with any of the Trustees and
officers of the Fund with respect to any matters dealing with the business
and affairs of the Fund, including the valuation of any of the Fund's
portfolio securities which are either not registered for public sale or
not traded on any securities market.
b. OFI shall not be liable for any loss sustained by the Fund in
connection with any matters to which this Agreement relates, except a loss
resulting by reason of OFI's willful misfeasance, bad faith or gross
negligence in the performance of its duties; or by reason of its reckless
disregard of its obligations and duties under this Agreement.
-1-
<PAGE>
2. INVESTMENT MANAGEMENT.
a. OFI shall, subject to the direction and control by the Fund's Board of
Trustees: (i) regularly provide investment advice and recommendations to
the Fund with respect to its investments, investment policies and the
purchase and sale of securities; (ii) supervise continuously the
investment program of the Fund and the composition of its portfolio and
determine what securities shall be purchased or sold by the Fund; and
(iii) arrange, subject to the provisions of paragraph "8" hereof, for the
purchase of securities and other investments for the Fund and the sale of
securities and other investments held in the portfolio of the Fund.
b. Provided that the Fund shall not be required to pay any compensation
other than as provided by the terms of this Agreement and subject to the
provisions of paragraph "8" hereof, OFI may obtain investment information,
research or assistance from any other person, firm or corporation to
supplement, update or otherwise improve its investment management
services.
3. ACTING AS ADVISER FOR OTHERS.
Nothing in this Agreement shall prevent OFI or any officer thereof from
acting as investment adviser for any other person, firm or corporation and
shall not in any way limit or restrict OFI or any of its directors,
officers, or employees from buying, selling or trading any securities for
its or their own account or for the account of others for whom it or they
may be acting, provided that such activities will not adversely affect or
otherwise impair the performance by OFI of its duties and obligations
under this Agreement.
4. OTHER DUTIES OF OFI.
OFI shall, at its own expense, provide and supervise the activities of all
administrative and clerical personnel as shall be required to provide
effective corporate administration for the Fund, including the compilation
and maintenance of such records with respect to its operations as may
reasonably be required; the preparation and filing of such reports with
respect thereto as shall be required by the Commission; composition of
periodic reports with respect to its operations for the shareholders of
the Fund; composition of proxy materials for meetings of the Fund's
shareholders and the composition of such registration statements as may be
required by federal and state securities laws for continuous public sale
of shares of the Fund. OFI shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
5. ALLOCATION OF EXPENSES.
All other costs and expenses not expressly assumed by OFI under this
Agreement, or to be paid by the General Distributor of the shares of the
Fund, shall be paid by the Fund, including, but not limited to: (i)
interest and taxes; (ii) brokerage commissions; (iii) premiums for
fidelity and other insurance coverage requisite to its operations; (iv)
the fees and expenses of its Trustees; (v) legal and audit expenses; (vi)
custodian and transfer agent
-2-
<PAGE>
fees and expenses; (vii) expenses incident to the redemption of its
shares; (viii) expenses incident to the issuance of its shares against
payment therefor by or on behalf of the subscribers thereto; (ix) fees and
expenses, other than as hereinabove provided, incident to the registration
under federal and state securities laws of shares of the Fund for public
sale; (x) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund; (xi) except as noted above, all
other expenses incidental to holding meetings of the Fund's shareholders;
and (xii) such extraordinary non-recurring expenses as may arise,
including litigation, affecting the Fund and any obligation which the Fund
may have to indemnify its officers and Trustees with respect thereto. Any
officers or employees of OFI or any entity controlling, controlled by or
under common control with OFI, who may also serve as officers, Trustees or
employees of the Fund shall not receive any compensation by the Fund for
their services.
6. COMPENSATION OF OFI.
The Trust agrees to pay OFI and OFI agrees to accept as full compensation
for the performance of all functions and duties on its part to be
performed pursuant to the provisions hereof, a fee computed on the
aggregate net assets of the Fund as of the close of each business day and
payable monthly at the following annual rates:
0.75% of the first $200 million of aggregate net assets;
0.72% of the next $200 million of aggregate net assets;
0.69% of the next $200 million of aggregate net assets;
0.66% of the next $200 million of aggregate net assets;
0.60% of the next $700 million of aggregate net assets; and
0.58% of aggregate net assets in excess of $1.5 billion.
7. USE OF NAME "OPPENHEIMER."
OFI hereby grants to the Fund a royalty-free, non-exclusive license to use
the name "Oppenheimer" in the name of the Fund for the duration of this
Agreement and any extensions or renewals thereof. Such license may, upon
termination of this Agreement, be terminated by OFI, in which event the
Fund shall promptly take whatever action may be necessary to change its
name and discontinue any further use of the name "Oppenheimer" in the name
of the Fund or otherwise. The name "Oppenheimer" may be used or licensed
by OFI in connection any of its activities or licensed by OFI to any other
party.
8. PORTFOLIO TRANSACTIONS AND BROKERAGE.
a. OFI is authorized, in arranging the Fund's portfolio transactions, to
employ or deal with such members of securities or commodities exchanges,
brokers or dealers including "affiliated" broker-dealers (as that term is
defined in the Investment Company Act) (hereinafter "broker-dealers"), as
may, in its best judgment, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution at
the most favorable security price obtainable) of the Fund's portfolio
transactions as well as to
-3-
<PAGE>
obtain, consistent with the provisions of subparagraph "(c)" of this
paragraph "8," the benefit of such investment information or research as
may be of significant assistance to the performance by OFI of its
investment management functions.
b. OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities
of a broker-dealer to obtain best execution of particular portfolio
transaction(s) will be judged by OFI on the basis of all relevant factors
and considerations including, insofar as feasible, the execution
capabilities required by the transaction or transactions; the ability and
willingness of the broker-dealer to facilitate the Fund's portfolio
transactions by participating therein for its own account; the importance
to the Fund of speed, efficiency or confidentiality; the broker-dealer's
apparent familiarity with sources from or to whom particular securities
might be purchased or sold; as well as any other matters relevant to the
selection of a broker-dealer for particular and related transactions of
the Fund.
c. OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Fund's portfolio transactions to broker-dealers, other
than affiliated broker-dealers, qualified to obtain best execution of such
transactions who provide brokerage and/or research services (as such
services are defined in Section 28(e)(3) of the Securities Exchange Act of
1934) for the Fund and/or other accounts for which OFI and its affiliates
exercise "investment discretion" (as that term is defined in Section
3(a)(35) of the Securities Exchange Act of 1934) and to cause the Fund to
pay such broker-dealers a commission for effecting a portfolio transaction
for the Fund that is in excess of the amount of commission another
broker-dealer adequately qualified to effect such transaction would have
charged for effecting that transaction, if OFI determines, in good faith,
that such commission is reasonable in relation to the value of the
brokerage and/or research services provided by such broker-dealer, viewed
in terms of either that particular transaction or the overall
responsibilities of OFI and its investment advisory affiliates with
respect to the accounts as to which they exercise investment discretion.
In reaching such determination, OFI will not be required to place or
attempt to place a specific dollar value on the brokerage and/or research
services provided or being provided by such broker-dealer. In
demonstrating that such determinations were made in good faith, OFI shall
be prepared to show that all commissions were allocated for purposes
contemplated by this Agreement and that the total commissions paid by the
Fund over a representative period selected by the Fund's Trustees were
reasonable in relation to the benefits to the Fund.
d. OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any
particular portfolio transactions or to select any broker-dealer on the
basis of its purported or "posted" commission rate but will, to the best
of its ability, endeavor to be aware of the current level of the charges
of eligible broker-dealers and to minimize the expense incurred by the
Fund for effecting the Fund's portfolio transactions to the extent
consistent with the interests and policies of the Fund as established by
the determinations of the Fund's Board of Trustees and the provisions of
this paragraph "8".
-4-
<PAGE>
e. The Fund recognizes that an affiliated broker (i) may act as one of the
Fund's regular brokers so long as it is lawful for it so to act; (ii) may
be a major recipient of brokerage commissions paid by the Fund; and (iii)
may effect portfolio transactions for the Fund only if the commissions,
fees or other remuneration received or to be received by it are determined
in accordance with procedures contemplated by any rule, regulation or
order adopted under the Investment Company Act for determining the
permissible level of such commissions.
f. Subject to the foregoing provisions of this paragraph "8," OFI may also
consider sales of Fund shares and shares of other investment companies
managed by OFI or its affiliates as a factor in the selection of
broker-dealers for the Fund's portfolio transactions.
9. DURATION.
This Agreement will take effect on the date first set forth above, and
replaces the Fund's Investment Advisory Agreement dated June 27, 1994.
This Agreement will continue in effect until December 31, 1998, and
thereafter, from year to year, so long as such continuance shall be
approved at least annually in the manner contemplated by Section 15 of the
Investment Company Act.
10. TERMINATION.
This Agreement may be terminated: (i) by OFI at any time without penalty
upon giving the Fund sixty days' written notice (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OFI (which notice may be waived by OFI)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the Trustees of the Fund then in
office or by the vote of the holders of a "majority" (as defined in the
Investment Company Act) of the outstanding voting securities of the Fund.
11. ASSIGNMENT OR AMENDMENT.
This Agreement may not be amended or the rights of OFI hereunder sold,
transferred, pledged or otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of the majority of the
outstanding voting securities of the Fund; this Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
12. DISCLAIMER OF SHAREHOLDER LIABILITY.
OFI understands and agrees that the obligations of the Fund under this
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and its property. OFI represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder liability for acts or obligations of the Fund.
-5-
<PAGE>
13. DEFINITIONS.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
Oppenheimer Multiple Strategies Fund
/s/ Andrew J. Donohue
By: _______________________________
Andrew J. Donohue, Secretary
OppenheimerFunds, Inc.
/s/ Katherine P. Feld
By: _______________________________
Katherine P. Feld, Vice President
advisory\240.d97
-6-
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Multiple Strategies Fund:
We consent to the use in this Registration Statement of Oppenheimer Multiple
Strategies Fund of our report dated October 21, 1997 appearing in the Statement
of Additional Information, which is a part of such Registration Statement, and
to the reference to us under the heading "Financial Highlights" 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 20, 1998
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Multiple Strategies Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. THE PLAN. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement
relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or
-1-
<PAGE>
of record by: (i) such Recipient, or (ii) such Recipient's Customers, but in no
event shall any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that more than one person or entity would
otherwise qualify as Recipients as to the same Shares, the Recipient which is
the dealer of record on the Fund's books as determined by the Distributor shall
be deemed the Recipient as to such Shares for purposes of this Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT
SERVICES.
(a) PAYMENTS TO THE DISTRIBUTOR. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) ADMINISTRATIVE SUPPORT SERVICES FEES. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and\or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and\or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering
-2-
<PAGE>
distribution assistance and administrative support services to the Fund; and
(iv) paying other direct distribution costs, including without limitation the
costs of sales literature, advertising and prospectuses (other than those
prospectuses furnished to current holders of the Fund's shares ("Shareholders"))
and state "blue sky" registration expenses.
(b) PAYMENTS TO RECIPIENTS. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) SERVICE FEE. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in
-3-
<PAGE>
the Fund and processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and providing such
other information and services in connection with the rendering of personal
services and/or the maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE)
PAYMENTS. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers for no more than six years and for any minimum period that the
Distributor may establish. Distribution assistance fee payments shall be made
only to Recipients that are registered with the SEC as a broker-dealer or are
exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided
-4-
<PAGE>
distribution assistance or administrative support services qualifying for
payment under the Plan if it has Qualified Holdings of Shares that entitle it to
payments under the Plan. In the event that either the Distributor or the Board
should have reason to believe that, notwithstanding the level of Qualified
Holdings, a Recipient may not be rendering appropriate distribution assistance
in connection with the sale of Shares or administrative support services for
Accounts, then the Distributor, at the request of the Board, shall require the
Recipient to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or services in
this regard. If the Distributor or the Board of Trustees still is not satisfied
after the receipt of such report, either may take appropriate steps to terminate
the Recipient's status as such under the Plan, whereupon such Recipient's rights
as a third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Fees from the Fund.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
-5-
<PAGE>
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class B
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. DISCLAIMER OF SHAREHOLDER AND TRUSTEE LIABILITY. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer Multiple Strategies Fund
/s/ Robert G. Zack
By: ______________________________
Robert G. Zack, Assistant Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By: ______________________________
Katherine P. Feld
Vice President and Secretary
ofmi\240-b.198
-6-
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
12th day of February, 1998, by and between Oppenheimer Multiple Strategies Fund
(the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. THE PLAN. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or
-1-
<PAGE>
of record by: (i) such Recipient, or (ii) such Recipient's Customers, but in no
event shall any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that more than one person or entity would
otherwise qualify as Recipients as to the same Shares, the Recipient which is
the dealer of record on the Fund's books as determined by the Distributor shall
be deemed the Recipient as to such Shares for purposes of this Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT
SERVICES.
(a) PAYMENTS TO THE DISTRIBUTOR. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) ADMINISTRATIVE SUPPORT SERVICES FEES. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the
Distributor in connection with the Shares may include, but shall not be limited
to, the following: (i) paying sales commissions to any broker, dealer, bank or
other person or entity that sells Shares, and/or paying such persons "Advance
Service Fee Payments" (as defined below) in advance of, and/or in amounts
greater than, the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and
-2-
<PAGE>
prospectuses (other than those prospectuses furnished to current holders of the
Fund's shares ("Shareholders")) and state "blue sky" registration expenses.
(b) PAYMENTS TO RECIPIENTS. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) SERVICE FEE. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (A) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (B) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, Advance Service Fee Payments may be made
more often than quarterly, and sooner than the end of the calendar quarter. In
the event Shares are redeemed less than one year after the date such Shares were
sold, the Recipient is obligated to and will repay the Distributor on demand a
pro rata portion of such Advance Service Fee Payments, based on the ratio of the
time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries
-3-
<PAGE>
concerning the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption transactions, making
the Fund's investment plans and dividend payment options available, and
providing such other information and services in connection with the rendering
of personal services and/or the maintenance of Accounts, as the Distributor or
the Fund may reasonably request.
(ii) DISTRIBUTION ASSISTANCE FEE (ASSET-BASED SALES CHARGE)
PAYMENTS. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it
-4-
<PAGE>
receives from the Fund), or (ii) by the Distributor (a subsidiary of OFI), from
its own resources, from Asset-Based Sales Charge payments or from the proceeds
of its borrowings, in either case, in the discretion of OFI or the Distributor,
respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so
-5-
<PAGE>
long as such continuance is specifically approved at least annually by a vote of
the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class C
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. DISCLAIMER OF SHAREHOLDER AND TRUSTEE LIABILITY. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer Multiple Strategies Fund
/s/ Robert G. Zack
By: ________________________________
Robert G. Zack, Assistant Secretary
OppenheimerFunds Distributor, Inc.
/s/ Katherine P. Feld
By: ________________________________
Katherine P. Feld
Vice President and Secretary
ofmi\240-c.198
-6-
Oppenheimer Multiple Strategies Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
10/23/87 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
12/19/96 0.1042700 0.7866400 13.960
03/18/97 0.1500000 0.0000000 14.140
06/17/97 0.1500000 0.0000000 15.090
09/16/97 0.1100000 0.0000000 16.040
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
<PAGE>
Oppenheimer Multiple Strategies Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
12/19/96 0.0761200 0.7866400 13.870
03/18/97 0.1250000 0.0000000 14.040
06/17/97 0.1240000 0.0000000 14.980
09/16/97 0.0810000 0.0000000 15.910
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
12/19/96 0.0738000 0.7866400 13.890
03/18/97 0.1240000 0.0000000 14.070
06/17/97 0.1220000 0.0000000 15.010
09/16/97 0.0810000 0.0000000 15.950
<PAGE>
Oppenheimer Multiple Strategies Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 09/30/97:
The formula for calculating average annual total return is as follows:
1/number of years = n {(ERV/P)^n} - 1 = average annual total return
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
{($1,182.48/$1,000)^ 1} - 1 = 18.25% {($1,254.60/$1,000)^ 1} - 1 = 25.46%
Five Year Five Year
{($1,913.12/$1,000)^.2} - 1 = 13.85% {($2,029.79/$1,000)^.2} - 1 = 15.21%
Ten Year Ten Year
{($2,688.97/$1,000)^.1} - 1 = 10.40% {($2,853.00/$1,000)^.1} - 1 = 11.05%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
3.00% for the inception year:
One Year One Year
{($1,193.41/$1,000)^ 1} - 1 = 19.34% {($1,243.40/$1,000)^ 1} - 1 = 24.34%
Inception Inception
{($1,403.20/$1,000)^.4794}-1 = 17.63% {($1,433.19/$1,000)^.4794}-1 = 18.83%
Class C Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
{($1,234.24/$1,000)^ 1} - 1 = 23.42% {($1,244.24/$1,000)^ 1} - 1 = 24.42%
Inception Inception
{($1,667.58/$1,000)^.2611}-1 = 14.28% {($1,667.58/$1,000)^.2611}-1 = 14.28%
<PAGE>
Oppenheimer Multiple Strategies Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 09/30/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
$1,182.48 - $1,000/$1,000 = 18.25% $1,254.60 - $1,000/$1,000 = 25.46%
Five Year Five Year
$1,913.12 - $1,000/$1,000 = 91.31% $2,029.79 - $1,000/$1,000 = 102.98%
Ten Year Ten Year
$2,688.97 - $1,000/$1,000 = 168.90% $2,853.00 - $1,000/$1,000 = 185.30%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
3.00% for the inception year:
One Year One Year
$1,193.41 - $1,000/$1,000 = 19.34% $1,243.40 - $1,000/$1,000 = 24.34%
Inception Year Inception Year
$1,403.20 - $1,000/$1,000 = 40.32% $1,433.19 - $1,000/$1,000 = 43.32%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
$1,234.24 - $1,000/$1,000 = 23.42% $1,244.24 - $1,000/$1,000 = 24.42%
Inception Year Inception Year
$1,667.58 - $1,000/$1,000 = 66.76% $1,667.58 - $1,000/$1,000 = 66.76%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<CIK> 729968
<NAME> OPPENHEIMER MULTIPLE STRATEGIES FUND- A
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 622,723,736
<INVESTMENTS-AT-VALUE> 835,396,252
<RECEIVABLES> 7,220,863
<ASSETS-OTHER> 22,015
<OTHER-ITEMS-ASSETS> 236,102
<TOTAL-ASSETS> 842,875,232
<PAYABLE-FOR-SECURITIES> 5,226,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,723,697
<TOTAL-LIABILITIES> 12,949,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 565,496,117
<SHARES-COMMON-STOCK> 44,059,355
<SHARES-COMMON-PRIOR> 18,756,434
<ACCUMULATED-NII-CURRENT> 1,488,298
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53,451,616
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 209,489,344
<NET-ASSETS> 712,470,073
<DIVIDEND-INCOME> 3,947,066
<INTEREST-INCOME> 16,298,110
<OTHER-INCOME> 0
<EXPENSES-NET> 5,733,394
<NET-INVESTMENT-INCOME> 14,511,782
<REALIZED-GAINS-CURRENT> 54,497,060
<APPREC-INCREASE-CURRENT> 37,676,936
<NET-CHANGE-FROM-OPS> 106,685,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,706,372
<DISTRIBUTIONS-OF-GAINS> 14,621,660
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,911,538
<NUMBER-OF-SHARES-REDEEMED> 3,316,554
<SHARES-REINVESTED> 1,707,937
<NET-CHANGE-IN-ASSETS> 538,483,628
<ACCUMULATED-NII-PRIOR> 615,057
<ACCUMULATED-GAINS-PRIOR> 15,672,173
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,267,378
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,733,394
<AVERAGE-NET-ASSETS> 395,436,000
<PER-SHARE-NAV-BEGIN> 14.09
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 2.88
<PER-SHARE-DIVIDEND> 0.51
<PER-SHARE-DISTRIBUTIONS> 0.79
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.17
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> OPPENHEIMER MULTIPLE STRATEGIES FUND- B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 622,723,736
<INVESTMENTS-AT-VALUE> 835,396,252
<RECEIVABLES> 7,220,863
<ASSETS-OTHER> 22,015
<OTHER-ITEMS-ASSETS> 236,102
<TOTAL-ASSETS> 842,875,232
<PAYABLE-FOR-SECURITIES> 5,226,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,723,697
<TOTAL-LIABILITIES> 12,949,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 565,496,117
<SHARES-COMMON-STOCK> 4,234,638
<SHARES-COMMON-PRIOR> 428,130
<ACCUMULATED-NII-CURRENT> 1,488,298
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53,451,616
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 209,489,344
<NET-ASSETS> 67,916,052
<DIVIDEND-INCOME> 3,947,066
<INTEREST-INCOME> 16,298,110
<OTHER-INCOME> 0
<EXPENSES-NET> 5,733,394
<NET-INVESTMENT-INCOME> 14,511,782
<REALIZED-GAINS-CURRENT> 54,497,060
<APPREC-INCREASE-CURRENT> 37,676,936
<NET-CHANGE-FROM-OPS> 106,685,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 600,770
<DISTRIBUTIONS-OF-GAINS> 435,849
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,154,484
<NUMBER-OF-SHARES-REDEEMED> 408,734
<SHARES-REINVESTED> 60,758
<NET-CHANGE-IN-ASSETS> 538,483,628
<ACCUMULATED-NII-PRIOR> 615,057
<ACCUMULATED-GAINS-PRIOR> 15,672,173
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,267,378
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,733,394
<AVERAGE-NET-ASSETS> 25,113,000
<PER-SHARE-NAV-BEGIN> 14.01
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 2.78
<PER-SHARE-DIVIDEND> 0.41
<PER-SHARE-DISTRIBUTIONS> 0.79
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.04
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
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<NAME> OPPENHEIMER MULTIPLE STRATEGIES FUND- C
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 622,723,736
<INVESTMENTS-AT-VALUE> 835,396,252
<RECEIVABLES> 7,220,863
<ASSETS-OTHER> 22,015
<OTHER-ITEMS-ASSETS> 236,102
<TOTAL-ASSETS> 842,875,232
<PAYABLE-FOR-SECURITIES> 5,226,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,723,697
<TOTAL-LIABILITIES> 12,949,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 565,496,117
<SHARES-COMMON-STOCK> 3,082,083
<SHARES-COMMON-PRIOR> 1,503,813
<ACCUMULATED-NII-CURRENT> 1,488,298
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53,451,616
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 209,489,344
<NET-ASSETS> 49,539,250
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<NET-CHANGE-FROM-OPS> 106,685,778
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<DISTRIBUTIONS-OF-GAINS> 1,359,035
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 381,455
<SHARES-REINVESTED> 151,633
<NET-CHANGE-IN-ASSETS> 538,483,628
<ACCUMULATED-NII-PRIOR> 615,057
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,733,394
<AVERAGE-NET-ASSETS> 33,813,000
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<EXPENSE-RATIO> 1.97
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</TABLE>
