<PAGE>
OPPENHEIMER SPECIAL FUND
Supplement dated April 1, 1994
to the Prospectus dated April 1, 1994
All references in the Prospectus to Class Y shares are amended by the
following statement:
The offering of Class Y shares has not yet commenced.
April 1, 1994 PS270
<PAGE>
Oppenheimer Special Fund
Two World Trade Center, New York, NY 10048-0203
Telephone 1-800-525-7048
Oppenheimer Special Fund (the "Fund") is a mutual fund with the
investment objective of capital appreciation. Current income is not a
consideration in the selection of the Fund's portfolio securities.
In seeking its objective, the Fund emphasizes investments in common
stock issued by established growth companies that, in the opinion of
Oppenheimer Management Corporation (the "Manager"), have better-than-
expected earnings prospects but are selling at below-normal valuations.
In an uncertain investment environment, defensive investment methods may
be stressed. The Fund may also use certain hedging instruments. See "The
Fund and Its Investment Policies."
The Fund offers two classes of shares which may be purchased at a
price equal to their respective net asset value per share, plus a sales
charge. The investor may elect to purchase shares with a sales charge
imposed (1) at the time of purchase (the "Class A shares"), or (2) on a
contingent deferred basis (the "Class B shares"). Class B shares are also
subject to an asset-based sales charge. The contingent deferred sales
charge will be imposed on most redemptions of Class B shares within six
years of purchase. These alternatives permit an investor to choose the
method of purchasing shares that is more beneficial to that investor
depending on the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. A third class of
shares may be purchased only by certain institutional investors at net
asset value per share (the "Class Y Shares"). See"How To Buy Shares -
Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
a prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement") dated
April 1, 1994, has been filed with the Securities and Exchange Commission
("SEC") and is available without charge upon written request to
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number above. The Additional Statement (which is incorporated in its
entirety by reference in this Prospectus) contains more detailed
information about the Fund and its management, including more complete
information as to certain risk factors.
Investors are advised to read and retain this Prospectus for future
reference. Shares of the Fund are not deposits or obligations of any
bank, are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including the possible loss
of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective April 1, 1994.
<PAGE>
Table of Contents
Page
Fund Expenses 2
Per Share Data and Ratios 4
The Fund and Its Investment Policies 6
Special Investment Methods 6
Investment Restrictions 10
Management of the Fund 10
How to Buy Shares 11
Alternative Sales Arrangements 11
Class A Shares 12
Class A Sales Charge Table 12
Class A Contingent Deferred Sales Charge 13
Reduced Sales Charges for Class A Purchases 14
Class A Service Plan 15
Class B Shares 16
Class B Contingent Deferred Sales Charge 16
Class B Conversion Feature 17
Class B Distribution and Service Plan 17
Purchase Programs for Class A and Class B Shares 18
AccountLink 18
PhoneLink 19
Asset Builder Plans 19
Class Y Shares 20
How to Redeem Shares 20
Regular Redemption Procedures 20
Telephone Redemptions 21
Distributions from Retirement Plans 21
Automatic Withdrawal and Exchange Plans 22
Repurchase 22
Reinvestment Privilege 22
General Information on Redemptions 22
Exchanges of Shares and Retirement Plans 23
Dividends, Distributions and Taxes 25
Fund Performance Information 26
Additional Information 28
<PAGE>
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and the expenses paid by the Fund during its fiscal year ended
June 30, 1993.
Shareholder Transaction Expenses
Class A Class B Class Y
Shares Shares Shares
Maximum Sales Charge on
Purchases (as a percentage
of offering price) 5.75% None None
Sales Charge on Reinvested
Dividends None None None
Maximum Contingent Deferred
Sales Charge on Redemption None(1) 5.0%(2) None
Redemption Fees None None None
Exchange Fee $5.00 $5.00 $5.00
Annual Fund Operating Expenses (Restated as to
Class A Shares) (Estimated as to Class B and Class Y
Shares) (as a percentage of average net assets)
Class A Class B Class Y
Shares Shares Shares
Management Fees 0.71% 0.71% 0.71%
12b-1 (Distribution and/or
Service Plan) Fees 0.16% 1.00% None
Other Expenses 0.19% 0.19% 0.26%
Total Fund Operating Expenses 1.06% 1.90% 0.97%
____________
(1) Certain Class A purchases of $1 million or more are not subject to
front-end sales charges, but a contingent deferred sales charge
(maximum of 1%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase,
subject to certain conditions. See "How to Buy Shares - Class A
Contingent Deferred Sales Charge," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within six years of their purchase, subject
to certain exceptions. That charge is imposed as a percentage of net
asset value at the time of purchase or redemption, whichever is less,
and declines from 5.0% in the first year that shares are held, to
4.0% in the second year, 3.0% in the third and fourth years, 2.0% in
the fifth year, 1.0% in the sixth year and is eliminated thereafter.
There is no charge on Class B shares held for more than six years.
See "How To Buy Shares--Class B Contingent Deferred Sales Charge,"
below.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual fund
operating expenses).
The "Annual Fund Operating Expenses" in the table above are restated
to reflect, effective October 1, 1993, the 0.15% annual 12b-1 fee on
assets representing Class A shares sold before April 1, 1991. Previously
that fee rate was zero. Such restatement sets forth what the Fund's 12b-1
distribution plan fees for its Class A shares would have been in the
Fund's fiscal year ended June 30, 1993 had the 0.15% 12b-1 fee on assets
representing pre-April 1, 1991 Class A shares been in effect during that
fiscal year. At the prior fee rate of zero for pre-April 1, 1991 assets,
the 12b-1 distribution plan fees for Class A shares during the fiscal year
ended June 30, 1993 were 0.03% of average annual net assets and total Fund
operating expenses were 0.93% of average annual net assets. See
"Distribution Plans" in the Additional Statement for further details.
The sales charge rate shown for Class A shares is the current maximum
rate applicable to purchases of Class A shares of the Fund. Investors in
Class A shares may be entitled to reduced sales charges based on the
amount purchased or the value of shares already owned and may be subject
to a contingent deferred sales charge in limited circumstances (see "How
to Buy Shares--Class A Contingent Deferred Sales Charge"). Class B and
Class Y shares were not publicly offered during the fiscal year ended June
30, 1993. The "Annual Fund Operating Expenses" as to Class B and Class
Y shares are estimates based on amounts that would have been payable in
that period, assuming that Class B and Class Y shares were outstanding
during such fiscal year. The actual amount of such fees and expenses in
the current and future years will depend on a number of factors, including
the actual average net assets of Class B and Class Y shares, respectively,
during such years. "Other Expenses" includes such expenses as custodial
and transfer agent fees, audit, legal and other business operating
expenses, but excludes extraordinary expenses. For further details, see
"Purchase, Redemption and Pricing of Shares - Dual Class Methodology" and
the Fund's financial statements, both included in the Additional
Statement.
The following examples apply the restated total Fund operating
expenses in the chart above and the current maximum sales charges to a
hypothetical $1,000 investment in shares of the Fund over the time periods
shown below, assuming a 5% annual rate of return on the investment. The
amounts below are the cumulative costs of such hypothetical $1,000
investment for the periods shown and, except as indicated in lines 3 and
4, assume that the shares are redeemed at the end of each stated period.
1 year 3 years 5 years 10 years(1)
1. Class A Shares $68 $89 $113 $179
2. Class A Shares,
assuming no
redemption $68 $89 $113 $179
3. Class B Shares $69 $90 $123 $180
4. Class B Shares,
assuming no
redemption $19 $60 $103 $180
5. Class Y Shares $10 $31 $54 $119
6. Class Y Shares,
assuming no
redemption $10 $31 $54 $119
______________
(1) Class B shares convert to Class A shares under the terms and
conditions described under "How to Buy Shares - Class B Conversion
Feature." Therefore, years 7 through 10 reflect the Class A expenses
shown above. Long-term shareholders of Class B shares could pay the
economic equivalent, through the asset-based sales charge and
contingent deferred sales charge imposed on Class B shares, of more
than the maximum front-end sales charges permitted under applicable
regulatory requirements. The Class B Conversion Feature is intended
to minimize the likelihood that this will occur.
These examples should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
Per Share Data and Ratios
Selected data for a Class A share of the Fund outstanding throughout each
period
The information in the table below has been audited by KPMG Peat
Marwick, independent auditors, whose report on the financial statements
of the Fund for the fiscal year ended June 30, 1993 is included in the
Additional Statement. Class B and Class Y shares were not publicly
offered during that period. Accordingly, no information on Class B and
Class Y shares is reflected in the table below or in the Fund's other
financial statements for prior periods.
<TABLE>
<CAPTION>
Year Ended June 30,
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value,
beginning of year $ 24.94 $ 21.88 $ 20.60 $ 18.90 $ 17.13 $ 20.37 $ 23.82 $ 20.46 $ 19.45 $ 24.04
Income (loss) from investment
operations:
Net investment income .19 .29 .47 .64 .62 .67 .93 .75 .60 .39
Net realized and unrealized
gain (loss) on investments 4.03 3.13 1.36 1.76 1.78 (.89) .59 3.70 1.87 (2.83)
Total income (loss) from
investment operations 4.22 3.42 1.83 2.40 2.40 (.22) 1.52 4.45 2.47 (2.44)
Dividends and distributions
to shareholders:
Dividends from net
investment income (.25) (.36) (.55) (.70) (.59) (1.27) (.77) (.61) (.39) (.52)
Distributions from net realized
gain on investments (1.57) -- -- -- (.04) (1.75) (4.20) (.48) (1.07) (1.63)
Total dividends and
distributions to shareholders (1.82) (.36) (.55) (.70) (.63) (3.02) (4.97) (1.09) (1.46) (2.15)
Net asset value, end of year $ 27.34 $ 24.94 $ 21.88 $ 20.60 $ 18.90 $ 17.13 $ 20.37 $ 23.82 $ 20.46 $ 19.45
Total Return,
At Net Asset Value** 16.88% 15.69% 9.39% 12.98% 14.54% (1.03)% 9.48% 22.77% 14.24%
(10.95)%
Ratios/Supplemental Data:
Net assets, end of
year (in thousands) $743,830 $630,767 $550,480 $551,295 $542,250 $552,863 $690,326 $772,619 $834,054
$644,138
Average net assets
(in thousands) $710,391 $624,527 $520,335 $547,090 $529,699 $570,250 $717,115 $783,491 $765,214
$610,559
Number of shares outstanding
at end of year (in thousands) 27,210 25,287 25,155 26,760 28,687 32,277 33,890 32,437 40,759 33,110
Ratios to average net assets:
Net investment income .72% 1.14% 2.20% 3.07% 3.31% 3.78% 4.32% 3.03% 3.28%
2.19%
Expenses .93% .90% .94% .92% .97% .95% .93% .95% .94% 1.05%
Portfolio turnover rate* 23.2% 36.7% 31.1% 27.6% 27.1% 120.3% 371.2% 67.4% 16.8%
20.8%
</TABLE>
[FN]
* The lesser of purchases or sales of portfolio securities for a year,
divided by the monthly average of the market value of portfolio
securities owned during the year. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the year ended June
30, 1993 were $160,757,743 and $184,132,966, respectively.
** Assumes a hypothetical initial investment on the business day before
the first day of the fiscal year, 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 year. Sales charges are not reflected in
the total returns.
<PAGE>
Selected data for a Class A and Class B share of the Fund outstanding
throughout each period (unaudited)
The information in the table below has not been audited. Class Y
shares were not publicly offered during that period and Class B shares
were first publicly offered on August 17, 1993. Accordingly, no
information on Class Y shares is reflected in the table below or in the
Fund's other financial statements for prior periods.
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------- ------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1993 JUNE 30, DECEMBER 31, 1993
(UNAUDITED) 1993 1992 1991 1990 1989 (UNAUDITED)(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $27.34 $24.94 $21.88 $20.60 $18.90 $17.13 $27.02
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .07 .19 .29 .47 .64 .62 (.02)
Net realized and unrealized
gain (loss) on investments 1.08 4.03 3.13 1.36 1.76 1.78 1.34
------- ------ ------ ------ ------ ------ ------
Total income from
investment operations 1.15 4.22 3.42 1.83 2.40 2.40 1.32
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.16) (.25) (.36) (.55) (.70) (.59) (.11)
Distributions from net realized
gain on investments (.64) (1.57) - - - (.04) (.64)
------- ------- ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.80) (1.82) (.36) (.55) (.70) (.63) (.75)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $27.69 $27.34 $24.94 $21.88 $20.60 $18.90 $27.59
------- ------ ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(2) 4.18% 16.88% 15.69% 9.39% 12.98% 14.54% 4.14%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $741,391 $743,830 $630,767 $550,480 $551,295 $542,250 $4,913
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $735,616 $710,391 $624,527 $520,335 $547,090 $529,699 $2,606
- ------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 26,770 27,210 25,287 25,155 26,760 28,687 178
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .45%(3) .72% 1.14% 2.20% 3.07% 3.31% (.47)%(3)
Expenses 1.03%(3) .93% .90% .94% .92% .97% 2.01%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 9.3% 23.2% 36.7% 31.1% 27.6% 27.1% 9.3%
<FN>
1. For the period from August 17, 1993 (inception of offering) to December
31, 1993.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal year, 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.
3. Annualized.
4. 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 six months ended December 31, 1993 were
$64,997,857 and $96,187,847, respectively.
</TABLE>
<PAGE>
The Fund and Its Investment Policies
The Fund is an open-end, diversified management investment company
presently organized as a Massachusetts business trust. It was initially
organized as a Maryland corporation in 1972. In seeking its objective of
capital appreciation in the value of its shares, the Fund will emphasize
investments in common stocks issued by established growth companies that,
in the opinion of the Manager, have better-than-expected earnings
prospects but are selling at below-normal valuations. In the event that
economic or financial conditions adversely affect equity securities,
defensive investment methods may be stressed. The investment policies and
practices described below are not "fundamental" policies unless a
particular policy is identified as fundamental. "Fundamental" policies
are those that cannot be changed without the approval of a "majority," as
defined in the Investment Company Act of 1940 (the "Investment Company
Act"), of the Funds outstanding voting securities. The Board may change
non-fundamental investment policies without shareholder approval.
The securities selected for their appreciation possibilities will be
primarily common stocks or securities having the investment
characteristics of common stocks, such as securities convertible into
common stocks. Investment opportunities may be sought among securities
of smaller, less well known companies as well as securities of large, well
known companies. Since investment in such securities may also involve
significant risks of loss, investments of this type may be considered
speculative, and there is no assurance that the Fund will achieve its
objective. The Fund is intended for investors seeking capital
appreciation over the long term and who are willing to accept greater
risks of loss in the hope of greater gain, but is not intended for
investors seeking current income or preservation of capital.
The securities selected for defensive or liquidity purposes may
include debt securities, such as rated or unrated bonds and debentures,
and other defensive securities such as preferred stocks. However, it is
expected that the emphasis of this portion of the portfolio will usually
be on short-term debt securities (i.e., those maturing in one year or less
from date of purchase), since such securities usually may be quickly
disposed of at prices not involving significant gains or losses when the
Manager wishes to increase the portion of the portfolio invested in
securities selected for appreciation possibilities.
The fact that a security selected for possible appreciation has a low
or no yield will not be an adverse factor in its selection, except to the
extent that such lack of yield might adversely affect appreciation
possibilities. Similarly, short-term debt securities may have a lower
yield than long-term debt securities, but their liquidity and relative
price stability are considered as more important than the yield factor.
Special Investment Methods
Small, Unseasoned Companies
The Fund may invest in securities of small, unseasoned companies as
well as those of large, well-known companies. In view of the limited
liquidity and volatility of price movements of the former, as a matter of
fundamental policy, the Fund will not make an investment that will result
in more than 15% of the Fund's total assets being invested in securities
of companies (including predecessors) that have been in operation less
than three years. The Fund has undertaken that it will not invest more
than 5% of its total assets in such companies. See "Small, Unseasoned
Companies" in "Investment Objective and Policies" in the Additional
Statement for a further discussion of the risks associated with such
investments.
Warrants and Rights
The Fund may invest up to 5% of its total assets in warrants and
rights (other than those that have been acquired in units or attached to
other securities). Not more than 2% of the Fund's assets may be invested
in warrants that are not listed on the New York or American Stock
Exchanges. For further details, see "Warrants and Rights" in "Investment
Objective and Policies" in the Additional Statement.
Foreign Securities
The Fund may purchase "foreign securities" that are debt or equity
securities issued by companies organized under the laws of countries other
than the United States and debt securities issued by foreign governments
that are listed on a foreign securities exchange or are traded in foreign
over-the-counter markets. The Fund has no restrictions on the amount of
its assets that may be invested in foreign securities. The Fund may
purchase securities in any country, developed or underdeveloped.
Securities of foreign issuers: (i) represented by American Depository
Receipts ("ADR's"), or (ii) traded in U.S. over-the-counter markets, or
(iii) listed on a U.S. securities exchange, are not considered "foreign
securities" for this purpose because they are not subject to many of the
special considerations and risks (discussed below and in the Additional
Statement) that apply to investments in foreign securities traded and held
abroad. If the Fund's securities are held abroad, the countries in which
such securities are held and the sub-custodians holding them, must be
approved by the Fund's Board of Trustees under applicable SEC rules. The
Fund will hold foreign currency only to effect foreign securities
transactions and not as an investment. Risks of investing in foreign
securities may include foreign taxation, changes in currency rates or
currency blockage, currency exchange costs, possibilities in some
countries of expropriation or nationalization of assets, political,
financial or social instability or adverse diplomatic developments, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards. See "Investments in Foreign Securities" in
"Investment Objective and Policies" in the Additional Statement for
further discussion as to the possible rewards and risks of investing in
foreign securities.
Illiquid and Restricted Securities
As a non-fundamental policy, the Fund will not purchase or otherwise
acquire any securities which may be "illiquid" by virtue of the absence
of a readily-available market or because their disposition would be
subject to legal restrictions ("restricted securities") if, as a result,
more than 15% of its net assets (taken at current value) would be invested
in securities that are illiquid. This policy applies to repurchase
agreements maturing in more than seven days, and over-the-counter options
and a portion of the Fund's assets used to cover such options, but does
not limit the acquisition of restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board of
Trustees or by the Manager under Board-approved guidelines. Such
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 (see "Illiquid and Restricted Securities" in "Investment
Objective and Policies" in the Additional Statement for further details).
The Fund currently intends to invest no more than 10% of its net assets
in illiquid and restricted securities, excluding securities eligible for
resale pursuant to Rule 144A that are determined to be liquid by the Board
of Trustees or by the Manager under Board-approved guidelines.
Derivatives
The most common derivatives, also known as structured financial
products, in which the Fund may invest include: (i) index-linked notes
whose final payouts are dependent upon the performance of one or more
market indices, and (ii) relative performance options whose cash
settlement is a function of the differential returns between two market
indices. A risk of these derivatives is a decline in value of the
underlying instrument due to adverse movements in the index.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements to
generate income for liquidity purposes, to meet anticipated redemptions,
or pending the investment of proceeds from sales of Fund shares or
settlement of purchases of portfolio investments. The Fund's repurchase
agreements will be fully collateralized. However, if the seller of the
securities fails to pay the agreed-upon repurchase price on the delivery
date, the Fund's risks may include the costs of disposing of the
collateral for the agreement and losses that might result from any delays
in foreclosing on the collateral. As a matter of non-fundamental policy,
the Fund will not enter into a repurchase agreement that will cause more
than 10% of the Fund's net assets to be subject to repurchase agreements
maturing in more than seven days. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements maturing
in seven days or less. See "Repurchase Agreements" in "Investment
Objective and Policies" in the Additional Statement for more details.
Loans of Portfolio Securities
To attempt to increase its income for liquidity purposes, the Fund
may lend its portfolio securities (other than in repurchase transactions)
to qualified borrowers if the loan is collateralized in accordance with
applicable regulatory requirements, and if, after any loan, the value of
the securities loaned does not exceed 25% of the value of the Fund's total
assets. The Fund presently does not intend that the value of securities
loaned in the coming year will exceed 5% of the value of the Fund's total
assets. See "Loans of Portfolio Securities" in "Investment Objective and
Policies" in the Additional Statement for further information on
securities loans.
Borrowing
From time to time, the Fund may increase its ownership of securities
by borrowing from banks on an unsecured basis and investing the borrowed
funds (on which the Fund will pay interest), subject to the 300% asset
coverage requirement of the Investment Company Act of 1940 (the
"Investment Company Act"). Purchasing securities with borrowed funds is
a speculative investment method known as leverage. There are risks
associated with leveraging purchases of portfolio securities by borrowing,
including possible reduction of income and increased fluctuation of net
asset value per share. The Fund may be subject to relatively greater
risks and costs than a fund that does not use leverage. For further
discussion of such risks and other details, see "Borrowing" in "Investment
Objective and Policies" in the Additional Statement.
Writing Covered Calls
The Fund may write (i.e., sell) call options ("calls") to generate
income for liquidity purposes or for defensive reasons if: (i) after any
sale, not more than 25% of the Fund's total assets are subject to calls,
(ii) the calls are listed on a domestic securities exchange, quoted on
NASDAQ or traded in the over-the-counter market, and (iii) the calls are
"covered," i.e., the Fund owns the securities subject to the call (or
other securities acceptable for applicable escrow arrangements) while the
call is outstanding. The Fund may write calls on securities indices.
Hedging
For hedging purposes, the Fund may buy and sell certain put and call
options, Stock Index Futures (described below), options on Stock Index
Futures and enter into Interest Rate Swap transactions, all of which are
referred to as "Hedging Instruments." In general, the Fund may use
Hedging Instruments: (i) to attempt to protect against declines in the
market value of the Fund's portfolio securities or Stock Index Futures
resulting from downward market trends, or (ii) to establish a position in
the securities markets as a temporary substitute for purchasing particular
securities. The Fund will not use Hedging Instruments for speculation.
The Hedging Instruments the Fund may use are described below and in
greater detail under "Covered Calls and Hedging" in the Additional
Statement.
-- Purchasing Puts and Calls. The Fund may purchase put options
("puts") which relate to: (i) securities (whether or not held by it), (ii)
Stock Index Futures (defined below), whether or not it holds such Futures
in its portfolio, or (iii) broadly-based stock indices. The Fund may
purchase calls as to securities, securities indices or Stock Index
Futures, or to effect a "closing purchase transaction" to terminate its
obligation as to a call previously written. A call or put may be
purchased only if, after any such purchase, the value of all call and put
options held by the Fund would not exceed 5% of its total assets.
-- Stock Index Futures. The Fund may buy and sell futures contracts
only if they relate to broadly-based stock indices ("Stock Index
Futures"). A stock index is "broadly-based" if it includes stocks that
are not limited to issuers in any particular industry or group of
industries. Stock Index Futures are settled by payment or acceptance of
cash, not by the stocks comprising the index. At present, the Fund does
not intend to enter into Stock Index 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. The Fund's potential liability generally will be
significantly in excess of that amount.
-- Writing Puts. The Fund may write puts on securities, securities
indices or Futures only if such puts are covered by segregated liquid
assets. The Fund may not write puts if, as a result, more than 50% of the
Fund's net assets would be required to be segregated liquid assets.
-- Foreign Currency Options. The Fund may purchase and write puts
and calls on foreign currencies that are traded on a securities or
commodities exchange or over-the-counter market or quoted by major
recognized dealers in such options, for the purpose of protecting against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If a rise is
anticipated in the dollar value of a foreign currency in which securities
to be acquired are denominated, the increased cost of such securities may
be partially offset by purchasing calls or writing puts on that foreign
currency. If a decline in the dollar value of a foreign currency is
anticipated, the decline in value of portfolio securities denominated in
that currency may be partially offset by writing calls or purchasing puts
on that foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would lose the premium it
paid and incur transactions costs.
-- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. The Fund may enter into a
Forward Contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which
has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a
foreign currency. There is a risk that use of Forward Contracts may
reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency.
-- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security,
(e.g., an exchange of floating rate payments for fixed rate payments).
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund. The
Fund may not enter into swap transactions with respect to more than 50%
of its total assets. The Fund will segregate liquid assets equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. There is a risk of loss
on a swap equal to the net amount of interest payments that the Fund is
contractually obligated to make. The credit risk of an interest rate swap
depends on the counterparty's ability to perform.
-- Risks of Options and Futures Trading. "Covered Calls and Hedging"
in the Additional Statement contains more information about options,
Futures, Forward Contracts, segregation arrangements for Forward Contracts
and the Fund's other limitations (which are not fundamental policies) on
investment in Futures and options thereon. There are certain risks in
writing calls. If a call written by the Fund is exercised, the Fund
foregoes any profit from any increase in the market price above the call
price of the underlying investment on which the call was written. In
addition, the Fund could experience capital losses which might cause
previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders. In writing puts, there
is the risk that the Fund may be required to buy the underlying security
at a disadvantageous price. The principal risks of Futures trading are:
(a) possible imperfect correlation between the prices of the Futures and
the market value of the debt securities in the Fund's portfolio; (b)
possible lack of a liquid secondary market for closing out a Futures
position; (c) the need for additional skills and techniques beyond those
required for normal portfolio management; and (d) losses on Futures
resulting from interest rate movements not anticipated by the Manager.
Short Sales Against-the-Box
The Fund may not sell securities short except in transactions
referred to as "short sales against-the-box." No more than 15% of the
Fund's net assets will be held as collateral for such short sales at any
one time. See "Short Sales Against-the-Box" in "Investment Objective and
Policies" in the Additional Statement for further details.
Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objective, are fundamental policies. Under some of those
restrictions, the Fund cannot: (1) with respect to 75% of its assets,
invest in the securities of any one issuer (other than the U.S. Government
or its agencies or instrumentalities) if immediately thereafter (a) more
than 5% of the Fund's total assets would be invested in securities of that
issuer, or (b) the Fund would then own more than 10% of that issuer's
voting securities; (2) 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
assets would consist of securities of companies in that industry; or (3)
deviate from the percentage restrictions listed in "Special Investment
Methods" under "Small, Unseasoned Companies," "Warrants and Rights,"
"Loans of Portfolio Securities," "Borrowing" and "Short Sales Against-the-
Box." The percentage restrictions described above and in the Additional
Statement apply 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
size of the Fund. A supplementary list of investment restrictions is
contained in "Investment Restrictions" in the Additional Statement.
Management of the Fund
The Fund's Board of Trustees has overall responsibility for the
management of the Fund under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. Subject to the authority
of the Board of Trustees, the Manager supervises the investment operations
of the Fund and the composition of its portfolio, and furnishes the Fund
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities pursuant to an investment
advisory agreement with the Fund (the "Agreement").
Robert C. Doll, Jr., is Vice President and Portfolio Manager of the
Fund, and has been the person principally responsible for the day-to-day
management of the Fund's portfolio since September, 1987. He is an
Executive Vice President of the Manager and an officer of other
OppenheimerFunds. For more information about the Fund's other officers
and Trustees, see "Trustees and Officers" in the Additional Statement.
The Agreement contains provisions relating to the selection of
brokers and dealers ("brokers") for the Fund's portfolio transactions.
Subject to the Agreement, the Manager may consider sales of shares of the
Fund and other funds advised by the Manager or its affiliates as a factor
in the selection of brokers for the Fund's portfolio transactions. Under
the Agreement, the Fund pays a management fee to the Manager monthly at
the following annual rates, which are higher than those paid by most other
investment companies: 0.75% of the first $200 million of net assets; 0.72%
of the next $200 million; 0.69% of the next $200 million; 0.66% of the
next $200 million; and 0.60% of net assets over $800 million.
"Investment Management Services" in the Additional Statement contains more
information about the Agreement, including a description of expense
reimbursement arrangements, exculpation provisions, and brokerage
practices of the Fund.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently advise U.S. investment
companies with assets aggregating over $26 billion as of December 31,
1993, and having more than 1.8 million shareholder accounts. The Manager
is owned by Oppenheimer Acquisition Corp., a holding company owned in part
by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies.
How To Buy Shares
Alternative Sales Arrangements
Two classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements." The investor may elect to purchase
shares with a sales charge imposed (1) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (2) on a contingent deferred
basis (the "Class B shares"). Only certain institutional investors may
elect to purchase a third class of shares at net asset value (the "Class
Y shares"). The contingent deferred sales charge will be imposed on most
redemptions of Class B shares within six years of purchase. The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to that investor depending on
the amount of the purchase, the length of time the investor expects to
hold the shares and other relevant circumstances. The Fund's distributor,
Oppenheimer Funds Distributor, Inc. (the "Distributor"), will not
knowingly accept any order for $1 million or more of Class B shares of one
or more of the "Eligible Funds" listed in "Right of Accumulation" below
on behalf of a single investor (not including dealer "street name" or
omnibus accounts) because it generally will be more advantageous for such
investor to purchase Class A shares of such Eligible Fund(s) instead.
Investors should understand that the purpose and function of the deferred
sales charge and asset-based sales charges with respect to Class B shares
are the same as those of the initial sales charge with respect to Class
A shares. Any financial intermediary or other person entitled to receive
compensation for selling or servicing Fund shares may receive different
compensation with respect to one class of shares than the other.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
For each class, the net income attributable to that class and the
dividends payable on its shares will be reduced by incremental expenses
borne solely by that class, including the asset-based sales charge to
which Class B shares are subject and the service plan fees to which Class
A and Class B shares are subject. For further information, see "Purchase,
Redemption and Pricing of Shares" in the Additional Statement.
The Fund's Class A and Class B shares may be purchased through any
dealer or broker which has a sales agreement with the Distributor, a
subsidiary of the Manager. There are two ways to make an initial
investment in shares of these two classes: either (1) complete an
OppenheimerFunds New Account Application and mail it with payment to the
Distributor at P.O. Box 5270, Denver, Colorado 80217 (if no dealer or
broker is named in the Application, the Distributor will be listed as the
dealer of record), or (2) order the shares through your dealer or broker.
Be certain to specify whether you wish to purchase Class A shares or Class
B shares. If no such instructions are provided, initial investments will
be made in Class A shares and subsequent investments will be made in the
same class as the most recent previous investment.
The minimum initial investment in Class A or Class B shares is
$1,000, except as otherwise described in this Prospectus. Subsequent
purchases must be at least $25 and may be made (1) through authorized
dealers or brokers, (2) by forwarding payment to the Distributor at the
above address with the names of all account owners, the account number and
the name of the Fund, (3) automatically through Asset Builder Plans or by
telephone using AccountLink or PhoneLink, described below, or (4) by
telephone using AccountLink, described below. Under an Asset Builder
Plan, Automatic Exchange Plan, military allotment plan or 403(b)(7)
custodial plan, initial and subsequent investments must be at least $25.
The minimum initial and subsequent purchase requirements are waived on
purchases made by reinvesting dividends from any of the "Eligible Funds"
listed in "Right of Accumulation," below, or by reinvesting distributions
from unit investment trusts for which reinvestment arrangements have been
made with the Distributor. No share certificates will be issued for Class
B or Class Y shares, and no share certificates will be issued for Class
A shares unless specifically requested in writing by an investor or the
dealer or broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day the New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Trustees has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities not having readily-available market
quotations; (ii) short-term debt securities; and (iii) covered calls and
Hedging Instruments. Further details are in "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. The net asset values per
share of Class A, Class B and Class Y shares will differ due to
differences in expenses borne by each class, as discussed under "Purchase,
Redemption and Pricing of Shares - Multiple Class Methodology" in the
Additional Statement.
All purchase orders received by the Distributor at its address in
Denver, Colorado, prior to 4:00 P.M. on a regular business day are
processed at that day's offering price. However, an order received by the
Distributor from a dealer or broker after the offering price is determined
that day will receive such offering price if the order was received by
the dealer or broker from its customer prior to 4:00 P.M. and was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Purchase orders received on other
than a regular business day will be executed on the next succeeding
regular business day. The Distributor, in its sole discretion, may accept
or reject any order for the purchase of the Fund's shares. The sale of
shares will be suspended during any period in which the determination of
net asset value is suspended and may be suspended by the Board of Trustees
whenever the Board judges it in the best interest of the Fund to do so.
Class A Shares
Class A shares are sold at their offering price, which (as that term
is used in this Prospectus and the Additional Statement) is net asset
value plus a front-end sales charge, except that as to certain purchases
described below that are not subject a front-end sales charge, the
offering price is net asset value. The offering price is determined as
of 4:00 P.M. each regular business day. Class A shares may not be
converted into Class B or Class Y shares.
The following table shows the regular front-end sales charge rates
for Class A shares for a "single purchaser" (defined below), together
with the dealer discounts paid to authorized dealers and the agency
commissions paid to authorized brokers (collectively, "commissions"):
- ------------------------------------------------------------------
Front-End
Front-End Sales
Sales Charge as
Charge as Approximate
Percentage Percentage Commission as
of Offering of Amount Percentage of
Amount of Purchase Price Invested Offering Price
- ------------------ ----------- ----------- --------------
Less than $25,000 5.75% 6.10% 4.75%
- ------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- ------------------------------------------------------------------
$1 million or more None* None* None*
- ------------------------------------------------------------------
* See, "Class A Contingent Deferred Sales Charge," below.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be reallowed to dealers or brokers, who might then
be deemed to be "underwriters" under the Securities Act of 1933.
Commission rates may vary among the funds for which the Manager and its
affiliates act as investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (both terms are defined below) in a calendar year, the dealer firm
is eligible to send such representative, with a guest, to a three-day
sales conference (generally held in a resort), if one is sponsored and
held by the Distributor; or in lieu of sending such representative, that
firm may, at its option, receive the equivalent cash value of such award
as additional commission. The Distributor may, from time to time, enter
into arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the "Eligible
Funds" held by the dealer and/or its customers, or some combination
thereof.
Dealers whose sales of Class A shares of "Eligible Funds" other than
"Money Market Funds" under OppenheimerFunds-sponsored 403(b)(7) custodial
plans exceed a rate of $5 million per year, calculated per calendar
quarter, will receive monthly one-half of the Distributor's retained
commission on such sales. Dealers whose sales of such plans exceed a rate
of $10 million per year, calculated per calendar quarter, will receive the
Distributor's entire retained commission on such sales; such dealers also
may be deemed to be "underwriters" as described above.
-- Class A Contingent Deferred Sales Charge. On certain purchases
of Class A shares of any one or more "Eligible Funds" by a "single
purchaser" (both terms are defined below in "Right of Accumulation")
aggregating $1 million or more, the Distributor will pay authorized
dealers an amount equal to 1.0% of the first $2.5 million of such
purchases, plus 0.50% of the next $2.5 million, plus 0.25% of such
purchases in excess of $5 million. However, that commission will be paid
only on the amount of those share purchases in excess of $1 million that
were not previously subject to a front-end sales charge and dealer
commissions (the shares with respect to which this commission is paid are
called "Class A CDSC shares"). A contingent deferred sales charge (the
"Class A CDSC") will be deducted from the redemption proceeds of Class A
CDSC shares redeemed within 18 months of the end of the calendar month of
their purchase. The Class A CDSC will be an amount equal to 1.0% of the
lesser of either (1) the aggregate net asset value of the redeemed shares
(not including shares purchased by reinvestment of dividends or capital
gains) or (2) the original cost of such shares. However, the total Class
A CDSC paid on such shares shall not exceed the aggregate commissions paid
to dealers on all Class A CDSC shares of "Eligible Funds" purchased by
that "single purchaser."
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" and will be waived in the case of
redemptions of shares made for: (i) retirement distributions (or loans)
to participants or beneficiaries from retirement plans qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") or from Individual Retirement Accounts ("IRAs"),
403(b)(7) plans, deferred compensation plans created under Section 457 of
the Code or other employee benefit plans (collectively, "Retirement
Plans"); (ii) returns of excess contributions to such Retirement Plans;
(iii) Automatic Withdrawal Plan payments limited to no more than 12% of
the original account value annually; and (iv) involuntary redemptions of
shares by operation of law or under procedures set forth in the Fund's
Declaration of Trust or as adopted by the Board of Trustees (collectively,
"Involuntary Redemptions"). See "Transfers" in "Purchase, Redemption and
Pricing of Shares" in the Additional Statement for further details.
Some or all of the proceeds of redeemed shares on which a Class A
CDSC was paid on redemption may be reinvested within 6 months of
redemption without sales charge at net asset value on the reinvestment
date if the investor notifies the Distributor that the privilege applies.
See "How to Redeem Shares - Reinvestment Privilege" below. Additionally,
no Class A CDSC is charged on exchanges, pursuant to the Fund's exchange
privilege, of shares purchased subject to a Class A CDSC, except that if
the Class A shares acquired by exchange are redeemed within 18 months of
the end of the calendar month of the initial purchase of the exchanged
shares, the Class A CDSC will apply. In determining whether a Class A
CDSC is payable, and the amount of any such charge, shares not subject to
a Class A CDSC are redeemed first, including shares purchased by
reinvestment of dividends and capital gains distributions, and then other
shares are redeemed in the order of purchase.
-- Reduced Sales Charges For Class A Purchases. The Class A sales
charge rates in the table above may be reduced as follows:
Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a "single purchaser"
(defined below) is entitled to cumulate current purchases with the greater
of: (1) amounts previously paid for, or (2) the current value (at offering
price) of, Class A shares of certain other "Eligible Funds" and of the
Fund if sold subject to an initial sales charge and if the investment is
still held in one of the Eligible Funds. The Eligible Funds are those for
which the Distributor or an affiliate acts as the distributor and include
the following: (i) the Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer High Yield Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Insured Tax-Exempt Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, Oppenheimer Investment Grade Bond Fund, Oppenheimer
Value Stock Fund, Oppenheimer New York Tax-Exempt Fund, Oppenheimer
Florida Tax-Exempt Fund, Oppenheimer New Jersey Tax-Exempt Fund,
Oppenheimer Strategic Income Fund, Oppenheimer Strategic Investment Grade
Bond Fund, Oppenheimer Strategic Income & Growth Fund, Oppenheimer
Strategic Short-Term Income Fund, Oppenheimer Discovery Fund, Oppenheimer
Target Fund, Oppenheimer Champion High Yield Fund, Oppenheimer Time Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Government Securities Fund,
Oppenheimer Global Environment Fund, Oppenheimer Global Growth & Income
Fund, Oppenheimer Global Bio-Tech Fund, Oppenheimer Fund, Oppenheimer
Global Fund, Oppenheimer Asset Allocation Fund, Oppenheimer Mortgage
Income Fund, Oppenheimer Equity Income Fund, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Main Street Income & Growth Fund and
Oppenheimer Main Street California Tax-Exempt Fund; (ii) the following
"Money Market Funds": Centennial Tax Exempt Trust, Centennial Money Market
Trust, Centennial America Fund, L.P., Centennial Government Trust,
Centennial California Tax Exempt Trust, Centennial New York Tax Exempt
Trust, Oppenheimer Money Market Fund, Inc., Daily Cash Accumulation Fund,
Inc., Oppenheimer Cash Reserves and Oppenheimer Tax-Exempt Cash Reserves.
There is an initial sales charge on the purchase of Class A shares of each
Eligible Fund except the Money Market Funds (under certain circumstances
described above, redemption proceeds of Money Market Fund shares may be
subject to a CDSC). The reduced sales charge applies only to current
purchases.
The term "single purchaser" refers to: (i) an individual; (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer. To
be entitled to a reduced sales charge under the Right of Accumulation, at
the time of purchase the purchaser must ask the Distributor for such
entitlement and provide the account number(s) for shares of Eligible Funds
owned by the "single purchaser," and the age of any minor children for
whom shares are held.
Letter of Intent. By initially investing at least $1,000 and
submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase Class A shares of the Fund and the other Eligible
Funds (other than the Money Market Funds) during a 13-month period at the
reduced sales charge rates or at net asset value but subject to the Class
A CDSC (described above), if applicable, applying to the aggregate amount
of the intended purchases stated in the Letter. The Letter may apply to
purchases made up to 90 days before the date of the Letter. The Fund and
the Distributor reserve the right to amend or terminate such program at
any time. For further details, including escrow requirements, see
"Letters of Intent" in the Additional Statement.
Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present and
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers or of financial
institutions that have entered into a sales arrangement with such dealer
or broker or the Distributor (and are identified to the Distributor by
such dealer or broker); the purchaser must certify to the Distributor at
the time of purchase that such purchase is for its own account (or for the
benefit of such employee's minor children); (v) sold to dealers, brokers
or registered investment advisers that have entered into an agreement with
the Distributor providing specifically for the use of shares of the Fund
in particular investment products made available to the clients of the
dealer, broker or registered investment adviser; or (vi) purchased by the
reinvestment of (a) loan repayments by a participant in a retirement plan
for which the Manager or its affiliates act as sponsor, or (b) dividends
or other distributions reinvested from the Fund or other "Eligible Funds"
(other than Cash Reserves Funds) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor. "Reduced
Sales Charges" in the Additional Statement discusses this policy.
-- Class A Service Plan. The Fund has adopted a Service Plan (the
"Class A Plan") under Rule 12b-1 of the Investment Company Act pursuant
to which the Fund will reimburse the Distributor for all or a portion of
its costs incurred in connection with the personal service and maintenance
of accounts that hold Class A shares. The Distributor will use such fees
received from the Fund in their entirety: (i) to compensate brokers,
dealers, banks and other institutions ("Recipients") each quarter for
providing personal service and maintenance of accounts that hold Class A
shares; and (ii) to reimburse itself (to the extent authorized by the
Board of Trustees) for its other expenditures under the Plan and for its
direct costs for personal service and maintenance of accounts. The Board
of Trustees has not presently authorized any reimbursement to the
Distributor under (ii) above. The services to be provided under the Class
A Plan include, but shall not be limited to, the following: answering
routine inquiries from the Recipient's customers concerning the Fund,
providing such customers with information on their investment in Class A
shares, assisting in the establishment and maintenance of accounts or sub-
accounts in the Fund, making the Fund's investment plans and dividend
payment options available, and providing such other information and
customer liaison services and the maintenance of accounts as the
Distributor or the Fund may reasonably request.
The Distributor will be reimbursed only for quarterly payments made
to each Recipient at a rate not to exceed 0.0625% (0.25% annually) of the
average net asset value of Class A shares owned by the Recipient or its
customers. Initially, the Board of Trustees has set the fee for assets
sold on or after April 1, 1991 at the maximum rate, with a reduced rate
to apply to assets representing Class A shares sold before April 1, 1991.
The Board may increase the fee for assets sold before April 1, 1991, but
not above the maximum rate. In no instance is there any minimum amount.
Under the Service Plan, any unreimbursed expenses incurred during any
quarter by the Distributor may not be recovered in later periods. The
Fund will not be charged for any interest expense, carrying charges or
other financial costs, or allocation of overhead by the Distributor.
The Class A Plan has the effect of increasing annual expenses of
Class A shares of the Fund by up to 0.25% of the class's average annual
net assets. In addition, the Manager and the Distributor may, under the
Class A Plan, from time to time from their own resources (which, as to the
Manager, may include profits derived from the advisory fee it receives
from the Fund) make payments to Recipients for distribution and
administrative services they perform. For further details, see
"Distribution and Service Plans" in the Additional Statement.
Class B Shares
Class B shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase.
-- Class B Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class B CDSC") will be deducted from the redemption
proceeds of Class B shares redeemed within six years of their purchase
(not including shares purchased by reinvestment of dividends or capital
gains). The charge will be assessed on an amount equal to the lesser of
the then current net asset value or the original purchase price of the
Class B shares being redeemed. Accordingly, no Class B CDSC will be
imposed on amounts representing increases in net asset value above the
initial purchase price (including increases due to reinvestment of
dividends or capital gains). In determining whether a Class B CDSC
applies to a redemption, Class B shares are redeemed in the following
order: (1) those acquired pursuant to reinvestment of dividends or
distributions, (2) those held for over six years, and (3) those held
longest during the six-year period.
Proceeds from the Class B CDSC are paid to the Distributor and are
used by it to reimburse its expenses related to providing
distribution-related services to the Fund in connection with the sale of
Class B shares. The combination of the Class B CDSC and the distribution
fee retained by the Distributor (as described under "Class B Distribution
and Service Plan") facilitates the sale of Class B shares without a sales
charge being deducted at the time of purchase. Any Class B CDSC required
to be imposed on Class B share redemptions will be assessed according to
the following schedule:
Contingent Deferred
Year(s) Since Sales Charge
Purchase Order in That Year (as % of
Was Accepted Applicable Proceeds)
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 or more None
In the table above, a "year" is a period of twelve months. In
determining the amount of the Class B CDSC that applies and when Class B
shares convert to Class A shares as described in the paragraph below, all
purchases shall be considered as having been made on the first regular
business day of the month in which the purchase was made. The Class B
CDSC will be waived upon the request of the shareholder for redemptions
for: (1) distributions to participants or beneficiaries from Retirement
Plans, which distributions are made either (a) under an Automatic
Withdrawal Plan (described under "How to Redeem Shares") after the
participant attains age 59-1/2, and which are limited to no more than 10%
of the account value annually (determined in the first year, as of the
date the redemption request is received by the Transfer Agent, and in
subsequent years, as of the most recent anniversary of that date) or (b)
following the participant's or beneficiary's (i) "disability" (as defined
in the Internal Revenue Code) that occurs since the account was
established, or (ii) death; (2) redemptions other than from Retirement
Plans following the (i) death or (ii) complete disability (as evidenced
by a certificate from the U.S. Social Security Administration) of all
persons individually owning such shares of record and not as fiduciaries
or agents, that occurs since the account was established; and (3) returns
of excess contributions to such Retirement Plans.
In addition, no Class B CDSC is imposed on shares of the Fund: (i)
sold to the Manager or its affiliates; (ii) sold to registered investment
companies or separate accounts of insurance companies having an agreement
with the Manager or the Distributor; (iii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers
to which the Fund is a party; or (iv) redeemed in Involuntary Redemptions.
See "Transfers" in "Purchase, Redemption and Pricing of Shares" in the
Additional Statement for details.
-- Class B Conversion Feature. At the end of the month seventy-two
months after an investor's purchase order for Class B shares is accepted,
such "Matured Class B Shares" automatically will convert to Class A
shares, on the basis of the relative net asset value of the two classes,
without the imposition of any sales load or other charge. Each time any
Matured Class B shares convert to Class A shares, any Class B shares
acquired by the reinvestment of dividends or distributions on such Matured
Class B shares that are still held will also convert to Class A Shares,
on the same basis. The conversion feature is intended to relieve holders
of Matured Class B shares of the asset-based sales charge under the Class
B Plan (as defined below) after such shares have been outstanding long
enough that the Distributor may have been compensated for distribution
expenses related to such shares.
The conversion of Matured Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or a tax adviser, to
the effect that the conversion of Matured Class B shares does not
constitute a taxable event for the holder under the Federal income tax
law. If such a private letter ruling or opinion is no longer available,
the automatic conversion feature may be suspended, in which event no
further conversions of Matured Class B shares would occur while such
suspension remained in effect. Although Matured 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.
-- Class B Distribution and Service Plan. The Fund has adopted a
Plan of Distribution and Service (the "Class B Plan") under Rule 12b-1 of
the Investment Company Act, pursuant to which it will compensate the
Distributor for its services and costs incurred in connection with the
distribution and service of the Fund's Class B shares. Pursuant to the
Class B Plan, the Fund will pay the Distributor an asset-based sales
charge of 0.75% per annum on Class B shares outstanding for six years or
less, plus a service fee of 0.25% per annum, each of which is computed on
the average net assets of Class B shares of the Fund determined as of the
close of each regular business day.
The Distributor will use the service fee payment to compensate
Recipients for providing personal service and the maintenance of
shareholder accounts that hold Class B shares, examples of which are
described under "Class A Service Plan." Service fee payments by the
Distributor to Recipients will be made (i) in advance for the first year
Class B shares are outstanding, following the purchase of such shares, in
an amount equal to 0.25% of the net asset value of the Class B shares
purchased by the Recipient or its customers and (ii) thereafter, on a
quarterly basis, computed as of the close of business each day at an
annual rate of 0.25% of the net asset value of Class B shares held in
accounts of the Recipient or its customers. Other terms and options under
the Class B Plan for payment of the service fee by the Distributor to
Recipients, and other terms and conditions of the Class B Plan are
described under "Distribution and Service Plans" in the Additional
Statement. Asset-based sales charges and service fees will be paid by the
Fund to the Distributor monthly and quarterly, respectively.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 3.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The
asset-based sales charge payments by the Fund to the Distributor under the
Class B Plan are intended to allow it to recoup such sales commissions
plus financing costs. The Distributor anticipates that it will take a
number of years to recoup the sales commissions paid to authorized brokers
or dealers from the Fund's payments to the Distributor under the Class B
Plan.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2 million was recovered in the
form of contingent deferred sales charges paid by investors and $1.6
million was reimbursed in the form of payments made by the Fund to the
Distributor under the Class B Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
The Class B Plan contains a provision that contractually obligates
the Fund to continue payments to the Distributor for certain expenses
incurred for Class B shares sold prior to termination of the Class B Plan.
If the Class B Plan is terminated, the Distributor is entitled to continue
to receive the asset-based sales charge of 0.75% per annum on Class B
shares sold prior to termination until the Distributor has recovered its
Class B distribution expenses (incurred prior to termination) from such
payments and from the Class B CDSC.
The Fund believes that under applicable accounting standards, its
obligation under the Class B Plan to pay any asset-based sales charges in
future periods is not required to be recognized as a liability. In the
future, if applicable accounting standards should be deemed to require
that obligation to be recognized as a liability, a decrease in the net
asset value per share of Class B shares could result. Were that to occur,
such decrease would affect all Class B shares regardless of how long the
shares were held. Furthermore, Class B shareholders would continue to
remain subject to the Class B CDSC. The accounting treatment of the
Fund's obligations under the Class B Plan for future payments is discussed
in "Distribution and Service Plans" in the Additional Statement. The
accounting standards now used are currently under review by the American
Institute of Certified Public Accountants and it is possible that those
standards will change and that the Fund's Class B Plan would be changed
as a result.
The Class B Plan has the effect of increasing annual expenses of
Class B shares of the Fund by up to 1.00% of the class's average annual
net assets from what its expenses would otherwise be. In addition, the
Manager and the Distributor may, under the Class B Plan, from time to time
from their own resources (which, as to the Manager, may include profits
derived from the advisory fee it receives from the Fund) make payments to
Recipients for distribution and administrative services they perform. For
further details, see "Distribution and Service Plans" in the Additional
Statement.
Purchase Programs for Class A and Class B Shares
-- AccountLink. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House ("ACH") member.
AccountLink can be used to transmit funds by electronic funds transfers
for account transactions, including subsequent share purchases. The
minimum investment by AccountLink is $25. Purchases of up to $250,000 may
be made by telephone using AccountLink (the maximum is $100,000 if the
transaction is done by PhoneLink, described below). To speak to service
operators to initiate such purchases, call the Distributor at 1-800-852-
8457. All such calls will be recorded. To initiate such purchases
automatically using PhoneLink, call 1-800-533-3310. Shares will be
purchased on the regular business day the Distributor is instructed to
initiate the ACH transfer to buy the shares. Dividends will begin to
accrue on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally three
days after the ACH transfer is initiated. If such Federal Funds are
received after that time, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How To Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends and Distributions"). AccountLink privileges must be requested
on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent
signature-guaranteed instructions to the Transfer Agent from all
shareholders of record for an account, and such privileges thereupon apply
to each shareholder of record and the dealer representative of record
unless and until the Transfer Agent receives written instructions from a
shareholder of record canceling such privileges. Changes of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent by all shareholders of record for an account. The Transfer
Agent, the Fund and the Distributor have adopted reasonable procedures to
confirm that telephone instructions under AccountLink (described above)
and "PhoneLink," "Telephone Redemptions" or the "Exchange Privilege"
(described below) are genuine, by requiring callers to provide tax
identification number(s) and other account data and by recording calls and
confirming such transactions in writing. If the Transfer Agent and the
Distributor do not use such procedures, they may be liable for losses due
to unauthorized transactions, but otherwise they will not be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. The Fund reserves the right to amend, suspend or
discontinue AccountLink privileges at any time without prior notice.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege," below), redemptions (see "How
To Redeem Shares - Telephone Redemptions," below) and purchases (see
"AccountLink," above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Identification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-- Asset Builder Plans. Investors may purchase shares of the Fund
(and up to four other Eligible Funds) automatically under Asset Builder
Plans. With AccountLink, Asset Builder Plans may be used to make regular
monthly investments ($25 minimum) from the investor's account at a bank
or other financial institution. See "AccountLink" above for details. 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 Redeem
Shares." Asset Builder Plans also enable shareholders of Oppenheimer Tax-
Exempt Cash Reserves or Oppenheimer Cash Reserves to use those accounts
for monthly automatic purchases of shares of up to five Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after 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.
Class Y Shares
Class Y Shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase to separate accounts
of insurance companies and other institutional investors ("Class Y
Sponsors") having an agreement ("Class Y Agreements") with the Manager or
the Distributor. The intent of Class Y Agreements is to allow tax
qualified institutional investors to invest indirectly (through separate
accounts of the Class Y Sponsor) in Class Y Shares of the Fund and to
allow institutional investors to invest directly in Class Y shares of the
Fund. Individual investors are not permitted to invest directly in Class
Y Shares. As of the date of this Prospectus, it is anticipated that
Massachusetts Mutual Life Insurance Company (an affiliate of the Manager
and the Distributor) will act as Class Y Sponsor for any outstanding Class
Y Shares of the Fund. While Class Y shares are not subject to a
contingent deferred sales charge, asset-based sales charge or service fee,
a Class Y sponsor may impose charges on separate accounts investing in
Class Y shares.
None of the instructions described elsewhere in this Prospectus or
the Additional Statement for the purchase, redemption, reinvestment,
exchange or transfer of shares of the Fund or the reinvestment of
dividends apply to its Class Y shares. Clients of Class Y Sponsors must
request their Sponsor to effect all transactions in Class Y shares on
their behalf.
How To Redeem Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates) under the Fund's regular redemption
procedures, a shareholder must send the following to the Fund's transfer
agent, Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box
5270, Denver, Colorado 80217 [send courier or Express Mail deliveries to
10200 E. Girard Avenue, Building D, Denver, Colorado 80231]: (1) a written
request for redemption signed by all registered owners exactly as the
account is registered, including fiduciary titles, if any, and specifying
the account number and the dollar amount or number of shares to be
redeemed; (2) a guarantee of the signatures of all registered owners on
the redemption request or on the endorsement on the share certificate or
accompanying stock power, by a U.S. bank, trust company, credit union or
savings association, or a foreign bank having 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, registered securities association or clearing agency; (3) any
share certificates issued for any of the shares to be redeemed; and (4)
any additional documents which may be required by the Transfer Agent for
redemption by corporations, partnerships or other organizations,
executors, administrators, trustees, custodians, guardians, or from an
OppenheimerFunds-sponsored IRA or other retirement plan, or if the
redemption is requested by anyone other than the shareholder(s) of record.
Transfers of shares are subject to similar requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record, to be sent
to the address of record for that account. To avoid delay in redemption
or transfer, shareholders having questions about these requirements should
contact the Transfer Agent in writing or by calling 1-800-525-7048 before
submitting a request. From time to time the Transfer Agent in its
discretion may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in the proper
form.
Telephone Redemptions
To redeem shares by telephone through a service representative, call
the Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically, without a service representative, call 1-800-533-3310.
Under either method of telephone redemption, proceeds may be paid through
check or through AccountLink as described below. The Transfer Agent may
record any calls. Telephone redemptions may not be available if all lines
are busy, and shareholders would have to use the Fund's regular redemption
procedure described above. Requests received by the Transfer Agent prior
to 4:00 P.M. on a regular business day will be processed at the net asset
value per share determined that day. Telephone redemption privileges are
not available for newly-purchased (within the prior 15 days) shares, for
OppenheimerFunds-sponsored retirement plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from a shareholder of record.
If an account has multiple owners, the Transfer Agent may rely on the
instructions of any one owner.
-- Telephone Redemptions Paid by Check. If redemption proceeds are
paid by check, up to $50,000 may be redeemed by telephone, once in every
seven day period, and the check must be payable to the shareholder(s) of
record and sent to the address of record for the account. Telephone
redemptions paid by check are not available within 30 days of a change of
address of record.
-- Redemptions by AccountLink. If AccountLink privileges have been
established for an account, any amount may be redeemed by telephone, wire
or written instructions to the Transfer Agent, and the ACH transfer of the
redemption proceeds to the designated bank account normally will be
initiated by the Transfer Agent on the next bank business day after the
redemption. There are no dollar or frequency limitations on telephone
redemptions sent to a designated bank account through AccountLink. No
dividends are paid on the proceeds of redeemed shares awaiting transmittal
by ACH transfer. See "AccountLink" under "How To Buy Shares" for
instructions on establishing this privilege.
Distributions from Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, or pension or profit-sharing plans for which
the Manager or its affiliates act as sponsors should be addressed to
"First Interstate Bank of Denver, N.A., c/o Oppenheimer Shareholder
Services" at the above address, and 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 redemption requirements above. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts; the employer or plan administrator must sign the request.
Distributions from such plans are subject to additional 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 penalties assessed.
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 or annual basis under an Automatic Withdrawal
Plan. Shares will be redeemed three business days prior to the date
requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone if
payments are by check payable to all shareholders of record and sent to
the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments wired to the bank account designated
on the OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of the payment on the
date requested and reserves the right to amend, suspend or discontinue
offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not
make regular additional Class A purchases while participating in an
Automatic Withdrawal Plan. Class B shareholders normally should not
establish withdrawal plans, because of the imposition of the Class B CDSC
on such withdrawals (except where the Class B CDSC is waived as described
in "Class B Contingent Deferred Sales Charge"). For further details,
refer to "Automatic Withdrawal Plan Provisions" in the Additional
Statement.
Shareholders can also authorize the Transfer Agent to exchange a pre-
determined amount (minimum $25) of shares of the Fund for shares of up to
four other "Eligible Funds" automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. Exchanges made
pursuant to such Plans are subject to the conditions and terms applicable
to exchanges described in "Exchange Privilege" below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received by the Distributor from dealers or
brokers after 4:00 P.M. on a regular business day will be processed at
that day's net asset value if such orders were received by the dealer or
broker from its customers prior to 4:00 P.M. and are transmitted to and
received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required documents, with
signature(s) guaranteed as described above.
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 CDSC when redeemed, in Class A
shares of the Fund or any of the Eligible Funds into which shares of the
Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order.
The shareholder must ask the Distributor for such entitlement at the time
of reinvestment. A realized gain on the redemption is taxable, and
reinvestment will not alter any capital gains tax payable. If there has
been a loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and the amount reinvested in the Fund.
Under the Internal Revenue Code, if the redemption proceeds of Fund shares
on which sales charges were paid are reinvested in shares of the Fund or
another Eligible Fund within 90 days of payment of the sales charge, the
shareholder's basis in the Fund shares redeemed may not include the amount
of the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption. The Fund may amend, suspend or cease
offering this privilege at any time as to shares redeemed after the date
of such amendment, suspension or cessation.
General Information on Redemptions
The redemption price will be the Fund's net asset value per share
next determined after the Transfer Agent receives redemption instructions
in proper form. The market value of the securities in the Fund's
portfolio is subject to daily fluctuations and the net asset value of each
class of the Fund's shares will fluctuate accordingly. Therefore, the
redemption value may be more or less than the investor's cost. Under
certain unusual circumstances, shares may be redeemed in kind (i.e., by
payment in portfolio securities). The Fund may involuntarily redeem small
accounts (if the account has fallen below $500 in value for reasons other
than market value fluctuations) and may redeem shares in amounts
sufficient to compensate the Distributor for any loss due to cancellation
of a share purchase order; for details, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. Under the Internal
Revenue Code, the Fund may be required to impose "backup" withholding of
Federal income tax at the rate of 31% from dividends, distributions and
redemption proceeds (including exchanges), if the shareholder has not
furnished the Fund a certified tax identification number or has not
complied with provisions of the Code relating to reporting dividends.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of receipt by the Transfer Agent of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently purchased shares only until the purchase
payment has cleared, which may take up to 15 or more days from the
purchase date. Such delay may be avoided if the shareholder arranges
telephone or written assurance satisfactory to the Transfer Agent from the
bank on which payment is drawn. The Fund makes no charge for redemption.
Dealers or brokers may charge a fee for handling redemption transactions,
but such charge can be avoided by requesting the redemption directly by
the Fund through the Transfer Agent. Under certain circumstances, the
Class A and Class B CDSCs described under "How to Buy Shares" may apply
to the proceeds of redemptions.
Exchanges of Shares and Retirement Plans for Class A or Class B Shares
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed in "Right
of Accumulation" may be exchanged at net asset value per share at the time
of exchange, without sales charge, if all of the following conditions are
met: (1) shares of the fund selected for exchange are available for sale
in the shareholder's state of residence; (2) the respective prospectuses
of the funds whose shares are to be exchanged and acquired offer the
Exchange Privilege to the investor; (3) newly-purchased (by initial or
subsequent investment) shares are held in an account for at least 7 days
and all other shares at least 1 day prior to the exchange; and (4) the
aggregate net asset value of shares surrendered for exchange is at least
equal to the minimum investment requirements of the fund whose shares are
to be acquired.
In addition to the conditions stated above, shares of a particular
class of an Eligible Fund may be exchanged only for shares of the same
class of another Eligible Fund. If a Fund has only one class of shares
that is not otherwise denominated, its shares shall be considered "Class
A" shares for this purpose. All of the Eligible Funds offer Class A
shares, but only certain Eligible Funds offer Class B shares and/or Class
Y shares and a list can be obtained by calling the Distributor at 1-800-
525-7048, or by referring to "Purchase, Redemption and Pricing of Shares"
in the Additional Statement.
In addition, Class A shares of Eligible Funds may be exchanged for
shares of any Money Market Fund; shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Eligible Funds
offered with a sales charge upon payment of the sales charge or, if
applicable, may be used to purchase shares of Eligible Funds subject to
a CDSC; and shares of this Fund acquired by reinvestment of dividends or
distributions from any other Eligible Fund 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 Eligible
Fund. No CDSC is imposed on exchanges of shares of any class purchased
subject to a CDSC. However, when Class A shares acquired by exchange of
Class A shares purchased subject to a Class A CDSC are redeemed within
eighteen months of the end of the calendar month of the initial purchase
of the exchanged Class A shares, the Class A CDSC is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge," above),
and the Class B CDSC is imposed on class B shares redeemed within six
years of the end of the calendar month of this initial purchase of the
exchanged Class B shares (see "Class B Contingent Deferred Sales Charge,"
above).
How to Exchange Shares. An exchange may be made by either: (1)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (2) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time on 60 days'
notice, if such notice is required by regulations adopted under the
Investment Company Act. The Fund reserves the right to reject telephone
or written exchange requests submitted in bulk on behalf of 10 or more
accounts. Telephone and written exchange requests must be received by the
Transfer Agent by 4:00 P.M. on a regular business day to be effected that
day. The number of shares exchanged may be less than the number requested
if the number requested would include shares subject to a restriction
cited above or shares covered by a certificate that is not tendered with
such request. Only the shares available for exchange without restriction
will be exchanged.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" for the imposition of the
Class B CDSC will be followed in determining the order in which shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any CDSC that may be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of both classes must specify whether they intend to exchange Class A or
Class B shares.
-- Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink, by calling 1-800-533-3310.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), shareholders might not be
able to request telephone exchanges and would have to submit written
requests. Telephone exchange calls may be recorded by the Transfer Agent.
Telephone exchanges are subject to the rules described above. By
exchanging shares by telephone, the shareholder is acknowledging receipt
of a prospectus of the fund to which the exchange is made and that for
full or partial exchanges, any special account features such as Asset
Builder Plans, Automatic Withdrawal or Exchange Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is otherwise instructed. Telephone exchange privileges
automatically apply to each shareholder of record and the dealer
representative of record unless and until the Transfer Agent receives
written instructions from a shareholder of record canceling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on the instructions of any one owner. The Transfer Agent and the
Fund will not be responsible for the authenticity of telephone
instructions and will not be responsible for any loss, damage, cost or
expense arising out of any telephone instructions received for an account
that the Transfer Agent reasonably believes to be authentic. The Transfer
Agent reserves the right to require shareholders to confirm in writing
their election of telephone exchange privileges for an account. Shares
acquired by telephone exchange must be registered exactly as the account
from which the exchange was made. Certificated shares are not eligible
for telephone exchange.
-- General Information on Exchanges. Shares to be exchanged are
redeemed on the 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 in its discretion reserves the right to refuse any
exchange request that will disadvantage it.
The Eligible Funds have different investment objectives and policies.
For complete information, including charges and expenses, a prospectus of
the fund into which the exchange is being made should be read prior to an
exchange. A $5 service charge will be deducted from the account into
which the exchange is made to help to defray administrative costs. That
charge is waived for telephone exchanges made by PhoneLink between
existing accounts. Dealers or brokers who process exchange orders on
behalf of their customers may charge for their services. Those charges
may be avoided by requesting the Fund directly to exchange shares. For
Federal tax purposes, an exchange is treated as a redemption and purchase
of shares. (See "How to Redeem Shares - Reinvestment Privilege" for a
discussion of certain tax effects of exchanges.) No sales commissions are
paid by the Distributor on exchanges of shares (unless a front-end sales
charge is assessed on the exchange).
Pursuant to telephone exchange agreements with the Distributor,
certain dealers, brokers and investment advisers may exchange their
clients' Fund shares by telephone, subject to the terms of the agreements
and the Distributor's right to reject or suspend such telephone exchanges
at any time. Because of the restrictions and procedures under such
agreement, such exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders
directly, as described above.
Retirement Plans
The Distributor has available: (i) pension and profit-sharing plans
for corporations and self-employed individuals, (ii) Individual Retirement
Accounts (IRAs), including Simplified Employee Pension Plans ("SEP IRAs"),
and (iii) 403(b)(7) custodial plans for employees of qualified employers.
Loans are permitted only from OppenheimerFunds 403(b)(7) plan accounts
holding Class A shares. The minimum initial investment for pension and
profit-sharing plans is $250, and is $250 for IRAs unless made under an
Asset Builder Plan. The Fund reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. For
further details, including the administrative fees, the appropriate
retirement plan should be requested from the Distributor.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws and is not
exhaustive; a qualified tax advisor should be consulted. Dividends and
distributions may also be subject to state and local taxation. See
"Covered Calls and Hedging" and "Tax Status of the Fund's Dividends and
Distributions" in the Additional Statement for more information on the tax
aspects of the Fund's investment in Hedging Instruments and other tax
matters.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A and
Class B and Class Y shares on an annual basis in December each year, on
a date set by the Board of Trustees. As current income is not an
objective of the Fund, the amount of dividends from net investment income
will likely be small. In addition, distributions may be made annually in
December out of any net short-term or long-term capital gains realized
from the sale of securities, premiums from expired calls written by the
Fund, and net profits from hedging transactions realized in the twelve
months ending on October 31 of that year. Any difference in the net asset
values of Class A, Class B and Class Y shares will be reflected in such
distribution. The Fund may make a supplemental distribution of capital
gains and ordinary income following the end of its fiscal year. Any long-
term capital gains distribution and any non-taxable return of capital will
be identified separately when paid and when tax information is distributed
by the Fund. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
gains.
All dividends and capital gains distributions are automatically
reinvested in Fund shares at net asset value, as of a date selected by the
Board of Trustees, unless the shareholder asks the Transfer Agent in
writing to pay dividends and capital gains distributions in cash, or to
reinvest them in another Eligible Fund, as described in "Total Return,
Dividends and Tax Information" in the Additional Statement. That request
must be received prior to the record date for a dividend to be effective
as to that dividend. Under AccountLink, dividends and distributions may
be automatically transferred to a designated account at a financial
institution that is an ACH member. See "AccountLink" in "How To Buy
Shares" and the OppenheimerFunds New Account Application for more details.
For existing accounts, such privileges may be established only by
signature-guaranteed instructions from all shareholders to the Transfer
Agent. 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 are reinvested in shares of Oppenheimer
Money Market Fund, Inc. as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending upon market conditions, the composition of the Fund's portfolio,
expenses borne by the Fund, or borne separately by that class as described
in "Purchase, Redemption and Pricing of Shares - Multiple Class
Methodology" in the Additional Statement. Dividends are calculated in the
same manner, at the same time, and on the same day for shares of each
class. However, dividends on Class B shares are expected to be lower than
on Class A or Class Y shares on a pro rata basis as a result of the asset-
based sales charge on Class B shares, and such dividends also will differ
in amount as a consequence of any difference between the net asset values
of Class A, Class B and Class Y shares.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or net
short-term capital gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested. Long-term capital gains
distributions, if any, are taxable as long-term capital gains whether
received in cash or reinvested and regardless of how long Fund shares have
been held. A shareholder purchasing Fund shares immediately prior to the
declaration of a capital gains distribution will receive a distribution
subject to income tax, and the distribution will have the effect of
reducing the Fund's net asset value per share by the amount of the
distribution. For information as to "backup" withholding on dividends,
see "How to Redeem Shares," above.
Tax Status of the Fund
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified
during its last fiscal year and intends to qualify in the current and
future years but reserves the right not to do so. However, the Code
contains a number of complex tests relating to qualification which the
Fund possibly might not meet in any particular year. For example, if the
Fund derives 30% or more of its gross income from the sale of securities
held less than three months, it may fail to qualify (see "Investment
Objective and Policies - Tax Aspects of Covered Calls and Hedging
Instruments" in the Additional Statement). If it did not so qualify, it
would be treated for tax purposes as an ordinary corporation and receive
no tax deduction for dividends and distributions made to shareholders.
Fund Performance Information
Total Return Information
From time to time the "average annual total return," "total return"
and "total return at net asset value" of an investment in each class of
shares of the Fund may be advertised. Total return is the change in value
of a hypothetical investment in a class of shares of the Fund over a given
period, assuming that all dividends and capital gains distributions are
reinvested. 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 actual year-by-year
performance of a class of shares. When total returns are quoted for Class
A shares, they reflect the payment of the maximum initial sales charge.
Total returns may be quoted as "net asset value," without considering the
sales charge, and those returns would be reduced if sales charges were
deducted. When total returns are shown for Class B shares, they reflect
the effect of the contingent deferred sales charge that applies to the
period for which the total return is shown, or else they may be shown
based on the change in net asset value without considering the sale
charge. All total returns are based on historical earnings and are not
intended to predict future performance. The Additional Statement contains
more information about the calculation of the performance data used by the
Fund.
The Fund's "average annual total return," "total return" and "total
return at net asset value" indicate the investment results an investor
would have experienced over the stated period from changes in share price
and reinvestment of dividends and distributions. All such performance
information is based on historical per share earnings and is not intended
to indicate future performance. Performance is calculated separately for
each class and will differ for shares of each class, and the higher
anticipated expenses of Class B shares should result in shares of that
class having lower yields than Class A shares for the same period of time.
"Performance and Tax Information" in the Additional Statement contains
more detailed information on calculating the Fund's returns and other
performance information.
Management's Discussion of Performance
During the Fund's prior fiscal year ended June 30, 1993, the Fund
continued to emphasize stocks in the financial services, technology and
healthcare sectors, focusing on companies with strong earnings
fundamentals and that are, in the opinion of the Manager, well-positioned
to benefit from an improving economy. The Fund limited its exposure to
energy, utility and other more risky deep cyclical stocks that do well in
the early stages of economic expansion. This limited exposure caused the
Fund's return to lag that of the market earlier in its fiscal year, but
later positioned the Fund well as those stocks began to falter. The Fund
sold a number of positions that the Manager believed were fully valued or
overvalued, particularly in consumer cyclicals and in certain sectors of
financial services, such as insurance. As the economy improves, the Fund
expects to further reduce its exposure to the financial sector and move
into stocks with better prospects for price gains.
Oppenheimer Special Fund
and S & P 500 Index
Comparison of Change
In Value of $10,000
Hypothetical Investment
Average Annual Total Return at 6/30/93
1 Year 5 Year 10 Year
10.16% 12.53% 9.34%
Indices
Year S&P 500 Investment Special
Ended Reinvested $10,000 Fund
06/30/83 $10,000 $ 9,425
06/30/84 -4.65% $ 9,535 $ 8,393
06/30/85 30.96% $12,487 $ 9,588
06/30/86 35.82% $16,960 $11,772
06/30/87 25.16% $21,227 $12,887
06/30/88 -6.93% $19,756 $12,754
06/30/89 20.52% $23,810 $14,608
06/30/90 16.45% $27,727 $16,505
06/30/91 7.37% $29,770 $18,055
06/30/92 13.39% $33,756 $20,888
06/30/93 13.61% $38,351 $24,413
Past performance is not predictive of future performance.
The performance graph set forth above depicts the performance of a
hypothetical investment of $10,000 in Class A shares of the Fund ten years
ago at the offering price including the sales charge in effect on June 30,
1983 held through June 30, 1993, with all dividends and distributions
reinvested in additional shares at net asset value on the reinvestment
date, without sales charge. The graph compares the total return of the
Fund's Class A shares over a ten year period against the performance of
the Standard & Poor's ("S&P") 500 Index, an unmanaged index of common
stocks frequently used as a measure of general stock market performance.
The performance of the S&P 500 Index includes a factor for the
reinvestment of income dividends, but does not reflect reinvestment of
capital gains or take sales charges or other initial or ongoing expenses
of such stocks into consideration. The Fund's Class A total return
reflects the deduction of the current maximum sales charge of 5.75% and
includes reinvestment of all dividends and capital gains distributions,
but does not consider taxes. Comparable graphs are not shown for the
Fund's Class B or Class Y shares as they were not publicly offered during
this ten year period.
Additional Information
Description of the Fund and Its Shares
The Fund's Board of Trustees is empowered to issue full and fractional
shares of one or more series and classes of series. Shares of one series
having three classes (Class A, Class B and Class Y shares) have been
authorized, which are the shares of beneficial interest described herein.
Series have separate assets and liabilities. Classes of series represent
an identical interest in a particular series but, as explained in this
Prospectus, each class has different dividends, distributions and
expenses, and may have different net asset values.
Each shareholder is entitled to one vote per share held (and a
fractional vote for a fractional share) on matters submitted to his or her
vote. Only shareholders of a particular class vote on matters determined
by the Board to affect only that class. On all other matters submitted
to a vote of the shareholders, the holders of separate classes vote
together as a single class. Shares do not have preemptive or subscription
or cumulative voting rights. The Trustees may divide or combine the
shares of a class into a greater or lesser number of shares without
thereby changing the proportionate beneficial interest in the Fund. The
Fund does not anticipate holding annual meetings. Class B shares will
automatically convert to Class A shares seventy-two months after an
investor's purchase order for Class B shares is accepted. See "How to Buy
Shares - Class B Conversion Feature."
Under certain circumstances, shareholders of the Fund have the right
to remove a Trustee. The Fund's shares are transferable without
restriction and, when issued, are fully-paid and nonassessable (except as
described in "Additional Information" in the Additional Statement).
Shareholders may be held personally liable as "partners" for the Fund's
obligations; however, the risk of a shareholder incurring any financial
loss is limited to the relatively remote circumstances in which the Fund
is unable to meet its obligations. See "Additional Information" in the
Additional Statement for details.
The Custodian and The Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York. The
Manager and its affiliates have banking relationships with the Custodian.
See "Additional Information" in the Additional Statement for further
information. The Fund's cash balances in excess of $100,000 held by the
Custodian are not protected by Federal deposit insurance. Such uninsured
balances at times may be substantial.
The Transfer Agent, a division of the Manager, acts as transfer agent
and shareholder servicing agent on an at-cost basis for the Fund and
certain other open-end funds advised by the Manager. Shareholders should
direct any inquiries to the Transfer Agent at the address or toll-free
phone number listed on the back cover of this Prospectus.
<PAGE>
Investment Adviser Prospectus
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder
Servicing Agent O P P E H E I M E R
Oppenheimer Shareholder Services Special
P.O. Box 5270 Fund
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York Effective April 1, 1994
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
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 Additional
Statement, and if given or made, such information
and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the
securities offered hereby in any state to any
person to whom it is unlawful to make such an
offer in such state.
OppenheimerFunds
PR271 (4/94) Printed on recycled paper
<PAGE>
Investment Adviser Prospectus and
Oppenheimer Management Corporation New Account Application
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder
Servicing Agent O P P E H E I M E R
Oppenheimer Shareholder Services Special
P.O. Box 5270 Fund
Denver, Colorado 80217
1-800-525-7048 Effective April 1, 1994
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
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 Additional
Statement, and if given or made, such information
and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the
securities offered hereby in any state to any
person to whom it is unlawful to make such an
offer in such state.
OppenheimerFunds
PR270 (4/94) Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER SPECIAL FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read together
with the Prospectus dated April 1, 1994 (the "Prospectus") of Oppenheimer
Special Fund (the "Fund"), which may be obtained by written request to
Oppenheimer Shareholder Services ("OSS"), P.O. Box 5270, Denver, Colorado
80217 or by calling OSS at the toll-free number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies 2
Investment Restrictions 12
Trustees and Officers 13
Investment Management Services 16
Brokerage 17
Purchase, Redemption and Pricing of Shares 19
Distribution and Service Plans 22
Performance and Tax Information 24
Additional Information 27
Automatic Withdrawal Plan Provisions 28
Letters of Intent 30
Report of Independent Auditors 33
Financial Statements 34
The date of this Additional Statement is April 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Set forth below is supplemental information about those
policies. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
Small, Unseasoned Companies. The securities of small, unseasoned
companies may have a limited trading market, which may adversely affect
their disposition and can result in their being priced lower than might
otherwise be the case. If other investors holding the same such
securities as the Fund sell them when the Fund attempts to dispose of its
holdings, the Fund may receive lower prices than might otherwise be
obtained.
Warrants and Rights. Warrants are options to purchase equity
securities at specific prices valid for a specific period of time. Their
prices do not necessarily move parallel to the prices of the underlying
securities. The price paid for a warrant will be foregone unless the
warrant is exercised prior to expiration. Rights are similar to warrants,
but normally have a short duration and are distributed directly by the
issuer to its shareholders. Warrants and rights have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Investments in Foreign Securities. Investments in foreign securities
offer potential benefits not available from investing solely in securities
of domestic issuers, by offering the opportunity to invest in the
securities of 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
investing in the securities of foreign stock markets that do not move in
a manner parallel to U.S. markets. In buying foreign securities, the Fund
may convert U.S. dollars into foreign currency, but only to effect
securities transactions on foreign securities exchanges and not to hold
such currency as an investment.
Investing in foreign securities involves special additional risks and
considerations not typically associated with investing in securities of
issuers traded in the U.S. These include: reduction of income by foreign
taxes; fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers; less volume on foreign securities exchanges than on U.S.
exchanges; greater volatility and less liquidity in foreign markets than
in the U.S.; less regulation of foreign issuers, stock exchanges and
brokers than in the U.S.; greater difficulties in commencing lawsuits
against foreign issuers; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio transactions;
possibilities in some countries of expropriation or nationalization of
assets, confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and differences between the U.S.
economy and foreign economies. In the past, U.S. Government policies have
discouraged certain investments abroad by U.S. investors, through
taxation or other restrictions, and it is possible that such restrictions
could be re-imposed.
Illiquid and Restricted Securities. The expenses of registration of
restricted securities that are subject to legal restriction on resale
(excluding securities that may be resold by the Fund pursuant to Rule
144A, as explained in the Prospectus) may be negotiated at the time such
securities are purchased by the Fund. When registration is required
before such securities may be sold, a considerable period may elapse
between the decision to sell the securities and the time the Fund would
be permitted to sell them. Thus, the Fund may not be able to obtain as
favorable a price as that prevailing at the time of the decision to sell.
The Fund also may acquire, through private placements, securities with
contractual resale restrictions, which might prevent their resale by the
Fund at a time when such sale would be desirable.
Repurchase Agreements. In a repurchase transaction, the Fund
purchases a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank or the U.S. branch of a foreign bank with
total domestic assets of at least $1 billion or a broker-dealer with a net
capital of at least $50 million and which has been designated a primary
dealer in government securities), for delivery on an agreed-upon future
date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to 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 value of the collateral must equal or exceed the repurchase
price to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus, to
attempt to increase the Fund's income for liquidity purposes. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of
the loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities),
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. The
Fund receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of: (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term
debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees and will not lend
its portfolio securities to any officer, trustee, employee or affiliate
of the Fund or the 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 days' notice or in time to vote on any
important matter.
Borrowing. From time to time, the Fund may increase its ownership
of securities by borrowing from banks on a unsecured basis and investing
the borrowed funds, subject to the restrictions stated in the Prospectus.
Any such borrowing will be made only from banks, and pursuant to the
requirements of the Investment Company Act, will be made only to the
extent that the value of the Fund's assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings including the
proposed borrowing. If the value of the Fund's assets so computed should
fail to meet the 300% asset coverage requirement, the Fund is required
within three days to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a
time when independent investment judgment would not dictate such sale.
Interest on money borrowed is an expense the Fund would not otherwise
incur, so that it may have little or no net investment income during
periods of substantial borrowings. Borrowing for investment increases
both investment opportunity and risk. Since substantially all of the
Fund's assets fluctuate in value whereas borrowing obligations are fixed,
when the Fund has outstanding borrowings, its net asset value per share
will tend to increase and decrease more when its portfolio assets
fluctuate in value than would otherwise be the case.
Covered Calls and Hedging. As described in the Prospectus, the Fund
may write covered calls or employ one or more types of Hedging Instruments
for temporary defensive purposes. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Stock Index Futures, (ii) buy puts on such
Futures or securities, or (iii) write covered calls on securities held by
it or on Stock Index Futures. When hedging to permit the Fund to
establish a position in the securities market as a temporary substitute
for purchasing particular securities (which the Fund will normally
purchase, and then terminate that hedging position), the Fund may: (i)
buy Stock Index Futures, or (ii) buy calls on such Futures or on
securities held by it. The Fund's strategy of hedging with Futures and
options on Futures will be incidental to the Fund's activities in the
underlying cash market. At present, the Fund does not intend to enter
into Futures and options on Futures if, after any such purchase or sale,
the sum of margin deposits on Futures and premiums paid on Futures options
exceeds 5% of the value of the Fund's total assets. Additional
information about the Hedging Instruments the Fund may use is provided
below. In the future, the Fund may employ Hedging Instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, legally permissible and adequately disclosed.
Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call during the call period (usually not
more than 9 months) at a fixed exercise price (which may differ from the
market price of the underlying security), regardless of market price
changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call
period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of option transaction costs and the premium previously received on
the call written is more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the related investments and the premium received.
Any such profits are considered short-term capital gains for Federal
income tax purposes, and when distributed by the Fund as ordinary income.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for a particular
option. If the Fund could not effect a closing purchase transaction due
to a lack of a market, it would have to hold the callable investments
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
Writing Put Options. A put option on securities gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. Writing a put
covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The
premium the Fund receives from writing a put option represents a profit,
as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the
put at the exercise price, even though the value of the investment may
fall below the exercise price. If the put lapses unexercised, the Fund
(as the writer of the put) realizes a gain in the amount of the premium.
If the put is exercised, the Fund must fulfill its obligation to purchase
the underlying investment at the exercise price, which will usually exceed
the market value of the investment at that time. In that case, the Fund
may incur a loss, equal to the sum of the current market value of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore foregoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Funds, are taxable as ordinary income.
Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as
to calls on stock indices or Stock Index Futures, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. When the
Fund purchases a call on a stock index or Stock Index Future, it pays a
premium, but 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 such underlying investment at the exercise price to a seller
of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date,
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
Buying a put on an investment it does not own, either a put on a
stock index or a put on a Stock Index Future not held by the Fund, permits
the Fund either to resell the put or buy the underlying investment and
sell it at the exercise price. The resale price of the put will vary
inversely with the price of the underlying investment. If the market
price of the underlying investment is above the exercise price and, as a
result, the put is not exercised, the put will become worthless on its
expiration date. When the Fund purchases a put on a stock index, or on
a Stock Index Future not held by it, the put protects the Fund to the
extent that the index moves in a similar pattern to the securities held.
In the case of a put on a stock index or Stock Index Future, settlement
is in cash rather than by the Fund's delivery of the underlying
investment.
Stock Index Futures. The Fund may buy and sell futures contracts
relating to broadly-based stock indices ("Stock Index Futures"). A stock
index, which cannot be purchased or sold directly, assign relative values
to the common stocks included in the index and fluctuates with the changes
in the market value of those stocks. 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. Upon entering into a futures
transaction, the Fund will be required to deposit an initial margin
payment in cash or U.S. Treasury bills with the futures commission
merchant (the "futures broker"). The initial margin will be deposited
with the Fund's Custodian in an account registered in the futures broker's
name; however the futures broker can gain access to that account only
under certain specified conditions. As the Future is marked to market to
reflect changes in its market value, subsequent margin payments, called
variation margin, will be paid to or by the futures broker on a daily
basis.
Prior to expiration of the Future, if the Fund elects to close out
its position by taking an opposite position, a final determination of
variation margin is made 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 by their terms call for settlement by the delivery of
cash, in most cases the obligation is fulfilled without such delivery by
entering into an offsetting transaction. All Futures transactions are
effected through a clearinghouse associated with the exchange on which the
contracts are traded.
Options on Foreign Currencies. The Fund intends to write and
purchase both covered and uncovered 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 a gain in addition to that
resulting from the currency option position. An uncovered call may be
written by the Fund on a foreign currency to provide a hedge against a
decline in the U.S. dollar value of a security which the Fund owns or has
the right to acquire and which is denominated in the currency underlying
the option due to an adverse change in the exchange rate. This is a cross
hedging strategy. In such circumstances, the Fund collateralizes the
option by maintaining in a segregated account with the Fund's custodian,
cash or Government Securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked-to-market daily.
Forward Contracts. A Forward Contract involves bilateral obligations
of one party to purchase, and another party to sell, a specific currency
at a future date (which may be any fixed number of days from the date of
the contract agreed upon by the parties), at a price set at the time the
contract is entered into. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase. The Fund will not speculate with Forward Contracts or foreign
currency exchange rates.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency. 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. The Fund may also enter into a forward contract to sell
a foreign currency denominated in a currency other than that in which the
underlying security is denominated. This is done in the expectation that
there is a greater correlation between the foreign currency of the forward
contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying
investment. This technique is referred to as "cross hedging." The
success of cross hedging depends on many factors, including the ability
of the Manager to correctly identify and monitor the correlation between
foreign currencies and the U.S. dollar. To the extent that the
correlation is not identical, the Fund may experience losses or gains on
both the underlying security and the cross currency hedge.
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities or other assets denominated
in that currency. The Fund, however, in order to avoid excess
transactions and transaction costs, may maintain a net exposure to Forward
Contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency provided the excess amount is
"covered" by liquid, high-grade debt securities, denominated in any
currency, at least equal at all times to the amount of such excess. As
an alternative, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense
of such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent through the facilities of the Options
Clearing Corporation ("OCC"), as to the securities on which the Fund has
written options traded or exchanged, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund entering into a closing purchase transaction. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. government securities
dealer, which will establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. This 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 ("in-the-money"). For any OTC
option the Fund writes, it will treat as illiquid (for purposes of its
restriction on illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities and
Exchange Commission is evaluating the general issue of whether or not OTC
options should be considered as liquid securities, and the procedure
described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on securities 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 or sells a put,
a call, or an underlying investment in connection with the exercise of a
put or call. Such commissions may be higher than those which would apply
to direct purchases or sales of such underlying investments. Premiums
paid for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its positions in Futures and options
thereon under a rule ("CFTC Rule") adopted by the Commodity Futures
Trading Commission ("CFTC") under the Commodity Exchange Act (the "CEA"),
which exempts the Fund from registration with the CFTC as a "commodity
pool operator" (as defined under the CEA), if it complies with the CFTC
Rule. Under those restrictions, the Fund will not, as to any positions,
whether long, short or a combination thereof, enter into Futures and
options thereon for which the aggregate initial margins and premiums
exceed 5% of the fair market value of its net assets, with certain
exclusions as defined in the CFTC Rule. Under the restrictions, the Fund
also must, as to its short position, use Futures and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions under the CEA.
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 brokers.
Thus, the number of options which the Fund may write or hold may be
affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund or an 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 provisions under
the Investment Company Act, when the Fund purchases a Future, the Fund
will maintain in a segregated account or accounts with its Custodian, cash
or readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held by the
Fund; (ii) writing calls on investments held for less than three months;
(iii) purchasing calls or puts which expire in less than three months;
(iv) effecting closing transactions with respect to calls or puts
purchased less than three months previously; and (v) exercising puts or
calls held by the Fund for less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including foreign currency
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 Code. An election can be made by the Fund to
exempt these transactions from this marked-to-market treatment.
Certain foreign currency forward contracts entered into by the Fund
may result in "straddles" for Federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the disposition of
a position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed.
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 ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by: (i) selling Stock Index Futures
or (ii) purchasing puts on stock indices or Stock Index Futures, that the
prices of the Futures or the applicable index 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 future
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 where 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 this
occurred, the Fund would lose money on the Hedging Instruments and also
experience a decline in value in its portfolio securities. 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 such securities.
Short Sales Against-the-Box. In such short sales, while the short
position is open, the Fund must own an equal amount of such securities,
or by virtue of ownership of securities have the right, without payment
of further consideration, to obtain an equal amount of the securities sold
short. Short sales against-the-box may be made to defer, for Federal
income tax purposes, recognition of gain or loss on the sale of securities
"in the box" until the short position is closed out.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following are also fundamental policies, and together
with the fundamental policies described in the Prospectus, cannot be
changed without the approval of a "majority" of the Fund's outstanding
voting securities as such term is defined in the Investment Company Act.
Such a "majority" vote is defined under the Investment Company Act as the
vote of the holders of the lesser of: (i) 67% or more of the shares
present or represented by proxy at a shareholders meeting, if the holders
of more than 50% of the outstanding shares are present or represented by
proxy; or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) Lend
money, but the Fund may invest in all or a portion of an issue of bonds,
debentures, commercial paper, or other similar corporate obligations; the
Fund may also make loans of portfolio securities subject to the
restrictions set forth in the Prospectus and above under the caption
"Loans of Portfolio Securities"; (2) Underwrite securities of other
companies, except insofar as it might be deemed to be an underwriter for
purposes of the Securities Act of 1933 in the resale of any securities
held in its own portfolio; (3) Invest in or hold securities of any issuer
if those officers and trustees or directors of the Fund or its adviser
owning individually more than .5% of the securities of such issuer
together own more than 5% of the securities of such issuer; (4) Invest in
commodities or commodity contracts other than the Hedging Instruments
which it may use as permitted by any of its other fundamental policies,
whether or not any such Hedging Instrument is considered to be a commodity
or commodity contract; (5) Invest in real estate or interests in real
estate, but may purchase readily marketable securities of companies
holding real estate or interests therein; (6) Purchase securities on
margin; however, the Fund may make margin deposits in connection with any
of the Hedging Instruments which it may use as permitted by any of its
other fundamental policies; (7) Mortgage, hypothecate or pledge any of its
assets; however, this does not prohibit the escrow arrangements or other
collateral or margin arrangements in connection with covered call writing
or any of the Hedging Instruments which it may use as permitted by any of
its other fundamental policies; or (8) Invest in other open-end investment
companies, or invest more than 5% of the value of its net assets in
closed-end investment companies, including small business investment
companies, nor make any such investments at commission rates in excess of
normal brokerage commissions.
In addition to the above, the Fund has undertaken to comply with
certain restrictions which are not fundamental policies and which may be
changed without shareholder approval. Under those restrictions, the Fund
will not: (1) Invest in interests in oil, gas, or other mineral
exploration or development programs; or (2) Invest more than 5% of its
total assets in securities of unseasoned issuers (including predecessors)
which have been in operation for less than three years.
TRUSTEES AND OFFICERS
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. The
address of each, except as noted, is Two World Trade Center, New York, New
York 10048-0203. Except for Mr. Doll, each serves in similar capacities
with Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Tax-Free Bond
Fund, Oppenheimer Time Fund, Oppenheimer Money Market Fund, Inc.,
Oppenheimer Target Fund, Oppenheimer Gold & Special Minerals Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Global Bio-Tech Fund,
Oppenheimer Global Environment Fund, Oppenheimer Global Growth & Income
Fund, Oppenheimer Discovery Fund, Oppenheimer Mortgage Income Fund,
Oppenheimer California Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-
Exempt Fund, Oppenheimer Florida Tax-Exempt Fund, Oppenheimer Multi-Sector
Income Trust and Oppenheimer Multi-Government Trust (collectively, the
"New York OppenheimerFunds"). As of September 3, 1993, the Trustees and
officers in the aggregate owned less than 1% of the Fund's outstanding
shares.
LEON LEVY, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings, Inc. (real estate development).
LEO CHERNE, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America, Inc.
ROBERT G. GALLI, Trustee
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC") the Manager's parent holding
company; formerly he held the following positions: a director of
Oppenheimer Funds 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, an officer of other OppenheimerFunds and Executive Vice
President & General Counsel of the Manager and the Distributor.
EDMUND T. DELANEY, Trustee
5 Gorham Road, Chester, Connecticut 06412
Attorney-at-law; formerly a member of the Connecticut State
Historical Commission and Counsel to Copp, Berall & Hempstead (a law
firm).
BENJAMIN LIPSTEIN, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
ELIZABETH B. MOYNIHAN, Trustee
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research and of the Freer Gallery of Art, Smithsonian
Institution; a member of the Indo-U.S. Sub-Commission on Education
and Culture.
KENNETH A. RANDALL, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company),
Dominion Resources, Inc. (electric utility holding company) and
Kemper Corporation (insurance and financial services company);
formerly Chairman of the Board of ICL, Inc. (information systems).
EDWARD V. REGAN, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a Member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and
trustee, New York State and Local Retirement Fund.
RUSSELL S. REYNOLDS, JR., Trustee
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House
and the Greenwich Historical Society.
SIDNEY M. ROBBINS, Trustee
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
DONALD W. SPIRO, President and Trustee*
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and of Oppenheimer Funds Distributor, Inc. (the
"Distributor").
PAULINE TRIGERE, Trustee
550 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
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), FMC
Corp. (chemicals and machinery), Lindsay Manufacturing Co. and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) Deputy Chairman, Bush/Quayle Presidential
Campaign, 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, Executive
Office of the President.
ROBERT C. DOLL, JR., Vice President and Portfolio Manager
Executive Vice President of the Manager; an officer of other
OppenheimerFunds.
ANDREW J. DONOHUE, Secretary
Executive Vice President and General Counsel of Oppenheimer
Management Corporation ("OMC") (the "Manager") and Oppenheimer Funds
Distributor, Inc. (the "Distributor"); an officer of other
OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor, Partner of Kraft
& McManimon (a law firm), an officer of First Investors Corporation
(a broker-dealer) and First Investors Management Company, Inc.
(broker-dealer and investment adviser), and director and an officer
of First Investors Family of Funds and First Investors Life Insurance
Company.
GEORGE C. BOWEN, Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI, SFSI; an
officer of other OppenheimerFunds; formerly Senior Vice
President/Comptroller and Secretary of Oppenheimer Asset Management
Corporation, a former investment advisory subsidiary of the Manager.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of
other OppenheimerFunds; formerly Vice President/Director of Internal
Audit of the Manager.
ROBERT G. ZACK, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other
OppenheimerFunds.
[FN]
_________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Remuneration of Trustees. The officers of the Fund (including Mr.
Spiro) are officers or directors of the Manager or its affiliates and
receive no salary or fee from the Fund. During the Fund's fiscal year
ended June 30, 1993, the remuneration (including expense reimbursements)
paid by the Fund to all Trustees of the Fund (excluding Messrs. Spiro and
Galli) for services as Trustees and as members of one or more committees
totaled $60,412 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 OppenheimerFunds at least 15 years to be eligible for the
maximum payment. No Trustee has retired since the adoption of the program
and no payments by the Fund have been made under it. In the fiscal year
ended June 30, 1993, the Fund accrued $35,000 for its benefit obligations
under the plan.
Major Shareholders. As of September 3, 1993, the only persons known
by the Fund to own of record or beneficially 5% or more of the Fund's
outstanding shares of any class of the Fund were: (1) Paine Webber for the
benefit of Paine Webber CDN FBO Robert F. Branscomb, P.O. Box 3321,
Weelawker, NJ 07087-8154 which owned of record 1,162.216 Class B shares
of the Fund, representing approximately 5.89% of the Fund's then
outstanding Class B shares; (2) FIDN Cust San Diego Unified School Dist.
403-R Plan FBO Richard H. Lord, 3850 Via Escuda, La Mesa CA 91941-7315
which owned of record 1,178.753 Class B shares of the Fund, representing
approximately 5.98% of the Fund's then-outstanding Class B shares; and (3)
FIDN TR Rollover IRA FBO Kathy E.B. Davis, 434 Mammoth Oaks Dr.,
Charlotte, NC 28270-5242 which owned of record 3,100,660 Class B shares,
representing approximately 15.73% of the Fund's then-outstanding Class B
shares.
INVESTMENT MANAGEMENT SERVICES
The Manager is owned by Oppenheimer Acquisition Corp. ("OAC"), a
holding company controlled by Massachusetts Mutual Life Insurance Company.
OAC is also owned in part by certain of the Manager's directors and
officers, some of whom may also serve as officers of the Fund, and one of
whom (Mr. Donald W. Spiro) also serves as a Trustee of the Fund.
The management fee is payable monthly to the Manager under the terms
of the Investment Advisory Agreement between the Manager and the Fund (the
"Agreement"), and is computed on the net assets of the Fund as of the
close of business each day. The 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 the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund. Expenses not
expressly assumed by the Manager under the Agreement or by the Distributor
are paid by the Fund. The Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to independent Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs, and non-recurring expenses,
including litigation. During the Fund's fiscal years ended June 30, 1991,
1992 and 1993, the management fees paid by the Fund to the Manager were
$3,770,175, $4,481,264 and $5,048,548, respectively.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has voluntarily undertaken that the total
expenses of the Fund in any fiscal year (including the management fee but
excluding taxes, interest, brokerage commissions, distribution plan
payments and extraordinary non-recurring expenses such as litigation
costs) shall not exceed (and the Manager undertakes to reduce the Fund's
management fee in the amount by which such expenses shall exceed) the most
stringent applicable regulatory limitation on fund expenses. At present,
that limitation is imposed by California and limits expenses (with
specified exclusions) to 2.5% of the first $30 million of average annual
net assets, 2% of the next $70 million of average annual net assets and
1.5% of average annual net assets in excess of $100 million. The payment
of the management fee at the end of any month will be reduced so that
there will not be any accrued but unpaid liability under this expense
limitation. Any assumption of the Fund's expenses under this undertaking
would lower the Fund's overall expense ratio and increase its total return
during any period in which expenses are limited. The Manager reserves the
right to vary the amount of expenses assumed or eliminate the assumption
of expenses altogether.
The Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, 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
under the Agreement. The Agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
BROKERAGE
Provisions of the Investment Advisory Agreement. One of the duties of the
Manager under the Agreement is to arrange the portfolio transactions for
the Fund. In doing so, the Manager is authorized by the Agreement to
employ broker-dealers ("brokers") including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection "posted" rates, but is expected to be aware of the
current rates of eligible brokers and to minimize the commissions paid to
the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreement, the Manager is authorized to select brokers
which provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. There is no formula under which any
of the brokers selected for the Fund's portfolio transactions are entitled
to the allocation of a particular amount of commissions. Subject to the
foregoing considerations, the Manager may also consider sales of shares
of the Fund and of other investment companies managed by the Manager or
its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement when brokers are used for the Fund's portfolio transactions,
allocations of brokerage are made by portfolio managers under the
supervision of executive officers of the Manager. 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 and otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the
option relates. 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. Transactions effected pursuant to such
combined orders are averaged as to price and allocated in accordance with
the purchase or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. For those transactions, instead of
using a broker the Fund normally deals directly with the selling or
purchasing principal or market maker unless it is determined that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of such orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of these
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by brokers broaden the
scope and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Board
of Trustees, including the independent Trustees of the Fund, annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonably related to the value or benefit
of such services.
During the fiscal years ended June 30, 1991, 1992, and 1993, total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) amounted to
$665,086, $810,645 and $523,738, respectively. During the fiscal year
ended June 30, 1993, $344,341 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
$131,337,510. The transactions giving rise to those commissions were
allocated in accordance with the internal allocation procedures described
above.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class Y shares of the Fund is determined as
of 4:00 P.M., New York time each day the New York Stock Exchange (the
"NYSE") is open (a "regular business day"), by dividing the value of the
Fund's net assets by the number of Fund shares outstanding. The NYSE's
most recent annual holiday schedule (which is subject to change) states
that it will close New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It
may also close on other days. The Fund may invest a portion of its assets
in debt securities or in foreign securities primarily traded on foreign
exchanges or in foreign over-the-counter markets which trade on weekends
or other customary U.S. business holidays or other days on which the NYSE
is closed. Because the Fund's offering price and net asset value will not
be calculated on those days, if debt securities or foreign securities held
in the Fund's portfolio are traded on those days, the Fund's net asset
value per share of Class A, Class B and Class Y shares may be
significantly affected on such days, 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 its securities: (i) equity securities traded on a securities
exchange or on NASDAQ for which last sale information is regularly
reported are valued at the last reported sale prices on their primary
exchange or NASDAQ that day (or, in the absence of sales that day, at
values based on the last sales prices of the preceding trading day, or
closing bid and asked prices); (ii) NASDAQ and other unlisted equity
securities for which last sales prices are not regularly reported but for
which over-the-counter market quotations are readily available are valued
at the highest closing bid price at the time of valuation, or, if no
closing bid price is reported, on the basis of a closing bid price
obtained from a dealer who maintains an active market in that security;
(iii) securities (including restricted securities) not having readily-
available market quotations are valued at fair value under the Board's
procedures; (iv) debt securities having a maturity in excess of 60 days
are valued at the mean between the asked and bid prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or
obtained from active market makers in the security; (v) short-term debt
securities (having a remaining maturity of 60 days or less) are valued at
cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) securities traded on foreign exchanges are valued at the closing
or last reported sales prices or, if none, at the mean between closing bid
and asked prices and reflect prevailing rates of exchange at the closing
price on the London foreign exchange market that day.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board, determines that the particular event would
materially affect the Fund's net asset value, in which case an adjustment
would be made. The values of securities denominated in foreign currency
will be converted to U.S. dollars at the prevailing rates of exchange at
the time of valuation. In the case of U.S. Government securities and
corporate bonds, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved. The Trustees will monitor the accuracy of
pricing services by comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sale prices on the
principal exchanges on which they are traded or on NASDAQ, as applicable,
or, if there were no sales that day, in accordance with (i) above. When
the Fund writes an option, an amount equal to the premium received by the
Fund is included in the Fund's Statement of Assets and Liabilities as an
asset, and an equivalent deferred credit is included in the liability
section. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option.
Multi-Class Methodology. The methodology for calculating the net
asset value, dividends and distributions of the Fund's Class A, Class B
and Class Y shares recognizes two types of expenses. General expenses
that do not pertain specifically to either class are allocated pro rata
to the shares of each class, based on the ratio 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. General expenses include (i) management fees,
(ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs
of shareholder reports, Prospectuses, Additional Statements and other
materials for current shareholders, (iv) fees to unaffiliated Trustees,
(v) custodian expenses, (vi) share issuance costs, (vii) organization and
start-up costs, (viii) interest, taxes and brokerage commissions, and (ix)
non-recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (a) Distribution Plan
fees, (b) incremental transfer agent 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.
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
circumstances described in the Prospectus because the Distributor or
dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, brothers and sisters, brothers- and
sisters-in-law, and sons- and daughters-in-law.
Redemptions. Information on how to redeem shares of the Fund is
stated in the Prospectus. The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees determines that it would be detrimental to the best interests
of the remaining shareholders of the Fund to make payment wholly or partly
in cash, the Fund may pay the redemption price 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 SEC rules. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant
to which it is obligated to redeem shares of the Fund 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
converting the assets to cash. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing
portfolio securities described above under "Determination of Net Asset
Value Per Share," and such valuation will be made as of the same time the
redemption price is determined.
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 such shares is less than $500 or such lesser amount as the Board
may decide. The Board of Trustees will not cause the involuntary
redemption of shares in an account if the aggregate net asset value of
such shares has fallen below the stated minimum solely as a result of
market fluctuations. Should the Board elect to exercise the right to
redeem small accounts, 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 may set requirements
for permission to allow the shareholder to increase the investment so that
the shares would not be involuntarily redeemed.
Cancellation of Purchase Orders. Cancellation of purchase orders for
Fund shares (for example, when checks submitted to purchase shares are
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 difference in net asset
values 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 by seeking other redress.
Transfers of Shares. Shareholders owning shares of both Class A and
Class B must specify whether they intend to transfer Class A or Class B
shares. Shares are not subject to the payment of a CDSC of either class
at the time of transfer (by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares
will remain subject to the CDSC, 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 not all shares in the account
would be subject to a CDSC if redeemed at the time of transfer, then
shares will be transferred in the order described in "How to Buy Shares -
Class B Contingent Deferred Sales Charge" in the Prospectus for the
imposition of the Class B CDSC on redemptions.
Exchanges of Class B and Class Y Shares. As stated in the
Prospectus, shares of a particular class of Eligible Funds having more
than one class of shares may be exchanged only for shares of the same
class or another eligible Fund. All of the Eligible Funds offer Class A
shares but only certain Eligible Funds offer Class B and Class Y shares.
The following other Eligible Funds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Government Securities Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer Main Street California Tax-Exempt Fund
The following other Eligible Funds offer Class Y shares:
Oppenheimer Discovery Fund
Oppenheimer Total Return Fund, Inc.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a separate Plan of Distribution for Class A and
Class B shares of the Fund under Rule 12b-1 of the Investment Company Act,
pursuant to which the Fund will reimburse the Distributor quarterly for
all or a portion of its costs incurred in connection with the distribution
and/or servicing of the shares of that class, as described in the
Prospectus. No such Plan has been adopted for Class Y shares. Each Plan
has been approved: (i) by a vote of the Board of Trustees of the Fund,
including a majority of the "Independent Trustees" (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 Plans or in any agreements relating to the Plans) cast
in person at a meeting called for the purpose of voting on the Plan; and
(ii) by the vote of the holders of a "majority" (as defined under the
Investment Company Act) of the Fund's outstanding voting securities (such
vote on the Class B Plan was cast by the Manager as the sole initial
shareholder). In approving each Plan, the Board determined that it is
likely that the Plan will benefit the shareholders of the respective class
of the Fund.
Each Plan shall, unless terminated as described below, continue in
effect from year to year only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of the respective class. Neither Plan may
be amended to increase materially the amount of payments to be made unless
such amendment is approved by shareholders of the class affected by the
amendment. 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 the Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. The Plans permit the
Distributor and the Manager to make additional distribution payments to
Recipients from their own resources (including profits from advisory fees)
at no cost to the Fund. The Distributor and the Manager may, in their
sole discretion, increase or decrease the amount of distribution
assistance payments they make to Recipients from their own assets.
For the fiscal year ended June 30, 1993, payments under the Rule
12b-1 Class A Plan of Distribution totaled $244,389, all of which was paid
by the Distributor to Recipients, including $9,029 paid to an affiliate
of the Distributor. Payments received by the Distributor under the Class
A Plan will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor. Any
unreimbursed expenses incurred with respect to Class A shares for any
fiscal quarter by the Distributor may not be recovered under the Class A
Plan in subsequent fiscal quarters. No payments were made under the Class
B Plan during that fiscal period, as no Class B shares were publicly
offered during that period.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
B shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B 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. Although the Class B Plan permits the Distributor to retain
both the asset-based sales charges and the service fee on Class B shares,
or to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan are subject to the limitations on such plans
imposed by the National Association of Securities Dealers, Inc. Rules of
Fair Practice. The Class B Plan allows for the carry-forward of
distribution expenses, to be recovered from asset-based sales charges in
subsequent fiscal periods, as described in the Prospectus.
The asset-based sales charge paid to the Distributor by the Fund
under the Class B Plan is intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at the
time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class B shares: (i) financing the advance of the
service fee payment to Recipients under the Class B Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class B shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
The Fund believes that current accounting standards do not require
the Fund to record as a current liability its obligation under the Class
B Plan to carry over and continue payments of the asset-based sales charge
to the Distributor in the future to reimburse it for expenses incurred as
to Class B shares sold prior to the termination of the plan. Those
accounting standards are currently being reviewed by the AICPA, as
discussed in the prospectus. If those accounting standards should be
changed to require the Fund to recognize that obligation for future
payments as a current liability, the Fund's Board would consider other
alternatives to that provision of the Class B Plan, because otherwise the
treatment of such expenses as a current liability could result in a
decrease in the net asset value per Class B share. Such decrease would
affect all then-outstanding Class B shares regardless of how long they had
been held. Furthermore, Class B shareholders whose shares had not matured
would continue to remain subject to the Class B CDSC.
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. Accordingly, the Distributor may
pay banks only for sales made on an agency basis or for the performance
of administrative and shareholder servicing functions. In addition,
certain banks and financial institutions may be required to register as
dealers under state law. While the matter is not free from doubt, the
Manager understands that such laws do not preclude a bank from performing
services required of a Recipient. However, judicial or administrative
decisions or interpretations of such laws, as well as changes in either
Federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent
certain banks from continuing to perform all or a part of these services.
The Fund's Board of Trustees will consider appropriate modifications to
the Fund's operations, including the discontinuance of payments under the
Plans to such institutions, in the event of future changes in such laws
or regulations that may adversely affect the ability of such institutions
to provide such services. If a bank were so prohibited, shareholders of
the Fund who were clients of such bank would be permitted to remain as
shareholders, and if a bank could no longer provide those service
functions, alternate means for continuing the servicing of such
shareholders would be sought. In such event, shareholders serviced by
such bank might no longer be able to avail themselves of any automatic
investment or other services then being provided by such bank. It is not
expected that shareholders would suffer any adverse financial consequences
as a result of any of those occurrences.
PERFORMANCE AND TAX INFORMATION
Total Return and Other Performance Information. As described in the
Prospectus, from time to time the "average annual total return," "total
return" and "total return at net asset value" of an investment in each
class of the Fund may be advertised. An explanation of how yield, average
annual total return and total return are calculated and the components of
those calculations are set forth below. No yields or returns are
presented below for Class B and Class Y shares because Class B shares were
not publicly issued prior to August 17, 1993 and Class Y shares were not
publicly issued prior to April 1, 1994.
The "average annual total return" of a class is an average annual
compounded rate of return. It is the rate of return based on factors
which include a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
1/n
( ERV )
(-----) -1 = Average Annual Total Return
( P )
The "total return" calculation uses the same factors, but does not
average the rate of return on an annual basis. Total return measures the
cumulative (rather than average) change in value of a hypothetical
investment over a stated period. Total return is determined as follows:
ERV - P
------- = Total Return
P
The formulas for average annual total return and for total return for
Class A shares assume the payment of the current maximum sales charge of
5.75% (as a percentage of the offering price) on the initial investment
("P"). The formulas for Class B shares assume the payment of the
contingent deferred sales charge 5% for the first year, 4% for the second
year, 3% for the third and fourth years, 2% for the fifth year, 1% for the
sixth year and none thereafter, applied as described in "How To Buy
Shares" in the Prospectus. The formulas also assume that all dividends
and capital gain distributions during the period are reinvested at net
asset value per share, and that the investment is redeemable at the end
of the period. The "average annual total return" on an investment in
Class A shares (using the method described above) for the one, five and
ten-year periods ended June 30, 1993 was 10.16%, 12.53% and 9.34%,
respectively. The "total return" for the ten-year period ended June 30,
1993 was 144.13%. During a portion of the period for which total returns
are shown, the Fund's maximum sales charge rate was higher. As a result,
returns on actual investments during those periods may be lower than the
results shown.
From time to time the Fund may also quote a "total return at net
asset value" may be quoted for a class of shares. It is based on the
difference in net asset value per share at the beginning and the end of
the period for that class (without considering sales charge) and takes
into consideration the reinvestment of dividends and capital gains (as
with total return, described above). The Fund's total return at net asset
value on Class A shares for the one year period ended June 30, 1993, was
16.88%.
From time to time the return on an investment in Class A, Class B or
Class Y shares of the Fund may be compared to the returns on other
investments at specified fixed rates of return over a 10-year period. The
chart below illustrates the returns on hypothetical investments having the
fixed rates of return illustrated, assuming (i) there is no sales charge
on the investment, (ii) earnings are reinvested at the end of each year
and (iii) each investment is made on the first day of each year in the
periods shown:
<TABLE>
<CAPTION>
Value on June 30, 1993 at
Investment Assumed Average Annual Return:
<S> <C> <C> <C> <C>
5% 10% 15% 20%
Single $1,000 $ 1,629 $ 2,594 $ 4,046 $ 6,192
Annual $1,000 13,208 17,533 23,350 31,151
</TABLE>
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class Y shares. However,
certain factors should be taken into account before using this
information as a basis for comparison with other investments. No
adjustment is made for taxes payable on distributions. An investment in
the Fund is not insured; its total return is not guaranteed and will
fluctuate over time. Total return for any given past period is not an
indication or representation by the Fund of future rates of return on its
shares. Total return of each class is affected by portfolio quality,
portfolio maturity, type of investment held and operating expenses. The
total return on an investment in the Fund's Class A, Class B or Class Y
shares may be compared with performance for the same period of either the
Dow Jones Industrial Average ("Dow") or the Standard & Poor's 500 Index,
both of which are widely recognized indices of stock market performance.
Both indices consist of unmanaged groups of common stocks; the Dow
consists of thirty such issues. The performance of both indices includes
a factor for the reinvestment of income dividends. Neither index reflects
reinvestment of capital gains or takes sales charges into consideration
as these items are not applicable to indices.
Investors may wish to compare the Fund's Class A, Class B or Class
Y return to the return on investments with returns which remain relatively
constant over time, including insured fixed-income investments available
from banks and thrift institutions, such as certificates of deposit,
ordinary interest-paying checking and savings accounts, and other forms
of fixed or variable time deposits as well as annuities issued by
insurance companies and various money market instruments such as Treasury
bills and commercial paper. When comparing the Fund's Class A, Class B
or Class Y total return and investment risks with that of other
alternatives, investors should understand that as the Fund is an equity
fund seeking capital appreciation, its shares may be subject to greater
market risks than other investments including shares of funds having other
investment objectives. The current price per share is listed daily in
many newspaper financial sections.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class Y shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent service, monitors the
performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund's classes of shares
is ranked against (i) all other funds, (ii) all other capital appreciation
funds and (iii) all other capital appreciation funds in a specific size
category. The Lipper performance analysis includes the reinvestment of
capital gain distributions and income dividends but does not take sale
charges into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service, that ranks various mutual
funds, including the Fund, based upon the fund's three, five and ten-year
average annual total returns (when available) and a risk factor that
reflects fund performance relative to three-month U.S. Treasury bill
monthly returns. Such returns are adjusted for fees and sales loads.
There are five ranking categories with a corresponding number of stars:
highest (5 stars); above-average (4); neutral (3); below average (2); and
lowest (1). Morningstar ranks the Fund in relation to other equity
funds.
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 funds listed in the Prospectus as
"Eligible Funds," at net asset value without sales charge. All of the
Eligible Funds offer Class A shares, but only certain Eligible Funds offer
Class B and Class Y shares. For a list of other Eligible Funds currently
offering Class B and/or Class Y shares, see "Purchases, Redemption and
Pricing of Shares," above. To elect this option, a shareholder must
notify the Transfer Agent in writing, and have an existing account in the
fund selected for investment or must obtain a prospectus for that fund and
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.
Tax Status of the Fund's Dividends and Distributions. Under the
Internal Revenue Code, by December 31 each year the Fund, in general, must
distribute 98% of its taxable investment income earned from January 1
through December 31 of the current year and 98% of its capital gains
realized in the period from the prior November 1 through October 31 of
that year or else pay an excise tax on the amounts not distributed. While
it is presently anticipated that the Fund will meet those requirements,
the Manager might determine that in a particular year that it might be in
the best interest of the shareholders not to distribute income or capital
gains at the mandated levels and to pay the excise tax on the
undistributed amounts, which would reduce the amount available for
distribution to shareholders.
ADDITIONAL INFORMATION
Description of the Fund. 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 a 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 trust
(such as the Fund) to be held personally liable as a "partner" under
certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively
remote circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the Fund, and
any shareholder of the Fund agrees under the Fund's Declaration of Trust
to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund, and the Trustees
shall have no personal liability to any such person, to the extent
permitted by law.
It is not contemplated that regular annual meetings of shareholders
will be held. 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 1% or more of the Fund's outstanding shares, whichever is less,
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 is set forth in Section 16(c) of the Investment
Company Act.
The Custodian and the Transfer Agent. The Bank of New York is the
Custodian of the Fund's assets. The Custodian's responsibilities include
safeguarding and controlling the Fund's portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that its banking relationships with the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice
of the Fund to deal with the Custodian in a manner uninfluenced by any
banking relationship the Custodian may have with the Manager and its
affiliates.
Oppenheimer Shareholder Services, as Transfer Agent, is responsible
for maintaining the Fund's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
General Distributor's Agreement. Under the General Distributor's
Agreement between the Fund and the Distributor, the Distributor acts as
the Fund's principal underwriter in the continuous public offering of the
Fund's Class A, Class B and Class Y shares, but it is not obligated to
sell a specific number of shares. Expenses normally attributable to sales
(other than paid under the of Distribution Plan), including advertising
and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders) are borne by the Distributor. During
the Fund's fiscal years ended June 30, 1991, 1992 and 1993, the aggregate
amount of sales charges on sales of the Fund's Class A shares was
$978,757, $1,331,379 and $2,826,831, respectively, of which the
Distributor (and an affiliated broker-dealer) retained $200,343, $364,125
and $806,143 in those respective years. Class B shares were not available
prior to August 17, 1993 and Class Y shares were not available prior to
April 1, 1994.
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.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the Class A or Class B
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and elsewhere in the Application for such Plans, the
Prospectus and this Additional Statement as they may be amended from time
to time by the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing 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
distributions followed by shares acquired with a sales charge will be
redeemed to the extent necessary to meet withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted.
Payments made to shareholders under such plans should not be considered
as a yield or income on an investment. Purchases of additional shares
concurrently with withdrawals are undesirable because of sales charges on
purchases. Accordingly, a shareholder may not maintain an Automatic
Withdrawal Plan while simultaneously making regular purchases. The Fund
reserves the right to amend, suspend or cease offering such plans at any
time without prior notice.
1. Oppenheimer Shareholder Services, the transfer agent of the Fund
(the "Transfer Agent"), will administer the Automatic Withdrawal Plan (the
"Plan") as agent for the person (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent.
2. 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 now held by the 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. Those
shares will be carried on the Planholder's Plan Statement.
3. 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 may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share in effect on the redemption
date.
5. Checks or ACH payments will be transmitted approximately three
business days prior to the date selected for receipt of the monthly or
quarterly payment (the date of receipt is approximate), according to the
choice specified in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. 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 such 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 of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on
written notice to the Transfer Agent, or by the Transfer Agent upon
receiving directions to that effect from the Fund. The Transfer Agent
will also terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon termination of
the Plan by the Transfer Agent or the Fund, shares remaining unredeemed
will be held in an uncertificated account 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, his executor or guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral,
the Planholder may request issuance of a portion of his shares in
certificated form. Upon written request from the Planholder, the Transfer
Agent will determine the number of shares as to which a certificate may
be issued, so as not to cause the withdrawal checks to stop because of
exhaustion of uncertificated shares needed to continue payments. Should
such uncertificated shares become exhausted, Plan withdrawals will
terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Plan.
LETTERS OF INTENT
In submitting a Letter of Intent ("Letter") to purchase shares of the
Fund and other OppenheimerFunds at a reduced sales charge, the investor
agrees to the terms of the Prospectus, the Application used to buy such
shares and the language of this Additional Statement as to Letters of
Intent, as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters.
A Letter is the investor's statement of intention to purchase Class
A shares of the Fund (and other eligible OppenheimerFunds sold with a
sales charge) during the 13-month period from the investor's first
purchase pursuant to the Letter (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The investor states the intention to make the
aggregate amount of purchases (excluding any reinvestments of dividends
or distributions or purchases made at net asset value without sales
charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in "How to
Buy Shares" in the Prospectus) applicable to purchases of shares in that
amount (the "intended amount"). Each purchase under the Letter will be
made at the public offering price applicable to a single lump-sum purchase
of shares in the intended amount, as described in the applicable
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 such fund shares on the last day of that period,
do not equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below, as those terms may be amended from time
to time. The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Fund's transfer agent
subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to refer to the Letter in placing any
purchase orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if
necessary), made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Fund's transfer agent. For example, if the minimum amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period,
the total purchases pursuant to the Letter are less than the intended
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent of the Fund as attorney-in-fact to surrender
for redemption any or all escrowed shares.
5. The funds whose shares are eligible for purchase under the
Letter (or the holding of which may be counted toward completion of the
Letter) do not include any fund whose shares are sold without a front-end
sales charge or without being subject to a Class A contingent deferred
sales charge unless (for the purpose of determining completion of the
obligation to purchase shares under the Letter) the shares were acquired
in exchange for shares of a fund (described as a "Eligible Fund" in the
Prospectus) whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
<PAGE>
<Audit-Report>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Special Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Special Fund as of June 30, 1993, and the
related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the ten-year
period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of June 30, 1993,
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 Special Fund as of June 30, 1993, the results of its
operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick
- ---------------------
KPMG PEAT MARWICK
Denver, Colorado
July 22, 1993
</Audit-Report>
<PAGE>
Statement of Investments June 30, 1993
<TABLE>
<Caption
Face Market Value
Amount See Note 1
<S> <C> <C>
Repurchase Agreements -- 5.2%
Repurchase agreement with First Chicago Capital Markets, Inc.,
3.27%, dated 6/30/93 and maturing 7/1/93, collateralized by
U.S. Treasury Notes, 5%, 6/30/94, with a value of
$39,384,187 (Cost $38,600,000) $38,600,000 $38,600,000
Shares
Common Stocks -- 94.7%
Basic Materials -- 1.1%
Chemicals -- .4%
Great Lakes Chemical Corp. 45,000 3,088,125
Chemicals-Diversified -- .7%
FMC Corp.* 110,000 4,977,500
Consumer Cyclicals -- 15.6%
Auto Parts-After Market -- 1.1%
Cooper Tire & Rubber Co. 250,000 6,312,500
Goodyear Tire & Rubber Co. 40,000 1,690,000
SPX Corp. 40,000 630,000
8,632,500
Automobiles -- .1%
Harley-Davidson, Inc.* 5,000 208,750
Broadcast Media -- .6%
Multimedia, Inc.* 45,000 1,496,250
Tele-Communications, Inc., Cl. A* 125,000 2,843,750
4,340,000
Entertainment -- 1.0%
King World Productions, Inc.* 235,000 7,843,125
Publishing -- .0%
Marvel Entertainment Group, Inc.* 1,000 37,875
Restaurants -- 1.5%
Brinker International, Inc.* 30,000 1,027,500
McDonald's Corp. 60,000 2,947,500
Pancho's Mexican Buffet, Inc. 65,000 487,500
Shoney's, Inc.* 390,000 7,215,000
11,677,500
Retail-Specialty -- 6.0%
Circuit City Stores, Inc. 475,000 15,318,750
Edison Brothers Stores, Inc. 130,000 4,663,750
Home Depot, Inc. (The) 353,333 15,458,319
Michaels Stores, Inc.* 77,500 2,373,438
Rocky Mountain Chocolate Factory, Inc.* (1) 100,000 512,500
Service Merchandise Co., Inc.* 330,000 3,753,750
Sotheby's Holdings, Inc., Cl. A 200,000 2,575,000
44,655,507
Retail-Specialty Apparel -- .8%
Gap, Inc. (The) 195,800 5,922,950
Retail Stores-Department Stores -- .1%
50-Off Stores, Inc.* 80,000 550,000
Retail Stores-General Merchandise Chains -- 1.6%
Wal-Mart Stores, Inc. 450,000 11,756,250
Shoes -- 1.2%
Reebok International Ltd. 280,000 7,805,000
Stride Rite Corp. 70,000 1,093,750
8,898,750
Textiles-Apparel Manufacturers -- 1.2%
Fruit of the Loom, Inc., Cl. A * 275,000 9,178,125
<PAGE>
Market Value
Shares See Note 1
Common Stocks (continued)
Consumer Cyclicals (continued)
Toys -- .4%
Galoob (Lewis) Toys, Inc.* 335,000 $ 1,130,625
Hasbro, Inc. 60,000 2,265,000
3,395,625
Consumer Non-Cyclicals -- 29.6%
Beverages-Soft Drinks -- 2.6%
Coca-Cola Co. (The) 170,000 7,310,000
PepsiCo, Inc. 330,000 12,168,750
19,478,750
Drugs -- 5.9%
Forest Laboratories, Inc.* 110,000 3,836,250
Lilly (Eli) & Co. 15,000 738,750
Marion Merrell Dow, Inc. 225,000 3,825,000
Merck & Co., Inc. 225,000 7,987,500
Mylan Laboratories, Inc. 210,000 5,722,500
Pfizer, Inc. 75,000 5,025,000
Schering-Plough Corp. 155,000 10,830,625
Syntex Corp. 80,000 1,460,000
Upjohn Co. 150,000 4,481,250
43,906,875
Food Processing -- 2.6%
ConAgra, Inc. 155,000 3,933,125
General Mills, Inc. 35,000 2,384,375
Gerber Products Co. 60,000 1,672,500
Sara Lee Corp. 150,000 3,712,500
Tyson Foods, Inc., Cl. A 340,000 7,480,000
19,182,500
Healthcare-Diversified -- 5.2%
Abbott Laboratories 390,000 9,993,750
American Home Products Corp. 95,000 6,127,500
Bristol-Myers Squibb Co. 160,000 9,260,000
Healthdyne, Inc.* 15,000 125,625
IVAX Corp. 265,000 6,658,125
Johnson & Johnson 40,000 1,650,000
Warner-Lambert Co. 65,000 4,606,875
38,421,875
Healthcare-Miscellaneous -- 4.7%
Invacare Corp.* 10,000 230,000
National Health Laboratories, Inc. 400,000 7,350,000
United Healthcare Corp. 190,000 12,207,500
U.S. Healthcare, Inc. 325,000 15,437,500
35,225,000
Hospital Management -- .2%
Novacare, Inc.* 80,000 1,080,000
Surgical Care Affiliates, Inc. 20,000 357,500
1,437,500
<PAGE>
Statement of Investments (continued)
Market Value
Shares See Note 1
Common Stocks (continued)
Consumer Non-Cyclicals (continued)
Household Products -- .5%
Clorox Co. (The) 40,000 $ 2,085,000
Colgate-Palmolive Co. 30,000 1,747,500
3,832,500
Medical Products -- 4.9%
Becton, Dickinson & Co. 60,000 2,400,000
Cordis Corp.* 345,000 11,040,000
Medtronic, Inc. 110,000 7,425,000
Rhone-Poulenc Rorer, Inc. 60,000 2,820,000
SciMed Life Systems, Inc.* 165,000 10,230,000
United States Surgical Corp. 85,000 2,337,500
36,252,500
Retail Stores-Food Chains -- .3%
Vons Cos., Inc. (The)* 105,000 2,428,125
Tobacco -- 2.7%
American Brands, Inc. 195,000 6,508,125
Philip Morris Cos., Inc. 200,000 9,675,000
UST, Inc. 129,000 3,805,500
19,988,625
Energy -- 1.3%
Oil-Exploration and Production -- .9%
Maxus Energy Corp.* 515,000 4,635,000
Pogo Producing Co.* 110,000 2,007,500
6,642,500
Oil-Integrated Domestic -- .2%
Quaker State Corp. 120,000 1,410,000
Oil Well Services and Equipment -- .2%
McDermott International, Inc. 50,000 1,437,500
Financial -- 20.5%
Financial Services-Miscellaneous -- 9.5%
Advanta Corp., Cl. A 65,000 2,973,750
Bear Stearns Cos., Inc. (The) 215,000 5,079,375
Countrywide Credit Industries, Inc. 51,500 1,577,188
Federal Home Loan Mortgage Corp. 40,000 2,235,000
Federal National Mortgage Assn. 165,000 13,612,500
Green Tree Financial Corp. 135,000 5,670,000
Household International, Inc. 20,000 1,382,500
MBIA, Inc. 15,000 988,125
Morgan Stanley Group, Inc. 60,000 4,147,500
PaineWebber Group, Inc. 265,000 7,651,875
Primerica Corp. 307,500 16,259,063
Schwab (Charles) Corp. (The) 150,000 4,256,250
Student Loan Marketing Assn. 105,000 4,541,250
70,374,376
Insurance-Life -- 3.8%
AFLAC, Inc. 71,875 2,039,453
Conseco, Inc. 290,000 18,125,000
Torchmark Corp. 85,000 4,515,625
UNUM Corp. 60,000 3,240,000
27,920,078
<PAGE>
Market Value
Shares See Note 1
Common Stocks (continued)
Financial (continued)
Insurance-Property and Casualty -- 1.9%
Loews Corp. 60,000 $ 5,677,500
Progressive Corp. 65,000 2,128,750
USF&G Corp. 360,000 6,525,000
14,331,250
Insurance Brokers -- .1%
Alexander & Alexander Services, Inc. 39,300 1,085,659
Major Banks-Other -- 1.8%
Bank of Boston Corp. 400,000 9,900,000
Continental Bank Corp. 55,000 1,313,125
Mellon Bank Corp. 45,000 2,542,500
13,755,625
Major Banks-Regional -- 3.2%
BANC ONE CORP. 60,000 3,375,000
KeyCorp 115,000 4,801,250
Midlantic Corp.* 175,000 3,696,875
Shawmut National Corp. 185,000 4,416,875
Signet Banking Corp. 100,000 6,037,500
SouthTrust Corp. 67,500 1,307,813
23,635,313
Money Center Banks -- .2%
Chemical Banking Corp. 40,000 1,635,000
Industrial -- 2.8%
Commercial Services -- .4%
Comdisco, Inc. 215,000 3,144,375
Mercury Air Group, Inc.* 100,000 300,000
3,444,375
Conglomerates -- .1%
Hanson PLC, Sponsored ADR 40,000 680,000
Electrical Equipment -- 1.5%
General Electric Co. 115,000 10,996,875
Machinery-Diversified -- .3%
Varity Corp.* 76,300 2,289,000
Pollution Control -- .3%
Rollins Environmental Services, Inc. 270,000 1,991,250
Yellowstone Environmental Services, Inc.* 100,000 6,250
1,997,500
Transportation-Miscellaneous -- .2%
American President Cos. Ltd. 20,000 1,137,500
Technology -- 23.8%
Aerospace/Defense -- 2.2%
Boeing Co. (The) 135,000 4,995,000
Grumman Corp. 120,000 4,770,000
Northrop Corp. 160,000 6,680,000
16,445,000
Computer Software and Services -- 8.0%
Adobe Systems, Inc. 40,000 2,470,000
Automatic Data Processing, Inc. 206,800 9,874,700
Ceridian Corp.* 150,000 2,250,000
Computer Associates International, Inc. 375,000 11,109,375
Computer Sciences Corp.* 50,000 4,168,750
General Motors Corp., Cl. E 360,000 10,530,000
Microsoft Corp.* 160,000 14,080,000
Novell, Inc.* 190,000 4,940,000
59,422,825
<PAGE>
Statement of Investments (continued)
Market Value
Shares See Note 1
Common Stocks (continued)
Technology (continued)
Computer Systems -- 7.6%
Applied Magnetics Corp.* 10,000 $ 97,500
AST Research, Inc.* 237,500 3,532,813
Cabletron Systems, Inc.* 135,000 14,242,500
Cisco Systems, Inc.* 25,000 1,368,750
Compaq Computer Corp.* 20,000 980,000
Conner Peripherals, Inc.* 155,000 1,491,875
Data General Corp.* 176,500 1,698,813
Dell Computer Corp.* 250,000 4,687,500
Maxtor Corp.* 330,000 2,062,500
Micropolis Corp.* 145,000 942,500
QMS, Inc.* 30,000 262,500
Quantum Corp.* 325,000 3,656,250
Scitex Corp. Ltd. 40,000 1,535,000
Seagate Technology* 660,000 10,477,500
Synoptics Communications, Inc.* 30,000 1,080,000
Unisys Corp.* 670,400 8,044,800
56,160,801
Electronics-Instrumentation -- .1%
American Power Conversion Corp.* 25,000 950,000
Electronics-Semiconductors -- 2.9%
Advanced Micro Devices, Inc.* 195,000 4,704,375
Intel Corp. 300,000 16,500,000
21,204,375
Telecommunications -- 3.0%
American Telephone & Telegraph Co. 95,000 5,985,000
Telefonica de Espana SA, Sponsored ADR 210,000 6,720,000
Telefonos de Mexico SA, Sponsored ADR 210,000 9,817,500
22,522,500
Total Common Stocks (Cost $488,147,317) 704,794,884
Total Investments, at Value (Cost $526,747,317) 99.9% 743,394,884
Other Assets Net of Liabilities .1 435,155
Net Assets 100.0% $743,830,039
<FN>
* Non-income producing security.
(1) Affiliated company. Represents ownership of at least 5% of
the voting securities of the issuer and is or was an affiliate,
as defined in the Investment Company Act of 1940, at or during
the year ended June 30, 1993. The aggregate fair value of all
securities of affiliated companies as of June 30, 1993 amounted
to $512,500. Transactions during the period in which the issuer
was an affiliate are as follows:
</TABLE>
<TABLE>
<CAPTION>
Balance June 30, 1992 Gross Additions Balance June 30, 1993
Shares Cost Shares Cost Shares Cost
<S> <C> <C> <C> <C> <C> <C>
Rocky Mountain
Chocolate Factory, Inc. -- $ -- 100,000 $494,000 100,000 $494,000
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Assets and Liabilities June 30, 1993
<TABLE>
<S> <S> <C>
Assets Investments, at value (cost $526,747,317) -- see accompanying statement $743,394,884
Cash 477,723
Receivables:
Dividends and interest 1,098,708
Investments sold 617,686
Shares of beneficial interest sold 479,172
Other 206,563
Total assets 746,274,736
Liabilities Payables and other liabilities:
Shares of beneficial interest redeemed 1,321,847
Investments purchased 726,720
Distribution assistance -- Note 4 54,382
Other 341,748
Total liabilities 2,444,697
Net Assets $743,830,039
Composition of Paid-in capital $505,764,907
Net Assets Undistributed net investment income 2,818,869
Accumulated net realized gain from investment transactions 18,598,696
Net unrealized appreciation of investments -- Note 3 216,647,567
Net Assets -- Applicable to 27,209,834 shares of beneficial
interest outstanding $743,830,039
Net Asset Value and Redemption Price Per Share $27.34
Maximum Offering Price Per Share (net asset value plus sales charge of 5.75% of offering price) $29.01
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Operations For the Year Ended June 30, 1993
<TABLE>
<S> <S> <C>
Investment Income Dividends (including $724,271 from foreign securities less $108,837
of foreign tax withheld at source) $ 10,308,131
Interest 1,375,533
Total income 11,683,664
Expenses Management fees -- Note 4 5,048,548
Transfer and shareholder servicing agent fees -- Note 4 836,590
Distribution assistance -- Note 4 244,389
Shareholder reports 204,223
Trustees' fees and expenses 95,412
Custodian fees and expenses 65,451
Legal and auditing fees 60,133
Other 39,660
Total expenses 6,594,406
Net Investment Income 5,089,258
Realized and Net realized gain (loss) on investments:
Unrealized Unaffiliated companies 36,712,138
Gain (Loss) Affiliated companies (902,840)
on Investments Net realized gain 35,809,298
Net change in unrealized appreciation of investments:
Beginning of year 152,228,889
End of year -- Note 3 216,647,567
Net change 64,418,678
Net Realized and Unrealized Gain on Investments 100,227,976
Net Increase in Net Assets Resulting from Operations $105,317,234
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
1993 1992
<S> <S> <C> <C>
Operations Net investment income $ 5,089,258 $7,114,834
Net realized gain on investments 35,809,298 53,583,658
Net change in unrealized appreciation or depreciation
of investments 64,418,678 25,333,202
Net increase in net assets resulting from operations 105,317,234 86,031,694
Dividends and Dividends from net investment income ($.245 and
Distributions to $.355 per share, respectively) (6,227,354) (8,860,743)
Shareholders
Distributions from net realized gain on investments
($1.571 per share) (39,984,953) --
Beneficial Interest Proceeds from sales of shares 149,845,978 140,086,971
Transactions Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions 44,669,529 8,564,414
Cost of shares redeemed (140,557,861) (145,534,591)
Net increase in net assets resulting from
beneficial interest transactions 53,957,646 3,116,794
Net Assets Total increase 113,062,573 80,287,745
Beginning of year 630,767,466 550,479,721
End of year (including undistributed net investment
income of $2,818,869 and $3,956,965, respectively) $743,830,039 $630,767,466
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value,
beginning of year $ 24.94 $ 21.88 $ 20.60 $ 18.90 $ 17.13 $ 20.37 $ 23.82 $ 20.46 $ 19.45 $24.04
Income (loss) from investment
operations:
Net investment income .19 .29 .47 .64 .62 .67 .93 .75 .60 .39
Net realized and unrealized
gain (loss) on investments 4.03 3.13 1.36 1.76 1.78 (.89) .59 3.70 1.87 (2.83)
Total income (loss) from
investment operations 4.22 3.42 1.83 2.40 2.40 (.22) 1.52 4.45 2.47 (2.44)
Dividends and distributions
to shareholders:
Dividends from net
investment income (.25) (.36) (.55) (.70) (.59) (1.27) (.77) (.61) (.39) (.52)
Distributions from net realized
gain on investments (1.57) -- -- -- (.04) (1.75) (4.20) (.48) (1.07) (1.63)
Total dividends and
distributions to shareholders (1.82) (.36) (.55) (.70) (.63) (3.02) (4.97) (1.09) (1.46) (2.15)
Net asset value, end of year $ 27.34 $ 24.94 $ 21.88 $ 20.60 $ 18.90 $ 17.13 $ 20.37 $ 23.82 $ 20.46 $ 19.45
Total Return,
At Net Asset Value** 16.88% 15.69% 9.39% 12.98% 14.54% (1.03)% 9.48% 22.77% 14.24%
(10.95)%
Ratios/Supplemental Data:
Net assets, end of
year (in thousands) $743,830 $630,767 $550,480 $551,295 $542,250 $552,863 $690,326 $772,619 $834,054
$644,138
Average net assets
(in thousands) $710,391 $624,527 $520,335 $547,090 $529,699 $570,250 $717,115 $783,491 $765,214
$610,559
Number of shares outstanding
at end of year (in thousands) 27,210 25,287 25,155 26,760 28,687 32,277 33,890 32,437 40,759 33,110
Ratios to average net assets:
Net investment income .72% 1.14% 2.20% 3.07% 3.31% 3.78% 4.32% 3.03% 3.28%
2.19%
Expenses .93% .90% .94% .92% .97% .95% .93% .95% .94% 1.05%
Portfolio turnover rate* 23.2% 36.7% 31.1% 27.6% 27.1% 120.3% 371.2% 67.4% 16.8%
20.8%
<FN>
* The lesser of purchases or sales of portfolio securities for a year,
divided by the monthly average of the market value of portfolio
securities owned during the year. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the year ended June
30, 1993 were $160,757,743 and $184,132,966, respectively.
** Assumes a hypothetical initial investment on the business day before
the first day of the fiscal year, 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 year. Sales charges are not reflected in
the total returns.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. Significant
Accounting Policies
Oppenheimer Special 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 adviser is Oppenheimer
Management Corporation (the Manager). The following is a summary of
significant accounting policies consistently followed by the Fund.
Investment Valuation -- Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Short-term
debt securities having a remaining maturity of 60 days or less are valued
at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Trustees to determine fair value in good faith.
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. 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.
Federal Income Taxes -- The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
Trustees' Fees and Expenses -- The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended June 30, 1993, a provision of $35,000 was made for the
Fund's projected benefit obligations, resulting in an accumulated
liability of $127,168 at June 30, 1993. No payments have been made under
the plan.
Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
<PAGE>
Notes to Financial Statements (continued)
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1993 1992
<S> <C> <C>
Sold 5,518,247 5,688,827
Dividends and distributions reinvested 1,627,898 360,913
Redeemed (5,223,558) (5,917,037)
Net increase 1,922,587 132,703
</TABLE>
3. Unrealized Gains
and Losses on
Investments
At June 30, 1993, net unrealized appreciation of investments of
$216,647,567 was composed of gross appreciation of $253,041,081, and gross
depreciation of $36,393,514.
4. Management Fees
and Other
Transactions
with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75%
on the first $200 million of net assets with a reduction of .03% on each
$200 million thereafter to $800 million, and .60% on net assets in excess
of $800 million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the year ended June 30, 1993, commissions (sales charges paid by
investors) on sales of Fund shares totaled $2,826,831, of which $806,143
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker/dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under an approved plan of distribution, the Fund reimburses OFDI for costs
incurred in distributing shares of the Fund, including amounts paid to
brokers, dealers, banks and other institutions. Reimbursements are not to
exceed .25% annually of the net asset value of Fund shares sold subsequent
to March 31, 1991. During the year ended June 30, 1993, OFDI paid $9,029
to an affiliated broker/dealer as reimbursement for distribution-related
expenses.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1993 (UNAUDITED)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-5.5%
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Repurchase agreement with First Chicago Capital Markets, Inc.,
3.13%, dated 12/31/93 and maturing 1/3/94, collateralized by
U.S. Treasury Notes:
9.13%, 5/15/99, with a value of $29,762,525 $29,150,000 $29,150,000
4.63%, 12/31/94, with a value of $12,096,783 11,850,000 11,850,000
-----------
Total Repurchase Agreements (Cost $41,000,000) 41,000,000
Shares
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS-94.1%
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS-0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.4% Great Lakes Chemical Corp. 45,000 3,358,125
- -----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS: DIVERSIFIED-0.3% FMC Corp.(1) 40,000 1,885,000
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS-12.6%
- -----------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS: AFTER MARKET-0.7% Cooper Tire & Rubber Co. 105,000
2,625,000
------------------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. 60,000 2,745,000
-----------
5,370,000
- -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES-0.3% Harley-Davidson, Inc. 40,000 1,765,000
- -----------------------------------------------------------------------------------------------------------------------------------
BROADCAST MEDIA-0.2% Multimedia, Inc.(1) 45,000 1,541,250
- -----------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-1.2% King World Productions, Inc.(1) 235,000
9,018,125
- -----------------------------------------------------------------------------------------------------------------------------------
PUBLISHING-0.0% Marvel Entertainment Group, Inc.(1) 2,000 54,500
- -----------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS-1.9% Brinker International, Inc.(1) 30,000 1,380,000
------------------------------------------------------------------------------------------------
McDonald's Corp. 55,000 3,135,000
------------------------------------------------------------------------------------------------
Pancho's Mexican Buffet, Inc. 70,000 857,500
------------------------------------------------------------------------------------------------
Shoney's, Inc.(1) 390,000 9,018,750
-----------
14,391,250
- -----------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY-4.7% Circuit City Stores, Inc. 475,000 10,331,250
------------------------------------------------------------------------------------------------
CML Group, Inc. 79,600 1,880,550
------------------------------------------------------------------------------------------------
Edison Brothers Stores, Inc. 80,000 2,380,000
------------------------------------------------------------------------------------------------
Home Depot, Inc. (The) 284,600 11,241,700
------------------------------------------------------------------------------------------------
Michaels Stores, Inc.(1) 90,000 3,217,500
------------------------------------------------------------------------------------------------
Rocky Mountain Chocolate Factory, Inc.(1)(2) 100,000 1,325,000
------------------------------------------------------------------------------------------------
Service Merchandise Co., Inc.(1) 225,000 2,250,000
------------------------------------------------------------------------------------------------
Sotheby's Holdings, Inc., Cl. A 170,000 2,613,750
-----------
35,239,750
- -----------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY APPAREL-0.8% GAP, INC. (THE) 140,000
5,512,500
- -----------------------------------------------------------------------------------------------------------------------------------
RETAIL STORES: DEPARTMENT May Department Stores Co. 25,000
984,375
STORES-0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
RETAIL STORES: GENERAL Wal-Mart Stores, Inc. 450,000 11,250,000
MERCHANDISE CHAINS-1.5%
- -----------------------------------------------------------------------------------------------------------------------------------
SHOES-0.5% Reebok International Ltd. 125,000 3,750,000
- -----------------------------------------------------------------------------------------------------------------------------------
TEXTILES: APPAREL Fruit of the Loom, Inc., Cl. A(1) 125,000 3,015,625
MANUFACTURERS-0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
TOYS-0.3% Hasbro, Inc. 40,000 1,450,000
------------------------------------------------------------------------------------------------
Mattel, Inc. 35,000 966,875
-----------
2,416,875
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS-28.7%
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
BEVERAGES: SOFT DRINKS-2.8% Coca-Cola Co. (The) 170,000 $
7,586,250
------------------------------------------------------------------------------------------------
PepsiCo, Inc. 330,000 13,488,750
-----------
21,075,000
- -----------------------------------------------------------------------------------------------------------------------------------
DRUGS-5.6% Forest Laboratories, Inc.(1) 110,000 5,238,750
------------------------------------------------------------------------------------------------
Marion Merrell Dow, Inc. 160,000 2,880,000
------------------------------------------------------------------------------------------------
Merck & Co., Inc. 225,000 7,734,375
------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 175,000 4,440,625
------------------------------------------------------------------------------------------------
Pfizer, Inc. 75,000 5,175,000
------------------------------------------------------------------------------------------------
Schering-Plough Corp. 155,000 10,617,500
------------------------------------------------------------------------------------------------
Syntex Corp. 80,000 1,270,000
------------------------------------------------------------------------------------------------
Upjohn Co. 150,000 4,368,750
-----------
41,725,000
- -----------------------------------------------------------------------------------------------------------------------------------
FOOD PROCESSING-2.2% ConAgra, Inc. 150,000 3,956,250
------------------------------------------------------------------------------------------------
General Mills, Inc. 35,000 2,126,250
------------------------------------------------------------------------------------------------
Sara Lee Corp. 150,000 3,750,000
------------------------------------------------------------------------------------------------
Tyson Foods, Inc., Cl. A 270,000 6,480,000
-----------
16,312,500
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: DIVERSIFIED-5.1% Abbott Laboratories 390,000
11,505,000
------------------------------------------------------------------------------------------------
American Home Products Corp. 95,000 6,151,250
------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 140,000 8,137,500
------------------------------------------------------------------------------------------------
IVAX Corp. 265,000 7,618,750
------------------------------------------------------------------------------------------------
Johnson & Johnson 40,000 1,790,000
------------------------------------------------------------------------------------------------
Warner-Lambert Co. 45,000 3,037,500
-----------
38,240,000
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: MISCELLANEOUS-5.2% National Health Laboratories, Inc. 400,000
5,700,000
------------------------------------------------------------------------------------------------
United Healthcare Corp. 190,000 14,416,250
------------------------------------------------------------------------------------------------
U.S. Healthcare, Inc. 325,000 18,728,125
-----------
38,844,375
- -----------------------------------------------------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT-0.2% Novacare, Inc.(1) 80,000
1,220,000
------------------------------------------------------------------------------------------------
Surgical Care Affiliates, Inc. 20,000 310,000
-----------
1,530,000
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.2% Colgate-Palmolive Co. 30,000
1,871,250
- -----------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS-5.2% Becton, Dickinson & Co. 40,000
1,435,000
------------------------------------------------------------------------------------------------
Cordis Corp.(1) 345,000 17,034,375
------------------------------------------------------------------------------------------------
Medtronic, Inc. 110,000 9,033,750
------------------------------------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 60,000 2,190,000
------------------------------------------------------------------------------------------------
Sci-Med Life Systems, Inc.(1) 200,000 7,850,000
------------------------------------------------------------------------------------------------
St. Jude Medical, Inc. 35,000 927,500
-----------
38,470,625
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF INVENTMENTS (unaudited)(continued)
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
RETAIL STORES: FOOD CHAINS-0.2% Vons Cos., Inc. (The)(1) 80,000 $
1,280,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOBACCO-2.0% American Brands, Inc. 100,000 3,325,000
------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 140,000 7,805,000
------------------------------------------------------------------------------------------------
UST, Inc. 129,000 3,579,750
-----------
14,709,750
- -----------------------------------------------------------------------------------------------------------------------------------
ENERGY-1.6%
OIL: EXPLORATION AND Maxus Energy Corp.(1) 630,000 3,465,000
------------------------------------------------------------------------------------------------
PRODUCTION-0.7% Pogo Producing Co.(1) 110,000 1,842,500
-----------
5,307,500
- -----------------------------------------------------------------------------------------------------------------------------------
OIL: INTEGRATED DOMESTIC-0.2% Quaker State Corp. 120,000
1,605,000
- -----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS DRILLING-0.2% Pennzoil Co. 30,000 1,597,500
- -----------------------------------------------------------------------------------------------------------------------------------
OIL WELL SERVICES AND McDermott International, Inc. 140,000 3,710,000
EQUIPMENT-0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL-24.4%
- -----------------------------------------------------------------------------------------------------------------------------------
BANKS-0.1% UJB Financial Corp. 25,000 593,750
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: Advanta Corp., Cl. A 120,000 3,990,000
------------------------------------------------------------------------------------------------
MISCELLANEOUS-11.1% Bear Stearns Cos., Inc. (The) 374,500 8,192,188
Countrywide Credit Industries, Inc. 215,000 5,401,875
------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 40,000 1,995,000
------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. 165,000 12,952,500
------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 160,000 7,680,000
------------------------------------------------------------------------------------------------
Household International, Inc. 40,000 1,305,000
------------------------------------------------------------------------------------------------
MBIA, Inc. 15,000 943,125
------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc. 60,000 4,245,000
------------------------------------------------------------------------------------------------
PaineWebber Group, Inc. 280,000 7,560,000
------------------------------------------------------------------------------------------------
Primerica Corp. 410,000 15,938,750
------------------------------------------------------------------------------------------------
Raymond James Financial, Inc. 30,000 498,750
------------------------------------------------------------------------------------------------
Salomon Inc. 40,000 1,905,000
------------------------------------------------------------------------------------------------
Schwab (Charles) Corp. (The) 150,000 4,856,250
------------------------------------------------------------------------------------------------
Student Loan Marketing Assn. 105,000 4,711,875
------------------------------------------------------------------------------------------------
Sunamerica, Inc. 15,000 648,750
-----------
82,824,063
- -----------------------------------------------------------------------------------------------------------------------------------
INSURANCE: LIFE-3.3% AFLAC, Inc. 71,875 2,048,438
------------------------------------------------------------------------------------------------
Conseco, Inc. 287,500 15,956,250
------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 5,000 234,375
------------------------------------------------------------------------------------------------
Torchmark Corp. 85,000 3,825,000
------------------------------------------------------------------------------------------------
UNUM Corp. 45,000 2,362,500
-----------
24,426,563
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
INSURANCE: PROPERTY AND Loews Corp. 45,000 $ 4,185,000
------------------------------------------------------------------------------------------------
CASUALTY-2.2% Progressive Corp. 125,000 5,062,500
------------------------------------------------------------------------------------------------
USF&G Corp. 495,000 7,301,250
-----------
16,548,750
- -----------------------------------------------------------------------------------------------------------------------------------
INSURANCE BROKERS-0.0% Alexander & Alexander Services, Inc. 10,000
195,000
- -----------------------------------------------------------------------------------------------------------------------------------
MAJOR BANKS: OTHER-1.7% Bank of Boston Corp. 400,000
9,200,000
------------------------------------------------------------------------------------------------
Continental Bank Corp. 55,000 1,450,625
------------------------------------------------------------------------------------------------
Mellon Bank Corp. 45,000 2,385,000
-----------
13,035,625
- -----------------------------------------------------------------------------------------------------------------------------------
MAJOR BANKS: REGIONAL-5.6% BANC ONE CORP. 75,000
2,934,375
------------------------------------------------------------------------------------------------
First Interstate Bancorp 95,000 6,091,875
------------------------------------------------------------------------------------------------
First Union Corp. 70,000 2,887,500
------------------------------------------------------------------------------------------------
KeyCorp 195,000 6,898,125
------------------------------------------------------------------------------------------------
Midlantic Corp.(1) 190,000 4,845,000
------------------------------------------------------------------------------------------------
Shawmut National Corp. 240,000 5,220,000
------------------------------------------------------------------------------------------------
Signet Banking Corp. 200,000 6,950,000
------------------------------------------------------------------------------------------------
SouthTrust Corp. 170,000 3,230,000
------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 20,000 900,000
------------------------------------------------------------------------------------------------
Washington Mutual Savings Bank of Seattle 65,000 1,568,125
-----------
41,525,000
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY CENTER BANKS-0.4% Chase Manhattan Corp. 30,000
1,016,250
------------------------------------------------------------------------------------------------
Chemical Banking Corp. 40,000 1,605,000
-----------
2,621,250
- -----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-3.2%
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES-0.6% Comdisco, Inc. 215,000 4,138,750
------------------------------------------------------------------------------------------------
Mercury Air Group, Inc.(1) 100,000 375,000
-----------
4,513,750
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.6% General Electric Co. 115,000
12,060,625
- -----------------------------------------------------------------------------------------------------------------------------------
MACHINERY: DIVERSIFIED-0.8% Varity Corp.(1) 135,000 6,041,250
- -----------------------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.2% Rollins Environmental Services, Inc. 200,000
1,150,000
------------------------------------------------------------------------------------------------
Yellowstone Environmental Services, Inc.(1) 100,000 6,250
-----------
1,156,250
- -----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY-22.9%
- -----------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-1.5% Boeing Co. (The) 40,000 1,730,000
------------------------------------------------------------------------------------------------
Gencorp, Inc. 40,000 570,000
------------------------------------------------------------------------------------------------
Grumman Corp. 120,000 4,740,000
------------------------------------------------------------------------------------------------
Northrop Corp. 110,000 4,111,250
-----------
11,151,250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF INVENTMENTS (Unaudited)(continued)
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMPUTER SOFTWARE AND Adobe Systems, Inc. 70,000 $
1,557,500
------------------------------------------------------------------------------------------------
SERVICES-8.4% Automatic Data Processing, Inc. 206,800 11,425,700
------------------------------------------------------------------------------------------------
Ceridian Corp.(1) 150,000 2,850,000
------------------------------------------------------------------------------------------------
Computer Associates International, Inc. 375,000 15,000,000
------------------------------------------------------------------------------------------------
Computer Sciences Corp.(1) 50,000 4,975,000
------------------------------------------------------------------------------------------------
Electronic Arts(1) 25,000 750,000
------------------------------------------------------------------------------------------------
General Motors Corp., Cl. E 320,000 9,360,000
------------------------------------------------------------------------------------------------
Microsoft Corp.(1) 175,000 14,109,375
------------------------------------------------------------------------------------------------
Novell, Inc.(1) 105,000 2,178,750
-----------
62,206,325
- -----------------------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS-6.5% AST Research, Inc.(1) 237,500 5,403,125
------------------------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 135,000 15,187,500
------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 50,000 3,231,250
------------------------------------------------------------------------------------------------
Compaq Computer Corp.(1) 20,000 1,480,000
------------------------------------------------------------------------------------------------
Data General Corp.(1) 156,500 1,467,187
------------------------------------------------------------------------------------------------
Maxtor Corp.(1) 120,000 660,000
------------------------------------------------------------------------------------------------
Quantum Corp.(1) 50,000 706,250
------------------------------------------------------------------------------------------------
Seagate Technology(1) 505,000 11,993,750
------------------------------------------------------------------------------------------------
Unisys Corp.(1) 680,000 8,585,000
-----------
48,714,062
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS-0.1% ADT Ltd.(1) 105,000 945,000
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: INSTRUMENTATION-0.4% American Power Conversion Corp.(1) 140,000
3,325,000
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: SEMICONDUCTORS-3.0% Advanced Micro Devices, Inc.(1) 195,000
3,461,250
------------------------------------------------------------------------------------------------
Intel Corp. 300,000 18,600,000
------------------------------------------------------------------------------------------------
National Semiconductor Corp. 25,000 403,125
-----------
22,464,375
- -----------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.0% American Telephone & Telegraph Co. 95,000
4,987,500
------------------------------------------------------------------------------------------------
Hong Kong Telecommunications Ltd., Sponsored ADR 25,000 1,556,250
------------------------------------------------------------------------------------------------
Telefonica de Espana SA, Sponsored ADR 40,000 1,560,000
------------------------------------------------------------------------------------------------
Telefonos de Mexico SA, Sponsored ADR 210,000 14,175,000
-----------
22,278,750
-----------
Total Common Stocks (Cost $463,739,084) 702,457,513
-----------
TOTAL INVESTMENTS, AT VALUE (COST $504,739,084) 99.6%
743,457,513
OTHER ASSETS NET OF LIABILITIES .4 2,846,379
----------- -----------
NET ASSETS 100.0% $746,303,892
----------- ------------
----------- ------------
<FN>
1. Non-income producing security.
2. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the six months ended December
31, 1993. The aggregate fair value and cost of all securities of
affiliated companies as of December 31, 1993 amounted to $1,325,000 and
$494,000, respectively. There were no transactions with affiliates during
the six months ended December 31, 1993.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1993 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $504,739,084)-see accompanying statement $743,457,513
------------------------------------------------------------------------------------------------
Cash 439,116
------------------------------------------------------------------------------------------------
Receivables:
Investments sold 2,461,833
Shares of beneficial interest sold 1,504,893
Dividends and interest 911,530
------------------------------------------------------------------------------------------------
Other 470,594
------------
Total assets 749,245,479
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 2,149,230
Distribution assistance-Note 4 303,269
Dividends and distributions 72,501
Other 416,587
------------
Total liabilities 2,941,587
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $746,303,892
------------
------------
- -----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $498,819,696
------------------------------------------------------------------------------------------------
NET ASSETS Undistributed net investment income 443,157
------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 8,322,610
------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments-Note 3 238,718,429
------------
Net assets $746,303,892
------------
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets of
$741,391,155 and 26,770,494 shares of beneficial interest outstanding) $27.69
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $29.38
------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $4,912,737 and 178,071 shares of beneficial
interest outstanding) $27.59
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended December 31, 1993 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Dividends $ 4,940,709
------------------------------------------------------------------------------------------------
Interest 574,317
------------
Total income 5,515,026
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees-Note 4 2,635,474
------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees-Note 4 434,285
------------------------------------------------------------------------------------------------
Distribution assistance:
Class A-Note 4 413,568
Class B-Note 4 9,648
------------------------------------------------------------------------------------------------
Shareholder reports 207,915
------------------------------------------------------------------------------------------------
Trustees' fees and expenses 31,922
------------------------------------------------------------------------------------------------
Custodian fees and expenses 27,606
------------------------------------------------------------------------------------------------
Legal and auditing fees 24,735
------------------------------------------------------------------------------------------------
Registration and filing fees-Class B 1,014
------------------------------------------------------------------------------------------------
Other 50,375
------------
Total expenses 3,836,542
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,678,484
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain on investments
6,470,679
------------------------------------------------------------------------------------------------
GAIN ON INVESTMENTS Net change in unrealized appreciation on investments:
Beginning of period 216,647,567
End of period-Note 3 238,718,429
------------
Net change 22,070,862
------------
Net realized and unrealized gain on investments 28,541,541
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 30,220,025
------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 1993 YEAR ENDED
(UNAUDITED) JUNE 30, 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OPERATIONS Net investment income $ 1,678,484 $ 5,089,258
------------------------------------------------------------------------------------------------
Net realized gain on investments 6,470,679 35,809,298
------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments 22,070,862 64,418,678
----------- ------------
Net increase in net assets resulting from operations 30,220,025 105,317,234
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income:
TO SHAREHOLDERS Class A ($.155 and $.245 per share, respectively) (4,036,019)
(6,227,354)
Class B ($.107 per share) (18,177) -
------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.639 and $1.571 per share, respectively) (16,638,213) (39,984,953)
Class B ($.639 per share) (108,552) -
- -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS Net increase (decrease) in net assets resulting from
Class A beneficial interest transactions-Note 2 (11,888,872) 53,957,646
------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions-Note 2 4,943,661 -
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 2,473,853 113,062,573
------------------------------------------------------------------------------------------------
Beginning of period 743,830,039 630,767,466
----------- ------------
End of period (including undistributed net investment
income of $443,157 and $2,818,869, respectively) $746,303,892 $743,830,039
------------ ------------
------------ ------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
--------------------------------------------------------------------------- ------------
SIX MONTHS ENDED YEAR ENDED PERIOD
ENDED
DECEMBER 31, 1993 JUNE 30, DECEMBER 31, 1993
(UNAUDITED) 1993 1992 1991 1990 1989 (UNAUDITED)(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $27.34 $24.94 $21.88 $20.60 $18.90 $17.13 $27.02
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .07 .19 .29 .47 .64 .62 (.02)
Net realized and unrealized
gain (loss) on investments 1.08 4.03 3.13 1.36 1.76 1.78 1.34
------- ------ ------ ------ ------ ------ ------
Total income from
investment operations 1.15 4.22 3.42 1.83 2.40 2.40 1.32
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.16) (.25) (.36) (.55) (.70) (.59) (.11)
Distributions from net realized
gain on investments (.64) (1.57) - - - (.04) (.64)
------- ------- ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.80) (1.82) (.36) (.55) (.70) (.63) (.75)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $27.69 $27.34 $24.94 $21.88 $20.60 $18.90 $27.59
------- ------ ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(2) 4.18% 16.88% 15.69% 9.39% 12.98% 14.54% 4.14%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $741,391 $743,830 $630,767 $550,480 $551,295 $542,250 $4,913
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $735,616 $710,391 $624,527 $520,335 $547,090 $529,699 $2,606
- ------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 26,770 27,210 25,287 25,155 26,760 28,687 178
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .45%(3) .72% 1.14% 2.20% 3.07% 3.31% (.47)%(3)
Expenses 1.03%(3) .93% .90% .94% .92% .97% 2.01%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 9.3% 23.2% 36.7% 31.1% 27.6% 27.1% 9.3%
<FN>
1. For the period from August 17, 1993 (inception of offering) to December
31, 1993.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal year, 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.
3. Annualized.
4. 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 six months ended December 31, 1993 were
$64,997,857 and $96,187,847, respectively.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- -------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Special Fund (the Fund) is registered under the Investment
Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Fund's investment advisor is Oppenheimer Management Corporation (the
Manager). The Fund offers both Class A and Class B shares. Class A shares
are sold with a front-end sales charge. Class B shares may be subject to
a contingent deferred sales charge. Both classes of shares have identical
rights to earnings, assets and voting privileges, except that each class
has its own distribution plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters
affecting a single class. 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 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Short-term
debt securities having a remaining maturity of 60 days or less are valued
at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Trustees to determine fair value in good faith.
- --------------------------------------------------
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. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller enters
an insolvency proceeding, realization of the value of the collateral by
the Fund may be delayed or limited.
- --------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class. Federal Income Taxes. The Fund intends to
continue to comply with provisions of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income tax provision
is required.
- --------------------------------------------------
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. The
accumulated liability for the Fund's projected benefit obligations was
$127,168 at December 31, 1993. No payments have been made under the plan.
- --------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
- --------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold
(trade date) and dividend income is recorded on the ex-dividend date.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same
basis used for federal income tax purposes.
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (Continued)
- ------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1993(1) YEAR ENDED JUNE 30, 1993
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A:
Sold 1,548,655 $ 42,915,730 5,518,247 $149,845,978
Dividends and distributions reinvested 720,452 19,970,949 1,627,898 44,669,529
Redeemed (2,708,447) (74,775,551) (5,223,558) (140,557,861)
Net increase (decrease) (439,340) $(11,888,872) 1,922,587 $ 53,957,646
Class B:
Sold 189,067 $ 5,254,243 - $ -
Dividends and distributions reinvested 4,452 122,908 - -
Redeemed (15,448) (433,490) - -
------------ ----------- --------- -------------
Net increase 178,071 $ 4,943,661 - $ -
------------ ----------- --------- -------------
------------ ----------- --------- -------------
<FN>
1. For the six months ended December 31, 1993 for Class A shares and for
the period from August 17, 1993 (inception of offering) to December 31,
1993 for Class B shares.
</TABLE>
- -------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At December 31, 1993, net unrealized appreciation on investments of
$238,718,429 was composed of gross appreciation of $260,861,318, and gross
depreciation of $22,142,889.
- ------------------------------------------------------------
4. Management Fees And Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75%
on the first $200 million of net assets with a reduction of .03% on each
$200 million thereafter to $800 million, and .60% on net assets in excess
of $800 million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the six months ended December 31, 1993, commissions (sales
charges paid by investors) on sales of Class A shares totaled $1,024,599,
of which $281,527 was retained by Oppenheimer Funds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an
affiliated broker/dealer. During the six months ended December 31, 1993,
OFDI received contingent deferred sales charges of $2,427 upon redemption
of Class B shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under separate approved plans of distribution, each class may
expend up to .25% of its net assets annually to reimburse OFDI for costs
incurred in distributing shares of the Fund (prior to October 1, 1993,
Class A reimbursements were made with respect to shares sold subsequent
to March 31, 1991), including amounts paid to brokers, dealers, banks and
other institutions. In addition, Class B shares are subject to an
asset-based sales charge of .75% of net assets annually, to reimburse OFDI
for sales commissions paid from its own resources at the time of sale and
associated financing costs. In the event of termination or discontinuance
of the Class B plan of distribution, the Fund would be contractually
obligated to pay OFDI for any expenses not previously reimbursed or
recovered through contingent deferred sales charges. During the six months
ended December 31, 1993, OFDI paid $11,072 to an affiliated broker/dealer
as reimbursement for distribution-related expenses and retained $9,648 as
reimbursement for Class B distribution-related expenses and sales
commissions.
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder
Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80201
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
707 Seventeenth Street
Denver, Colorado 80202
Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 W. 47th Street
New York, New York 10036
