OPPENHEIMER TIME FUND
Prospectus dated October 21, 1994
Oppenheimer Time Fund (the "Fund") is a mutual fund that seeks
capital appreciation. Current income is not a consideration in the
selection of the Fund's portfolio securities. In seeking to achieve its
investment objective, the Fund emphasizes investment in "mid-
capitalization" companies that are, in the opinion of Oppenheimer
Management Corporation (the "Manager") established, well-managed companies
with strong market positions, high quality products and high earnings
growth potential that have a proven ability to translate growth in sales
and market share into earnings gains.
The Fund invests mainly in common stocks, preferred stocks, and
convertible securities. The Fund also uses "hedging" instruments, to seek
to reduce the risks of market fluctuations that affect the value of the
securities the Fund holds. Some investment techniques the Fund uses may
be considered to be speculative investment methods that may increase the
risks of investing in the Fund and may also increase the Fund's operating
costs. You should carefully review the risks associated with an investment
in the Fund. Please refer to "Investment Policies and Strategies" for more
information about the types of securities the Fund invests in and the
risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the October 21, 1994, Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Because of the Fund's investment policies and practices, the Fund's shares
may be considered to be speculative.
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are reflected in the Fund's net asset value per share. As
a shareholder, you pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you might expect
to bear indirectly. The calculations are based on the Fund's expenses
during its fiscal year ended June 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages ---- through ---- for
an explanation of how and when these charges apply.
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75%
Sales Charge on Reinvested Dividends None
Deferred Sales Charge None(1)
Redemption Fee None
Exchange Fee $5.00(2)
(1) If you invest more than $1 million, you may have to pay a sales
charge of up to 1% if you sell your shares within 18 calendar months
from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares," below.
(2) Fee is waived for automated exchanges, as described in "How to
Exchange Shares."
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager"), and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the Fund's average net assets for
that year. An amended Service Plan for the Fund's shares took effect July
1, 1994, that applies to all shares of the Fund, regardless of the date
on which the shares were purchased. "12b-1 Service Plan Fees" are based
on expenses that would have been incurred if that Plan had been in effect
during the Fund's fiscal year ended June 30, 1994.
Management Fees 0.74%
12b-1 Service Plan Fees (restated) 0.12%
Other Expenses 0.15%
Total Fund Operating Expenses 1.01%
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in shares of the Fund, and
that the Fund's annual return is 5%, and that its operating expenses are
as shown in the chart above. If you were to redeem your shares at the end
of each period shown below, your investment would incur the following
expenses by the end of each period shown:
1 year 3 years 5 years 10 years
$67 $86 $107 $166
This example shows the effect of expenses on an investment, but is not
meant to state or predict actual or expected costs or investment returns
of the Fund, all of which will vary.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about the
Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by KPMG
Peat Marwick LLP, the Fund's independent auditors, whose report on the
Fund's financial statements for the fiscal year ended June 30, 1994, is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $17.06 $14.84 $14.37 $16.71 $17.38
- --------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income --(1) --(1) .14 .40 .54
Net realized and unrealized
gain(loss) on investments and
options written (.38) 3.06 1.24 (.25) .62
------ ------ ------ ------ ------
Total income (loss) from
investment operations (.38) 3.06 1.38 .15 1.16
- --------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- (.05) (.22) (.52) (.51)
Dividends in excess of net
investment income --(1) -- -- -- --
Distributions from net realized
gain on investments and options
written (1.23) (.79) (.69) (1.97) (1.32)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.23) (.84) (.91) (2.49) (1.83)
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $15.45 $17.06 $14.84 $14.37 $16.71
====== ====== ====== ====== ======
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TOTAL RETURN, AT NET ASSET
VALUE(2) (3.40)% 20.95% 9.28% 2.46% 6.91%
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RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (in thousands) $321,536 $370,439 $329,975 $309,390 $335,026
- --------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $387,363 $358,834 $358,097 $310,040 $328,266
- --------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of year (in thousands) 20,814 21,710 22,242 21,526 20,050
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (.21)% .01% .80% 2.48% 3.12%
Expenses .94% 1.00% .96% .96% .94%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 62.7% 61.7% 86.3% 107.5% 115.7%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1989 1988 1987 1986 1985
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<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $15.50 $20.59 $20.15 $14.17 $12.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .48 .30 .15 .22 .33
Net realized and unrealized
gain(loss) on investments and
options written 2.35 (.99) 2.60 6.17 2.50
------ ------ ------ ------ ------
Total income (loss) from
investment operations 2.83 (.69) 2.75 6.39 2.83
- --------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.42) (.27) (.23) (.31) (.21)
Dividends in excess of net
investment income -- -- -- -- --
Distributions from net realized
gain on investments and options
written (.53) (4.13) (2.08) (.10) (.45)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.95) (4.40) (2.31) (.41) (.66)
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $17.38 $15.50 $20.59 $20.15 $14.17
====== ====== ====== ====== ======
==========================================================
========================================
TOTAL RETURN, AT NET ASSET
VALUE(2) 19.48% (2.79)% 16.31% 46.39% 25.01%
==========================================================
========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (in thousands) $319,789 $318,293 $347,503 $301,887 $222,423
- --------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $294,079 $311,729 $292,151 $239,231 $194,346
- --------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of year (in thousands) 18,401 20,539 16,877 14,981 15,693
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 2.74% 1.83% .85% 1.42% 2.60%
Expenses 1.00% .97% .94% .96% .95%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 67.4% 102.6% 47.0% 106.7% 175.8%
</TABLE>
1. Less than $.005 per share.
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
year. Sales charges are not reflected in the total returns.
3. 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, 1994 were $214,351,214
and $270,797,541, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund invests its assets to seek capital appreciation for
its shareholders. The Fund does not invest to seek current income to pay
shareholders.
Investment Policies and Strategies. The Fund seeks its investment
objective of capital appreciation by emphasizing investment in "mid-
capitalization" companies (those generally with capitalization between
$500 million and $5 billion, also known as "mid-cap" companies) that are,
in the Manager's opinion, established, well-managed companies with strong
market positions, high quality products and high earnings growth potential
that have a proven ability to translate growth in sales and market share
into earnings gains.
The Fund's investments include common stocks, preferred stocks,
convertible securities, and rights and warrants in proportions which vary
from time to time. Of the companies whose stocks the Fund held during the
fiscal year ended June 30, 1994, some are categorized as "consumer
cyclicals" that do well in the early to middle stages of the economic
cycle; some fall into the technology sector, others are considered
healthcare companies and a few are classified as financial-services
issues. As a group, mid-cap stocks may be more vulnerable to a weaker
economy than other stock sectors. See "Management's Discussion of
Performance" on page 11 for details. In every case, however, sector
classifications are a less important selection criterion for the Fund than
specific company characteristics.
When investing the Fund's assets, the Manager considers many factors,
including general economic conditions in the U.S. relative to foreign
economies, and the trends in domestic and foreign stock markets. The Fund
may try to hedge against losses in the value of its portfolio of
securities by using hedging strategies described below. When market
conditions are unstable, the Fund may invest substantial amounts of its
assets in debt securities, such as money market instruments or government
securities, as described below. The Fund's portfolio manager may employ
special investment techniques in selecting securities for the Fund. These
are also described below. Additional information may be found about them
under the same headings in the Statement of Additional Information.
- Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three years, even after including the
operations of any of their predecessors. Securities of these companies
may have limited liquidity (which means that the Fund may have difficulty
selling them at an acceptable price when it wants to) and the price of
these securities may be volatile. The Fund currently intends to invest
no more than 5% of its net assets in the next year in securities of small,
unseasoned issuers.
- Warrants and Rights. Warrants basically are options to purchase
stock at set prices that are valid for a limited period of time. Rights
are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. The Fund may
invest up to 2% of its total assets in warrants or rights (other than
those that have been acquired in units or attached to other securities).
For further details, see "Warrants and Rights" in the Statement of
Additional Information.
- Special Situations. The Fund may invest in securities of companies
that are in "special situations" that the Manager believes present
opportunities for capital growth. A "special situation" may be an event
such as a proposed merger, reorganization, or other unusual development
that is expected to occur and which may result in an increase in the value
of a company's securities regardless of general business conditions or the
movement of prices in the securities market as a whole. There is a risk
that the price of the security may decline if the anticipated development
fails to occur.
- Other Investment Risks. Because of the types of securities the Fund
invests in and the investment techniques the Fund uses, some of which may
be speculative securities, the Fund is designed for investors who are
investing for the long-term, and who are willing to accept greater risks
of loss of their capital in the hope of achieving capital appreciation.
It is not intended for investors seeking assured income and preservation
of capital. Investing for capital appreciation entails the risk of loss
of all or part of your principal. Because there is no assurance that the
Fund will achieve its investment objective, when you redeem your shares,
they may be worth more or less than what you paid for them.
- Special Risks - Borrowing for Leverage. The Fund may borrow up to
10% of the value of its assets from banks on an unsecured basis to buy
securities. The Fund will borrow only if it can do so without putting up
assets as security for a loan. This is a speculative investment method
known as "leverage." This investment technique may subject the Fund to
greater risks and costs than funds that do not borrow. These risks may
include the possibility that the Fund's net asset value per share will
fluctuate more than the net asset value of funds that don't borrow, since
the Fund pays interest on borrowings and interest expense affects the
Fund's share price. Borrowing for leverage is subject to limits under the
Investment Company Act, described in more detail in "Borrowing for
Leverage" in the Statement of Additional Information.
- Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund may engage frequently in short-
term trading to try to achieve its objective. As a result, the Fund's
portfolio turnover may be higher than other mutual funds, although it is
not expected to be more than 100% each year. The "Financial Highlights,"
above, show the Fund's portfolio turnover rate during past fiscal years.
High turnover and short-term trading may cause the Fund to have relatively
larger commission expenses and transaction costs than funds that do not
engage in short-term trading. Additionally, high portfolio turnover may
affect the ability of the Fund to qualify as a "regulated investment
company" under the Internal Revenue Code to enable the Fund to obtain tax
reductions for dividends and capital gains distributions paid to
shareholders. The Fund qualified in its last fiscal year and intends to
do so in the coming year, although it reserves the right not to qualify.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's
investment objective is a fundamental policy. The Fund's Board of Trustees
may change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
- Writing Covered Calls. The Fund may write (that is, sell) covered
call options (calls) to raise cash for liquidity purposes (for example,
to meet redemption requirements) or for defensive reasons. The Fund
receives cash (called a premium) when it writes a call. The call gives
the buyer the ability to buy the security from the Fund at the call price
during the period in which the call may be exercised. If the value of the
security does not rise above the call price, it is likely that the call
will lapse without being exercised, while the Fund keeps the cash premium
(and the security).
The Fund may write calls only if certain conditions are met: (1) after
writing any call, not more than 25% of the Fund's total assets may be
subject to calls; (2) the calls must be listed on a domestic securities
exchange, quoted on the Automated Quotation System of the National
Association of Securities Dealers, Inc. (NASDAQ); or traded in the over-
the-counter market; and (3) each call must be "covered" while it is
outstanding; that means the Fund must own the securities on which the call
is written or it must own other securities that are acceptable for the
escrow arrangements required for calls. The Fund can also write covered
calls on Future Contracts it owns (these are described in the next
section) but these calls must be covered by securities or other liquid
assets the Fund owns, which the Fund must segregate from its other assets
so that it will be able to satisfy its delivery obligations if the call
is exercised.
If a covered call written by the Fund is exercised, the Fund will be
required to sell the security at the call price and will not be able to
realize any profit if the security has increased in value above the call
price on a security that has increased in value, the Fund will be required
to sell the security at the call price and will not be able to realize any
profit if the security has increased in value above the call price.
- Hedging With Options and Futures Contracts. The Fund may buy and
sell options and futures contracts to try to manage its exposure to
declining prices on its portfolio securities or to establish a position
in the equity securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling futures,
buying puts and writing covered calls, hedge the Fund's portfolio against
price fluctuations. Other hedging strategies, such as buying futures and
buying call options, tend to increase the Fund's exposure to the market.
The Fund may buy and sell futures contracts only if they relate to
broadly-based stock indices (these are referred to as "Stock Index
Futures"), as described in the Statement of Additional Information. The
Fund may purchase certain kinds of put and call options, Stock Index
Futures (described below), financial futures and options on Stock Index
Futures and on broadly-based stock indices, and engage in interest rate
swap transactions. These are all referred to as "hedging instruments."
The Fund does not use hedging instruments for speculative purposes. The
hedging instruments the Fund may use are described below and in greater
detail in "Other Investment Techniques and Strategies" in the Statement
of Additional Information.
The Fund may purchase put options (puts). Buying a put on an investment
gives the Fund the right to sell the investment to a seller of a put on
that investment at a set price. The Fund can buy only puts that relate
to (1) securities or Stock Index Futures, or (2) broadly-based stock
indices. The Fund can buy a put on a security or Stock Index Future
whether or not the Fund owns the particular security or Stock Index Future
in its portfolio. The Fund may sell puts on securities indices or Futures
only if such puts are covered by segregated liquid assets, but may not
sell puts if, as a result, more than 50% of the Fund's net assets would
be required to be segregated liquid assets. The Fund may not sell puts
other than a put that it previously purchased. The Fund may purchase
calls only on securities, broadly-based stock indices or Stock Index
Futures, or to terminate its obligation on a call the Fund previously
wrote. A call or put may not be purchased if the value of all of the
Fund's put and call options would exceed 5% of the Fund's total assets.
The Fund may buy and sell futures contracts only if they relate to
broadly-based stock indices (these are referred to as "Stock Index
Futures"), as described in the Statement of Additional Information. The
Fund may purchase and sell 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 securities to be acquired. The
Fund may also enter into foreign currency exchange contracts 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.
Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from those required
for normal portfolio management. If the Manager uses a hedging instrument
at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience
losses if the prices of its futures and options positions were not
correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
- Foreign Securities. The Fund may purchase equity (and debt)
securities issued or guaranteed by foreign companies or foreign
governments or their agencies. The Fund may purchase securities in any
country, developed or undeveloped. There is no limit on the amount of the
Fund's assets that may be invested in foreign securities. Foreign
currency will be held by the Fund only in connection with the purchase or
sale of foreign securities. If the Fund's securities are held abroad, the
countries in which they are held and the sub-custodians holding them must
be approved by the Fund's Board of Trustees.
Foreign Securities Have Special Risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign instruments may be
affected by changes in foreign currency rates, exchange control
regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in
governmental, economic or monetary policy in the U.S. or abroad, or other
political and economic factors. More information about the risks and
potential rewards of investing in foreign securities is contained in the
Statement of Additional Information.
- 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 25%
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.
- Illiquid and Restricted Securities. Under the policies established
by the Fund's Board of Trustees, the Manager determines the liquidity of
certain of the Fund's investments. Investments may be illiquid because of
the absence of a trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is
one that has a contractual restriction on its resale or that cannot be
sold publicly until it is registered under the Securities Act of 1933. The
Fund currently intends to invest no more than 10% of its assets in
illiquid or restricted securities (that limit may increase to 15% if
certain state laws are changed or the Fund's shares are no longer sold in
those states). Certain restricted securities, eligible for resale to
qualified institutional purchasers, are not subject to that limit.
- Loans of Portfolio Securities. To raise cash for liquidity purposes,
the Fund may lend its portfolio securities to certain types of eligible
borrowers approved by the Board of Trustees. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. There are some risks in connection
with securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the loan
securities. The Fund presently does not intend to engage in loans of
securities that will exceed 5% of the value of its total assets in the
coming year.
- Derivative Investments. The Fund can invest in a number of different
kinds of "derivative investments." In general, a "derivative investment"
is a specially designed investment whose performance is linked to the
performance of another investment or security, such as an option, future,
index or currency. In the broadest sense, derivative instruments include
exchange-traded options and futures contracts (see "Writing Covered Calls"
and "Hedging with Options and Futures Contracts"). The risks of investing
in derivative investments include not only the ability of the company
issuing the instrument to pay the amount due on the maturity of the
instrument, but also the risk that the underlying investment or security
might not perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by interest
rate changes in the U.S. and abroad. All of this can mean that the Fund
will realize less income than expected. Certain derivative instruments
held by the Fund may trade in the over-the-counter markets and may be
illiquid. See "Illiquid and Restricted Securities".
Examples of derivative investments the Fund may invest in include, among
others, "index-linked" notes. These are debt securities of companies that
call for payment on the maturity of the note in different terms than the
typical note where the borrower agrees to pay a fixed sum on the maturity
of the note. The payment on maturity of an index-linked note depends on
the performance of one or more market indices, such as the S & P 500
Index. Further examples of derivative investments the Fund may invest in
include "debt exchangeable for common stock" of an issuer or "equity-
linked debt securities" of an issuer. At maturity, the principal amount
of the debt security is exchanged for common stock of the issuer or is
payable in an amount based on the issuer's common stock price at the time
of maturity. In either case there is a risk that the amount payable at
maturity will be less than the principal amount of the debt.
Other examples of derivative investments the Fund may invest in are
currency-indexed securities. These are typically short-term or
intermediate-term debt securities whose maturity values or interest rates
are determined by reference to one or more specified foreign currencies.
Certain currency-indexed securities purchased by the Fund may have a
payout factor tied to a multiple of the movement of the U.S. dollar (or
the foreign currency in which the security is denominated) against the
movement in the U.S. dollar, the foreign currency, other currency, or an
index. Such securities may be subject to increased principal risk and
increased volatility than comparable securities without a payout factor
in excess of one, but the Manager believes the increased yield justifies
the increased risk.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor of the
securities under a repurchase agreement fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and losses if there is any delay in its ability to do so. The Fund will
not enter into a repurchase agreement which causes more than 10% of its
net assets to be subject to repurchase agreements having a maturity beyond
seven days.
- Short Sales "Against-the-Box". In a short sale, the seller does not
own the security that is sold, but normally borrows the security to
fulfill the delivery obligation. The seller later buys the security to
repay the loan in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Fund may not
sell securities short except in collateralized transactions referred to
as short sales "against-the-box," where the Fund owns an equivalent amount
of the security sold short. This technique is used primarily for tax
purposes. No more than 15% of the Fund's net assets will be held as
collateral for such short sales at any one time.
- Temporary Defensive Investments. When stock market prices are
falling or in other unusual economic or business circumstances, the Fund
may invest all or a portion of its assets in defensive securities.
Securities selected for defensive purposes may include debt securities,
such as rated or unrated bonds and debentures, and preferred stocks, cash
or cash equivalents, such as U.S. Treasury Bills and other short-term
obligations of the U.S. Government, its agencies or instrumentalities, or
commercial paper rated "A-1" or better by Standard & Poor's Corporation
or "P-1" or better by Moody's Investors Service, Inc.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following: (1) invest in securities of a single
issuer (except the U.S. Government or its agencies or instrumentalities)
if immediately thereafter either: (a) more than 5% of the Fund's total
assets would be invested in securities of that issuer, or (b) the Fund
would then own more than 10% of that issuer's voting securities; (2)
invest more than 25% of its total assets in securities of companies in any
one industry; (3) invest in other open-end investment companies or invest
more than 5% 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;
(4) make short sales of securities except "short sales against-the-box";
or (5) deviate from the percentage restrictions listed under "Illiquid and
Restricted Securities" and "Writing Covered Calls."
All of the percentage restrictions described above and elsewhere in this
Prospectus (other than the percentage limit that applies to borrowing,
described in the Statement of Additional Information) apply only at the
time the Fund purchases a security, and the Fund need not dispose of a
security merely because the Fund's assets have changed or the security has
increased in value relative to the size of the Fund. There are other
fundamental policies described in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was originally incorporated in
Maryland in 1971 but was reorganized in 1985 as a Massachusetts business
trust. The Fund is an open-end, diversified management investment company,
with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of June 30, 1994, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The Portfolio Manager of the Fund is Jay W.
Tracey III, a Vice President of the Manager and of the Fund. He has been
the person principally responsible for the day-to-day management of the
Fund's portfolio, since September, 1994. During the past five years, Mr.
Tracey has also served as an officer of other OppenheimerFunds, prior to
which he was Managing Director of Buckingham Capitol Management, prior to
which he was the portfolio manager of the Fund and a Vice President of the
Manager, before which he was Senior Vice President of Founders Asset
Management, Inc. (mutual fund adviser), prior to which he was a securities
analyst and portfolio manager of Berger Associates, Inc. (investment
adviser).
- Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.75% of the first $200 million of aggregate net
assets, 0.72% of the next $200 million, 0.69% of the next $200 million,
.66% of the next $200 million, and 0.60% of aggregate net assets over $800
million. The Fund's management fee for its last fiscal year was 0.74% of
average annual net assets, which may be higher than the rate paid by some
other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "average annual total
return." This performance information may be useful to help you see how
well your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary, depending on
market conditions, the composition of the portfolio, and expenses that the
Fund incurs.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted, they reflect the payment of the maximum
initial sales charge. Total returns may also be quoted "at net asset
value," without considering the effect of the sales charge, and those
returns would be reduced if sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended June 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's past
fiscal year, increases in short-term interest rates took a toll on growth
stocks. In that economic climate, the Manager continued to focus on mid-
capitalization companies (having a capitalization between $500 million and
$5 billion, also known as "mid-cap" companies) that, in the Manager's
opinion, have high earnings growth potential. The Fund emphasized
investments in portfolio companies with established market positions and
strong managements, and which may benefit from increased consumer
confidence and spending. The Fund sold stocks whose prices appeared to
have peaked, using the proceeds to invest in companies whose earnings
potential is not, in the Manager's opinion, fully reflected in the value
of their shares.
- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in shares of
the Fund held until June 30, 1994 over a ten-year period, with all
dividends and capital gains distributions invested in additional shares.
The graph reflects the deduction of the 5.75% maximum initial sales charge
on Fund shares.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a
general measure of the performance of the U.S. equity securities market.
Index performance data reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the S&P 500 Index, which tend to be securities of
larger, well-capitalized companies, as contrasted to the mid-cap growth-
type companies in which the Fund principally invests. Moreover, the index
data does not reflect any assessment of the risk of the investments
included in the index.
Comparison of Change in Value
of $10,000 Hypothetical Investment in:
Oppenheimer Time Fund And
S&P 500 Index
(Graph)
Past performance is not predictive of future performance.
Average Annual Total Return for the Fund at 6/30/94
1-Year 5-Year 10-Year
-8.95% 5.68% 12.54%
Past performance is not predictive of future performance.
ABOUT YOUR ACCOUNT
How to Buy Shares
When you buy shares of the Fund, you pay an initial sales charge (on
investments up to $1 million). If you purchase shares as part of an
investment of at least $1 million in shares of one or more
OppenheimerFunds, and you sell any of those shares within 18 months after
your purchase, you may pay a contingent deferred sales charge, which will
vary depending on the amount you invested.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service.
- Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (all references to time in
this Prospectus mean "New York time"). The net asset value is determined
as of that time on each day The New York Stock Exchange is open (which is
a "regular business day"). If you buy shares through a dealer, the dealer
must receive your order by 4:00 P.M., on a regular business day and
transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
The Fund's shares are sold at their offering price, which is normally
net asset value plus an initial sales charge. However, in some cases,
described below, where purchases are not subject to an initial sales
charge, the offering price may be net asset value. In some cases, reduced
sales charges may be available, as described below. Out of the amount you
invest, the Fund receives the net asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
_______________________________________________________________________
__________
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
_
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Contingent Deferred Sales Charge. There is no initial sales charge
on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more (shares of the Fund and other
OppenheimerFunds that offer only one class of shares that has no class
designation are considered "Class A" shares for this purpose). However,
the Distributor pays dealers of record commissions on such purchases in
an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50%
of the next $2.5 million, plus 0.25% of share purchases over $5 million.
That commission will be paid only on the amount of those purchases in
excess of $1 million that were not previously subject to a front-end sales
charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will be equal
to 1.0% of the aggregate net asset value of either (1) the redeemed shares
(not including shares purchased by reinvestment of dividends or capital
gain distributions) or (2) the original cost of the shares, whichever is
less. However, the contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all shares
of all OppenheimerFunds you purchased subject to the contingent deferred
sales charge. In determining whether a contingent deferred sales charge
is payable, the Fund will first redeem shares that are not subject to the
sales charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The contingent deferred sales charge is waived in certain
cases described in "Waivers of Sales Charges" below.
No contingent deferred sales charge is charged on exchanges of shares
under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of
the calendar month of the purchase of the exchanged shares, the sales
charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges. You may be eligible to buy the Fund's shares at
reduced sales charge rates in one or more of the following ways:
- Right of Accumulation. You and your spouse can cumulate shares you
purchase for your own accounts, or jointly, or on behalf of your children
who are minors, under trust or custodial accounts. A fiduciary can
cumulate shares purchased for a trust, estate or other fiduciary account
(including one or more employee benefit plans of the same employer) that
has multiple accounts.
Additionally, you can cumulate current purchases of shares of the Fund
and Class A shares of
other OppenheimerFunds with Class A shares of OppenheimerFunds you
previously purchased subject to a sales charge, provided that you still
hold your investment in one of the OppenheimerFunds. The value of those
shares will be based on the greater of the amount you paid for the shares
or their current value (at offering price). The OppenheimerFunds are
listed in "Reduced Sales Charges" in the Statement of Additional
Information, or a list can be obtained from the Transfer Agent. The
reduced sales charge will apply only to current purchases and must be
requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase shares
of the Fund and Class A shares of other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
- Waivers of Sales Charges. No sales charge is imposed on sales of
shares to the following investors: (1) the Manager or its affiliates; (2)
present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
(3) registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose; (4) dealers or brokers that have a sales
agreement with the Distributor, if they purchase shares for their own
accounts or for retirement plans for their employees; (5) employees and
registered representatives (and their spouses) of dealers or brokers
described above or financial institutions that have entered into sales
arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker, or investment adviser provides
administrative services.
Additionally, no sales charge is imposed on shares that are (a) issued
in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves Fund)
or unit investment trusts for which reinvestment arrangements have been
made with the Distributor. There is a further discussion of this policy
in "Reduced Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
shares at net asset value described above and is also waived if shares are
redeemed in the following cases: (1) retirement distributions or loans to
participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Declaration of Trust or adopted by the Board of Trustees; and (5)
if, at the time an order is placed for Class A shares that would otherwise
be subject to the Class A contingent deferred sales charge, the dealer
agrees to accept the dealer's portion of the commission payable on the
sale in installments of 1/18th of the commission per month (with no
further commission payable if the shares are redeemed within 18 months of
purchase).
- Service Plan. The Fund has adopted a Service Plan to reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the
average annual net assets of shares of the Fund. The Distributor uses all
of those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold shares of the Fund and to reimburse
itself (if the Fund's Board of Trustees authorizes such reimbursements,
which it has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of shares held in accounts
of the dealer or its customers. The payments under the Plan increase the
annual expenses of shares. For more details, please refer to "Service
Plan" in the Statement of Additional Information.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use to
buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly
to your AccountLink bank account. Please refer to "How to Sell Shares,"
below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in shares of the Fund or Class A shares of other OppenheimerFunds without
paying a sales charge. This privilege applies to Fund shares that you
purchased with an initial sales charge or on which you paid a contingent
deferred sales charge when you redeemed them. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and small
business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive a
check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-
852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is open
7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. Because the Fund has only one
class of shares that does not have a class designation, they are "Class
A" shares for exchange purposes. For example, you can exchange shares of
this Fund only for Class A shares of another fund. At present, not all
of the OppenheimerFunds offer the same classes of shares. If a fund has
only one class of shares that does not have a class designation, they are
"Class A" shares for exchange purposes. In some cases, sales charges may
be imposed on exchange transactions. Certain OppenheimerFunds offer Class
A shares and Class B and/or Class C shares, and a list can be obtained by
calling the Distributor at 1-800-525-7048. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at one of the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined as of 4:00 P.M. each day The
New York Stock Exchange is open by dividing the value of the Fund's net
assets by the number of shares that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
- The redemption price for the Fund's shares will vary from day to day
because the value of the securities in the Fund's portfolio fluctuates,
and the redemption value, which is the net asset value per share, may be
more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer
Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. The Transfer Agent may delay
forwarding a check or processing a payment via AccountLink for recently
purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 15 days from the date the shares were purchased.
That delay may be avoided if you purchase shares by certified check or
arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the fund may be redeemed "in
kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
taxpayer identification number when you sign your application, or if you
violate Internal Revenue Service regulations on tax reporting of
dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described above in "How To Buy Shares," you may
be subject to a contingent deferred sales charges when redeeming certain
shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname and address on
the Fund's records. However, each shareholder may call the Transfer Agent
at 1-800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends on an annual basis in
December each year, on a date set by the Board of Trustees. The Board may
also cause the Fund to declare dividends after the close of the Fund's
fiscal year (which ends June 30th). Because the Fund does not have an
objective of seeking current income, the amounts of dividends it pays, if
any, will likely be small.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurances that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER TIME FUND
Graphic material included in Prospectus of Oppenheimer Time Fund:
"Comparison of Total Return of Oppenheimer Time Fund with the S&P 500
Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Time
Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund over the
ten-year period from 6/30/84 through 6/30/94. The graph will compare such
values with a hypothetical $10,000 investment over the same time periods
in the S&P 500 Index. Set forth below are the relevant data points that
will appear on the linear graph. Additional information with respect to
the foregoing, including a description of the S&P 500 Index, is set forth
in the Prospectus under "Performance of the Fund - Comparing the Fund's
Performance to the Market."
Fiscal Year Oppenheimer S&P 500
(Period) Ended Time Fund Index
06/30/84 $ 9,425 $10,000
06/30/85 $11,782 $13,096
06/30/86 $17,248 $17,787
06/30/87 $20,060 $22,262
06/30/88 $19,501 $20,719
06/30/89 $23,299 $24,971
06/30/90 $24,909 $29,079
06/30/91 $25,521 $31,222
06/30/92 $27,890 $35,403
06/30/93 $33,734 $40,221
06/30/94 $32,587 $40,784
<PAGE>
Oppenheimer Time Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
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 OPPENHEIMER
Oppenheimer Shareholder Services Time Fund
P.O. Box 5270 Prospectus
Denver, Colorado 80217 Effective October 21, 1994
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street OppenheimerFunds
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.
PR381.1094.R * Printed on recycled paper
<PAGE>
Oppenheimer Time Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated October 21, 1994
This Statement of Additional Information of Oppenheimer Time Fund is
not a Prospectus. This document contains additional information about the
Fund and supplements information in the Prospectus dated October 21, 1994.
It should be read together with the Prospectus, which may be obtained by
writing to the Fund's Transfer Agent, Oppenheimer Shareholder Services,
at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent
at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 2
Other Investment Restrictions 12
How the Fund is Managed 13
Organization and History 13
Trustees and Officers of the Fund 14
The Manager and Its Affiliates 17
Brokerage Policies of the Fund 19
Performance of the Fund 21
Service Plan 23
About Your Account 24
How To Buy Shares 24
How To Sell Shares 29
How To Exchange Shares 32
Dividends, Capital Gains and Taxes 34
Additional Information About the Fund 34
Financial Information About the Fund 36
Independent Auditors' Report 36
Financial Statements 37
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
advisor, Oppenheimer Management Corporation (the "Manager"), evaluates the
merits of securities primarily through the exercise of its own investment
analysis. This may include, among other things, evaluation of the history
of the issuer's operations, prospects for the industry of which the issuer
is part, the issuer's financial condition, the issuer's pending product
developments and developments by competitors, the effect of general market
and economic conditions on the issuer's business, and legislative
proposals or new laws that might affect the issuer. Current income is not
a consideration in the selection of portfolio securities for the Fund,
whether for appreciation, defensive or liquidity purposes. The fact that
a security has a low yield or does not pay current income will not be an
adverse factor in selecting securities to try to achieve the Fund's
investment objective of capital appreciation unless the Manager believes
that the lack of yield might adversely affect appreciation possibilities.
The portion of the Fund's assets allocated to securities and methods
selected for capital appreciation will depend upon the judgment of the
Fund's Manager as to the future movement of the equity securities markets.
If the Manager believes that economic conditions favor a rising market,
the Fund will emphasize securities and investment methods selected for
high capital growth. If the Manager believes that a market decline is
likely, defensive securities and investment methods will be emphasized
(See "Temporary Defensive Investments," below).
Other Investment Techniques and Strategies
- Warrants and Rights. The prices of warrants do not necessarily
move in a manner parallel to the prices of the underlying securities. The
price the Fund pays for a warrant will be lost unless the warrant is
exercised prior to its expiration. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets
of the issuer.
- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on a security, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. 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 the Fund has written is more or less than
the price of the call the Fund subsequently purchased. A profit may also
be realized if the call lapses unexercised because the Fund retains the
underlying investment and the premium received. Such profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the future. In no circumstances would an exercise notice as to
a future put the Fund in a short futures position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (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 (as
described in the Prospectus). When hedging to establish a position in the
equity securities markets as a temporary substitute for the purchase of
individual equity securities the Fund may: (i) buy Stock Index Futures,
or (ii) buy calls on Stock Index Futures or securities. Normally, the
Fund would then purchase the equity securities and terminate the hedging
portion.
The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's investment activities in the underlying cash
market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
- Stock Index Futures. As described in the Prospectus, the Fund may
invest in Stock Index Futures only if they relate to broadly-based stock
indices. A stock index is considered to be broadly-based if it includes
stocks that are not limited to issuers in any particular industry or group
of industries. A stock index assigns relative values to the common stocks
included in the index and fluctuates with the changes in the market value
of those stocks. Stock indices cannot be purchased or sold directly.
Stock Index Futures are contracts based on the future value of the
basket of securities that comprise the underlying stock index. The
contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transactions or to enter into an offsetting
contract. No physical delivery of the securities underlying the index is
made on settling the futures obligation. No monetary amount is paid or
received by the Fund on the purchase or sale of a Stock Index Future.
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"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As
the future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the future for tax purposes. Although Stock Index
Futures by their terms call for settlement by the delivery of cash, in
most cases the settlement obligation is fulfilled without such delivery
by entering into an offsetting transaction. All futures transactions are
effected through a clearing house associated with the exchange on which
the contracts are traded.
- Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. 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, 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. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the call price, 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 call on
a stock index, it pays a premium, but settlement is in cash rather than
by delivery of the underlying investment to the Fund.
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
(a "protective put") enables the Fund to attempt to protect itself during
the put period against a decline in the value of the underlying investment
below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures
are similar to puts and calls on securities or futures contracts except
that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the stock market
generally) rather than on price movements of individual securities or
futures contracts. When the Fund buys a call on a stock index or Stock
Index Future, it pays a premium. If the Fund exercises the call during
the call period, a seller of a corresponding call on the same investment
will pay the Fund an amount of cash to settle the call if the closing
level of the stock index or future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price
of the call times a specified multiple (the "multiplier") which determines
the total dollar value for each point of difference. When the Fund buys
a put on a stock index or Stock Index Future, it pays a premium and has
the right during the put period to require a seller of a corresponding
put, upon the Fund's exercise of its put, to deliver cash to the Fund to
settle the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price of the
put. That cash payment is determined by the multiplier, in the same
manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index
Future not owned by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities the Fund holds. The
Fund can either resell the put or, in the case of a put on a Stock Index
Future, buy the underlying investment and sell it at the exercise price.
The resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying investment
is above the exercise price, and as a result the put is not exercised, the
put will become worthless on the expiration date. In the event of a
decline in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its loss on
its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Such commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of
the underlying investments, and consequently put and call options offer
large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes
in the value of the underlying investments.
- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short 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"). The CEA excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA), if the Fund complies
with the CFTC Rule. Under these restrictions, the Fund will not, as to
any positions, whether long, short or a combination thereof, enter into
Futures transactions and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use futures
and options thereon solely for "bona fide hedging purposes" within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, cash or readily-marketable, short-
term (maturing in one year or less) debt instruments in an amount equal
to the market value of the securities underlying such Future, less the
margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by (i) selling Stock Index Futures
or (ii) purchasing puts on stock indices or Stock Index Futures to attempt
to protect against declines in the value of the Fund's equity securities.
The risk is that the prices of Stock Index Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's equity securities. The ordinary spreads between prices in the
cash and futures markets are subject to distortions, due to differences
in the natures of those markets. First, all participants in the futures
markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may
close out futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures markets depends on participants
entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures markets could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the hedging instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of the equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual
equity securities (long hedging) by buying Stock Index Futures and/or
calls on such Futures, on securities or on stock indices, it is possible
that the market may decline. If the Fund then concludes not to invest in
equity securities at that time because of concerns as to a possible
further market decline or for other reasons, the Fund will realize a loss
on the hedging instruments that is not offset by a reduction in the price
of the equity securities purchased.
- Borrowing for Leverage. 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, 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 of 1940 (the
"Investment Company Act"), will only be made 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, when computed in that manner, 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 that
requirement. To do so, the Fund may have to sell a portion of its
investments at a time when independent investment judgment would not
dictate such sale.
- Investing in Small, Unseasoned Companies. The securities of small,
unseasoned companies may have a limited trading market, which may
adversely affect the Fund's ability to dispose of them and can reduce the
price the Fund might be able to obtain for them. If other investment
companies and investors that invest in this type of securities trade the
same securities when the Fund attempts to dispose of its holdings, the
Fund may receive lower prices than might otherwise be obtained, because
of the thinner market for such securities.
- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth
potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in
portfolio value by taking advantage of foreign stock markets that do not
move in a manner parallel to U.S. markets. If the Fund's portfolio
securities are held abroad, the countries in which they may be held and
the sub-custodians holding them must be approved by the Fund's Board of
Trustees under applicable rules of the Securities and Exchange Commission.
- Risks of Foreign Investing. Investments in foreign securities
present special additional risks and considerations not typically
associated with investments in domestic securities: reduction of income
by foreign taxes; fluctuation in value of foreign portfolio investments
due to changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement
of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; and unfavorable 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.
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, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities or other assets denominated
in that currency. The Fund, however, in order to avoid excess
transactions and transaction costs, may maintain a net exposure to Forward
Contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency 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 the 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."
- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts 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, and
(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.
The Fund 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 applicable tests under the Internal Revenue Code and must
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter.
- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board
of Trustees from time to time. The 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.
- Temporary Defensive Investments. When the equity markets in
general are declining, the Fund may commit an increasing portion of its
assets to defensive securities. These may include the types of securities
described in the Prospectus. When investing for defensive purposes, the
Fund will normally emphasize investment in short-term debt securities
(that is, securities maturing in one year or less from the date of
purchase), since those types of securities are generally more liquid and
usually may be disposed of quickly without significant gains or losses so
that the Manager may have liquid assets when it wishes to make investments
in securities for appreciation possibilities.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (1) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (2) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) lend money,
but the Fund may invest in a portion of a publicly distributed issue of
bonds, debentures, commercial paper, or other similar corporate
obligations; the Fund may also make loans of portfolio securities provided
the loan is collateralized in accordance with applicable regulatory
requirements and provided that immediately after any such loan the value
of the securities loaned does not exceed 25% of the total value of the
Fund's assets; (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, directors and trustees of the Fund or its adviser owning
individually more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer; (4) invest in commodities
or commodity contracts; however, the Fund may buy and sell any of the
Hedging Instruments it may use, whether or not 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; or (7)
mortgage, hypothecate or pledge any of its assets; however, this does not
prohibit the escrow arrangements contemplated by the writing of covered
call options or other collateral or margin arrangements in connection with
any of the Hedging Instruments it may use.
The Fund has further undertaken, as a non-fundamental investment
policy, in response to state securities regulations, that it will not
invest in oil, gas, or mineral exploration or development programs; the
Fund may terminate that undertaking at any time.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
The Fund's Declaration of Trust and an SEC exemptive order permits it
to offer shares of more than one class. In the event the Fund determines
to offer a class of shares in addition to the one presently offered, the
Prospectus will be amended accordingly.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees of Oppenheimer
Fund, Oppenheimer Global Fund, Oppenheimer Time Fund, Oppenheimer Growth
Fund, Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Emerging Growth Fund, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-
Exempt Fund, Oppenheimer California Tax-Exempt Fund, Oppenheimer Multi-
State Tax-Exempt Trust, Oppenheimer Asset Allocation Fund, Oppenheimer
Mortgage Income Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer
U.S. Government Trust, Oppenheimer Multi-Sector Income Trust, Oppenheimer
Multi-Government Trust and Oppenheimer Target Fund (the "New York-based
OppenheimerFunds"). Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and Zack
respectively hold the same offices with the other New York-based
OppenheimerFunds as with the Fund. As of September 30, 1994, the Trustees
and officers of the Fund as a group owned less than 1% of the outstanding
shares of the Fund.
Leon Levy, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership) and
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.
Robert G. Galli, Trustee*
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of the
Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee
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, DC 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research, the Freer Gallery of Art (Smithsonian
Institution), the Institute of Fine Arts (New York University) and the
Preservation League of New York State; 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 Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee
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 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), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order) Counsellor
to the President (Bush) for Domestic Policy, Chairman of the
Republican National Committee, Secretary of the U.S. Department of
Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a partner in Kraft & McManimon (a
law firm), an officer of First Investors Corporation (a broker-dealer)
and First Investors Management Company, Inc. (broker-dealer and
investment adviser), and a director and an officer of First Investors
Family of Funds and First Investors Life Insurance Company.
George C. Bowen, Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of
other OppenheimerFunds.
Jay W. Tracey, III, Vice President and Portfolio Manager
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly Managing Director of Buckingham Capital Management and Senior
Vice President of Founders Asset Management, Inc. (mutual fund
adviser), prior to which he was a securities analyst and portfolio
manager of Berger Associates, Inc. (investment adviser).
Paul LaRocco, Associate Portfolio Manager
Assistant Vice President of the Manager; an officer of other
OppenheimerFunds; formerly a Securities Analyst with Columbus Circle
Investors, prior to which he was an Investment Analyst for Chicago
Title & Trust Co.
Robert G. Zack, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffiger,
P.C., an accounting firm, and previously an Accountant and Commissions
Supervisor for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an International Mutual Fund Supervisor
for Brown Brothers Harriman Co., a bank, and previously a Senior Fund
Accountant for State Street Bank & Trust Company, before which he was
a sales representative for Central Colorado Planning.
_______________
* 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 are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Mr. Galli and Mr. Spiro, who is both an officer and
Trustee) receive no salary or fee from the Fund. During the Fund's fiscal
year ended June 30, 1994, the remuneration (including expense
reimbursements) paid to all Trustees of the Fund (excluding Mr. Galli and
Mr. Spiro) as a group for services as trustees and as members of one or
more committees of the Board, totalled $34,778. The Fund has adopted a
retirement plan that provides for payment to a retired Trustee of up to
80% of the average compensation paid during that Trustee's five years of
service in which the highest compensation was received. A Trustee must
serve in that capacity for any of the New York-based OppenheimerFunds for
at least 15 years to be eligible for the maximum payment; no payments have
been made by the Fund under the plan as of June 30, 1994. The accumulated
liability for the Fund's projected benefit obligations under the plan was
$117,741 as of that date.
- Major Shareholders. As of September 30, 1994, no person owned of
record or was known by the Fund to own beneficially 5% or more of the
Fund's outstanding shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Messrs. Galli and Spiro)
serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended June 30, 1992, 1993
and 1994, the management fees paid by the Fund to the Manager were
$2,638,571, $2,642,347 and $2,848,414, respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average 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 Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Fund in any fiscal year (including the management fee but excluding
taxes, interest, distribution plan payments, brokerage commissions and any
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 state
regulatory limitation on fund expenses applicable to the Fund. 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 net assets and
1.5% of average 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 amounts of expenses assumed or eliminate the assumption of
expenses altogether.
As long as the Manager has acted with due care and in good faith, the
Manager is not liable for any loss sustained by reason of any investment,
the adoption of any investment policy, or the purchase, sale or retention
of any security, provided, however, that the Agreement does not exculpate
the Manager from liability for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or reckless disregard of its
obligations under the Agreement.
- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's shares but is not obligated to
sell a specific number of shares. Expenses normally attributable to
sales, including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders, are
borne by the Distributor. During the Fund's fiscal years ended June 30,
1992, 1993 and 1994, the aggregate sales charges on sales of the Fund's
shares were $990,171, $714,148 and $629,755, respectively, of which the
Distributor and an affiliated broker-dealer retained in the aggregate
$246,042, $189,859 and $168,109 in those respective years. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Service Plan," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions in
listed securities and are otherwise paid only if it appears likely that
a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each
account.
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 those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
During the Fund's fiscal years ended June 30, 1992, 1993 and 1994,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $623,069,
$523,921 and $1,689,639, respectively. During the fiscal year ended June
30, 1994, $216,461 was paid to brokers as commissions in return for
research services; the aggregate dollar amount of those transactions was
$109,841,151. The transactions giving rise to those commissions were
allocated in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at net
asset value" of an investment in shares of the Fund may be advertised.
An explanation of how these total returns are calculated for each class
and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission ("SEC"),
include the average annual total returns for the Fund's shares for the 1,
5, and 10-year periods ending as of the most recently-ended calendar
quarter prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of other
funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with
other investments. An investment in the Fund is not insured; its returns
and share prices are not guaranteed and normally will fluctuate on a daily
basis. When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The returns
on shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses.
- Average Annual Total Returns. The Fund's "average annual total
return" is an average annual compounded rate of return for each year in
a specified number of years. It is the rate of return based on the change
in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over
an entire period of years. Its calculation uses some of the same factors
as average annual total return, but it does not average the rate of return
on an annual basis. Cumulative total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total return, the current maximum sales charge of 5.75%
(as a percentage of the offering price) is deducted from the initial
investment ("P") (unless the return is shown at net asset value, as
described below). Total returns also assume that all dividends and capital
gains distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is redeemed
at the end of the period. The "average annual total returns" on an
investment in the Fund for the one, five and ten year periods ended June
30, 1994 were (8.95%), 5.68% and 12.54%, respectively. The "cumulative
total return" for the ten year period ended June 30, 1994 was 225.87%.
During a portion of the periods for which total returns are shown, the
Fund's maximum initial sales charge rate was higher; as a result,
performance returns on actual investments during those periods may be
lower than the results shown.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for an investment in the Fund.
Each is based on the difference in net asset value per share at the
beginning and at the end of the period for a hypothetical investment
(without considering the sales charge) and takes into consideration the
reinvestment of dividends and capital gains distributions. The cumulative
total return at net asset value of the Fund's shares for the ten-year
period ended December 31, 1993 was 257.61%. The average annual total
returns at net asset value for the one, five and ten-year periods ended
December 31, 1993 were 19.63%, 19.19% and 15.02%, respectively.
Total return information may be useful to investors in reviewing the
Fund's performance. However, when comparing total return of an investment
in the Fund with that of other alternatives, investors should understand
that as the Fund is an aggressive equity fund seeking capital
appreciation, its shares are subject to greater market risks and
volatility than shares of funds having other investment objectives and
that the Fund is designed for investors who are willing to accept greater
risk of loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its performance by Lipper Analytical Services, Inc. ("Lipper"),
a widely-recognized independent service. Lipper monitors the performance
of regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to investment
objectives. The performance of the Fund is ranked against (i) all other
funds (excluding money market funds), (ii) all other capital appreciation
funds and (iii) all other capital appreciation funds in a specific size
category. The Lipper performance rankings are based on total returns that
include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of its performance
by Morningstar, Inc., an independent mutual fund monitoring service that
ranks mutual funds, including the Fund, monthly in broad investment
categories (equity, taxable bond, municipal bond and hybrid) based on a
risk-adjusted investment return. Investment return measures a fund's
three, five and ten-year average annual total returns (when available) in
excess of 90-day Treasury bill returns after considering sales charges and
expenses. Risk reflects fund performance below 90-day U.S. Treasury bill
monthly returns. Risk and return are combined to produce star rankings
reflecting performance relative to the average fund in a fund's category.
Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is
"below average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar ranks the Fund in relation to other equity funds. Rankings
are subject to change.
The total return on an investment in the Fund's 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 ("S&P 500"), 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 transaction charges or taxes into consideration
as these items are not applicable to indices.
Investors may also wish to compare the Fund's return to the returns on
fixed income investments available from banks and thrift institutions,
such as certificates of deposit, ordinary interest-paying checking and
savings accounts, and other forms of fixed or variable time deposits, and
various other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other agency
and will fluctuate daily, while bank depository obligations may be insured
by the FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government.
Service Plan
The Fund has adopted a Service Plan (the "Plan") 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 servicing of the Fund's shares, as described in the
Prospectus. The Plan has been approved by a vote of (i) the Board of
Trustees of the Fund, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on that Plan,
and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of the Fund.
In addition, under the Plan the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in
the case of the Manager, may include profits from the advisory fee it
receives from the Fund) to make payments to brokers, dealers or other
financial institutions (each is referred to as a "Recipient" under the
Plan) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, the Plan continues in effect from
year to year but only as long as its continuance is specifically approved
at least annually by the Fund's Board of Trustees and its Independent
Trustees by a vote cast in person at a meeting called for the purpose of
voting on such continuance. The 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
Fund's outstanding shares. The Plan may not be amended to increase
materially the amount of payments to be made unless such amendment is
approved by the Fund's shareholders. All material amendments must be
approved by the Board and the Independent Trustees.
While the Plan is in effect, the Treasurer of the Fund shall provide
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
each payment was made and the identity of each Recipient that received any
payment. 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. The 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 selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plan, 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. For the fiscal year ended
June 30, 1994, payments under the Plan totalled $241,045, all of which was
paid by the Distributor to Recipients, including $4,498 paid to MML
Investor Services, Inc., an affiliate of the Distributor.
Any unreimbursed expenses incurred by the Distributor for any fiscal
year may not be recovered in subsequent years. Payments received by the
Distributor under the Plan will not be used to pay any interest expense,
carrying charge, or other financial costs, or allocation of overhead by
the Distributor.
ABOUT YOUR ACCOUNT
How To Buy Shares
Determination of Net Asset Values Per Share. The net asset value per
share of the Fund is determined each day The New York Stock Exchange (the
"NYSE") is open, as of 4:00 P.M., New York time, that day, by dividing the
value of the Fund's net assets by the number of the Fund's shares
outstanding. The NYSE's most recent annual announcement (which is subject
to change) states that it will close on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. The Fund may invest
a portion of its assets in debt securities or in foreign securities
primarily listed on foreign exchanges or in foreign over-the-counter
markets which may trade on Saturdays or customary U.S. business holidays
on which the NYSE is closed. Because the Fund's offering price and net
asset value will not be calculated on those days, the Fund's net asset
value per share may be significantly affected on such days, when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sale
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) debt securities having a maturity
in excess of 60 days are valued at the mean between the bid and asked
prices determined by a portfolio pricing service approved by the Board or
obtained from active market makers on the basis of reasonable inquiry;
(iv) 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; (v) securities (including restricted securities)
not having readily-available market quotations are valued at fair value
under the Board's procedures; and (vi) securities traded on foreign
exchanges are valued at the closing or last sales prices reported on a
principal exchange, or, if none, at the mean between closing bid and asked
prices and reflect prevailing rates of exchange taken from 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 stock markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The
values of securities denominated in foreign currency will be converted to
U.S. dollars at the prevailing rates of exchange at the time of valuation.
Puts, calls and futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i),
above. Forward currency contracts are valued at the closing price on the
London foreign exchange market. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is "marked-to-market" to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call written by the
Fund is exercised, the proceeds are increased by the premium received.
If a call or put written by the Fund expires, the Fund has a gain in the
amount of the premium; if the Fund enters into a closing purchase
transaction, it will have a gain or loss depending on whether the premium
was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
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 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained under Right of Accumulation and Letters of
Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No
sales charge is imposed in certain other circumstances described in the
Prospectus because the Distributor incurs little or no selling expenses.
The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, parents-in-law, brothers and
sisters, sons- and daughters-in-law, a sibling's spouse and a spouse's
siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase shares of the Fund (and Class A shares
of other eligible OppenheimerFunds sold with a front-end 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 Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by 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. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase 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 purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual purchases. If total eligible purchases during the
Letter of Intent period exceed the intended purchase amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended purchase amount specified in the Letter shall be held in escrow
by the Transfer Agent. For example, if the intended purchase amount is
$50,000, the escrow shall be shares valued in the amount of $2,500
(computed at the public offering price adjusted for a $50,000 purchase).
Any dividends and capital gains distributions on the escrowed shares will
be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares 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 one of the
OppenheimerFunds 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.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use this account
for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for one shareholder. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage or other
costs in selling the securities for cash. The method of valuing securities
used to make redemptions in kind will be the same as the method the Fund
uses to value it portfolio securities described above under "Determination
of Net Asset Values Per Share" and that valuation will be made as of the
time the redemption price is determined.
- Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of those shares is less than $500 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of the shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or the Board may set requirements for granting
permission to the Shareholder to increase the investment, and set other
terms and conditions so that the shares would not be involuntarily
redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of shares of the Fund
in the Fund or in Class A shares of any other OppenheimerFund. The
reinvestment may be made without sales charge at the net asset value next
computed after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gains
recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, shares acquired pursuant to reinvestment of
dividends or distributions will be transferred first.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) 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 pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received 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 were 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 redemption documents, with signature(s) guaranteed
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on purchases, shareholders should not make regular additional
share purchases while participating in an Automatic Withdrawal Plan.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated
below and in the provisions of the OppenheimerFunds Application relating
to such Plans, as well as the Prospectus. These provisions may be amended
from time to time by the Fund and/or the Distributor. When adopted, such
amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who
executed the Plan authorization and application submitted to the Transfer
Agent. The Transfer Agent shall incur no liability to the Planholder for
any action taken or omitted by the Transfer Agent in good faith to
administer the Plan. Certificates will not be issued for shares of the
Fund purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of
the Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that the
shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent
to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class without a class designation are
deemed "Class A" shares for this purpose, and all OppenheimerFunds offer
"Class A" shares (except for Oppenheimer Strategic Diversified Income
Fund).
Class A shares of OppenheimerFunds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund
purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Contingent Deferred Sales Charge" in the Prospectus).
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of,
the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in Class A
shares of any of the other OppenheimerFunds listed in "Reduced Sales
Charges," above, at net asset value without sales charge. To elect this
option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from certain of the OppenheimerFunds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Time Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Time Fund as of June 30, 1994, and the related
statement of operations for the year then ended, the statements of changes
in net assets for each of the years in the two-year period then ended and
the financial highlights for each of the years in the 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, 1994,
by correspondence with the custodian and brokers; and where confirmations
were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Time Fund as of June 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
July 22, 1994
<PAGE>
STATEMENT OF INVESTMENTS June 30, 1994
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================
==========================================================
============
<S> <C> <C>
REPURCHASE AGREEMENTS--19.2%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.22%,
dated 6/30/94, to be repurchased at $61,907,256 on 7/1/94,
collateralized by U.S. Treasury Nts., 3.875%-9.25%, 12/31/94-11/30/98,
with a value of $44,997,687 and U.S. Treasury Bills, 0%, 6/29/95,
with a value of $18,163,596 (Cost $61,900,000) $61,900,000 $61,900,000
==========================================================
==========================================================
============
CORPORATE BONDS AND NOTES--1.3%
- --------------------------------------------------------------------------------------------------------------------------------
Solectron Corp., 0%, Liq. Yld. Opt. Sub. Nts., 5/5/12 (Cost $4,107,535) 8,000,000 4,340,000
UNITS
==========================================================
==========================================================
============
INDEXED INSTRUMENTS--0.1%
- --------------------------------------------------------------------------------------------------------------------------------
Nikkei Index, Opts.(1) (Cost $585,000) 1,000 396,000
==========================================================
==========================================================
============
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
Windmere Corp. Wts., Exp. 1/98(1) 4,727
----------------------------------------------------------------------------------------------------
XOMA Corp. Wts., Exp. 6/95(1) 5,511 276
----------
Total Rights, Warrants and Certificates (Cost $1,378) 276
SHARES
==========================================================
==========================================================
============
PREFERRED STOCKS--1.4%
- --------------------------------------------------------------------------------------------------------------------------------
Sunamerica, Inc., Cv Depositary Shares (Cost $3,380,000) 260,000 4,420,000
==========================================================
==========================================================
============
COMMON STOCKS--79.6%
- --------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--2.4%
- --------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.2% Geon Co. (The) 70,000 1,820,000
----------------------------------------------------------------------------------------------------
Georgia Gulf Corp.(1) 55,000 1,883,750
----------
3,703,750
- --------------------------------------------------------------------------------------------------------------------------------
METALS: DIVERSIFIED--1.2% Birmingham Steel Corp. 145,000 3,915,000
- --------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--33.5%
- --------------------------------------------------------------------------------------------------------------------------------
AIRLINES--2.0% Atlantic Southeast Airlines, Inc. 140,000 3,395,000
----------------------------------------------------------------------------------------------------
Southwest Airlines Co. 120,000 3,135,000
----------
6,530,000
- --------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS: AFTER
MARKET--2.4% AutoZone, Inc.(1) 240,000 5,850,000
----------------------------------------------------------------------------------------------------
Lear Seating Corp.(1) 100,000 1,837,500
----------
7,687,500
- --------------------------------------------------------------------------------------------------------------------------------
BROADCAST MEDIA--3.1% Comcast Corp., Cl. A Special 160,000 2,880,000
----------------------------------------------------------------------------------------------------
Grupo Televisa SA, ADS(2) 75,000 3,806,250
----------------------------------------------------------------------------------------------------
IDB Communications Group, Inc.(1) 353,000 3,265,250
----------
9,951,500
- --------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.7% Carnival Corp., Cl. A 58,000 2,566,500
----------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 150,000 2,812,500
----------
5,379,000
</TABLE>
<PAGE>
Oppenheimer Time Fund
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTELS/MOTELS--1.3% Promus Cos., Inc. (The)(1) 137,000 $ 4,058,625
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS Heilig-Meyers Co. 80,000 2,170,000
AND APPLIANCES--2.7% -------------------------------------------------------------------------------------------------
Rhodes, Inc.(1) 85,000 1,360,000
-------------------------------------------------------------------------------------------------
Sunbeam-Oster Co., Inc. 260,000 5,200,000
-----------
8,730,000
- -----------------------------------------------------------------------------------------------------------------------------
LEISURE TIME--2.9% Brunswick Corp. 150,000 3,300,000
-------------------------------------------------------------------------------------------------
Caesar's World, Inc.(1) 90,000 3,262,500
-------------------------------------------------------------------------------------------------
International Game Technology 140,000 2,642,500
-----------
9,205,000
- -----------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--1.3% Brinker International, Inc.(1) 98,000 2,058,000
-------------------------------------------------------------------------------------------------
Shoney's, Inc.(1) 145,000 2,211,250
-----------
4,269,250
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--7.3% AnnTaylor Stores, Inc.(1) 45,000 1,726,875
-------------------------------------------------------------------------------------------------
Blockbuster Entertainment Corp. 135,000 3,493,125
-------------------------------------------------------------------------------------------------
CML Group, Inc. 119,000 1,398,250
-------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc.(1) 115,200 1,987,200
-------------------------------------------------------------------------------------------------
Intelligent Electronics, Inc. 65,000 983,125
-------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 82,000 2,808,500
-------------------------------------------------------------------------------------------------
Office Depot, Inc.(1) 150,000 3,000,000
-------------------------------------------------------------------------------------------------
Spiegel, Inc., Cl. A 140,000 2,660,000
-------------------------------------------------------------------------------------------------
Staples, Inc.(1) 70,000 1,890,000
-------------------------------------------------------------------------------------------------
Viking Office Products, Inc.(1) 140,000 3,500,000
-----------
23,447,075
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL STORES: Dollar General Corp. 145,000 3,625,000
DEPARTMENT STORES--3.3% -------------------------------------------------------------------------------------------------
Kohl's Corp.(1) 42,000 1,974,000
-------------------------------------------------------------------------------------------------
Nordstrom, Inc. 120,000 5,100,000
-----------
10,699,000
- -----------------------------------------------------------------------------------------------------------------------------
SHOES--2.0% Nike, Inc., Cl. B 105,000 6,273,750
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES: APPAREL Cintas Corp. 140,000 4,585,000
MANUFACTURERS--3.5% -------------------------------------------------------------------------------------------------
Phillips-Van Heusen Corp. 80,000 2,010,000
-------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp.(1) 118,200 4,698,450
-----------
11,293,450
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--6.6%
- -----------------------------------------------------------------------------------------------------------------------------
DRUGS--1.9% R.P. Scherer Corp.(1) 116,000 3,828,000
-------------------------------------------------------------------------------------------------
Roberts Pharmaceutical Corp.(1) 115,000 2,386,250
-----------
6,214,250
- -----------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: Elan Corp. PLC(1) 100,000 3,475,000
MISCELLANEOUS--3.5% -------------------------------------------------------------------------------------------------
Genentech, Inc.(1) 75,000 3,693,750
-------------------------------------------------------------------------------------------------
Health Care and Retirement Corp.(1) 160,000 3,960,000
-----------
11,128,750
</TABLE>
<PAGE>
Oppenheimer Time Fund
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HOSPITAL MANAGEMENT--1.2% Clinicorp, Inc.(1) 50,000 $ 7,815
--------------------------------------------------------------------------------------------------------
Clinicorp, Inc.(1)(2) 128,300 19,045
--------------------------------------------------------------------------------------------------------
Lincare Holdings, Inc.(1) 120,000 2,325,000
--------------------------------------------------------------------------------------------------------
Quorum Health Group, Inc.(1) 87,000 1,522,500
-----------
3,874,360
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--8.3%
- ------------------------------------------------------------------------------------------------------------------------------------
BROKERS/DEALERS--0.4% Partnerre Holdings Ltd. 58,000 1,174,500
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: Advanta Corp., Cl. B 220,000 7,095,000
MISCELLANEOUS--5.0% --------------------------------------------------------------------------------------------------------
First USA, Inc. 155,000 5,948,125
--------------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 55,000 3,080,000
-----------
16,123,125
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE: LIFE--1.3% Bankers Life Holding Corp. 50,000 1,006,250
Equitable of Iowa Cos., Inc. 40,000 1,265,000
--------------------------------------------------------------------------------------------------------
Mid Atlantic Medical Services, Inc.(1) 43,000 1,913,500
-----------
4,184,750
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE: PROPERTY AND Mid Ocean Ltd.(1) 90,500
2,273,812
CASUALTY--0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
MAJOR BANKS:
REGIONAL--0.9% First Interstate Bancorp 40,000 3,080,000
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--8.5%
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS
GROUP--0.3% Martin Marietta Materials, Inc.(1) 50,000 1,100,000
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--0.6% Manpower, Inc. 85,000
1,785,000
- ------------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES--1.8% Grupo Carso SA, ADS(1)(2) 315,000
5,681,843
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING: DIVERSIFIED Stewart & Stevenson Services, Inc. 100,000
4,150,000
INDUSTRIALS--2.9% --------------------------------------------------------------------------------------------------------
Trinity Industries, Inc. 147,500 5,180,937
-----------
9,330,937
- ------------------------------------------------------------------------------------------------------------------------------------
RAILROADS--1.0% Southern Pacific Rail Corp.(1) 168,000 3,297,000
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: Federal Express Corp.(1) 80,000 5,970,000
MISCELLANEOUS--1.9%
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--19.8%
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE AND CUC International, Inc.(1) 240,000
6,420,000
SERVICES--10.3% --------------------------------------------------------------------------------------------------------
Cadence Design Systems, Inc.(1) 220,000 3,685,000
--------------------------------------------------------------------------------------------------------
Danka Business System PLC, Sponsored ADR 39,000 1,555,125
--------------------------------------------------------------------------------------------------------
EMC Corp.(1) 370,000 4,995,000
--------------------------------------------------------------------------------------------------------
First Financial Management Corp. 70,000 3,885,000
--------------------------------------------------------------------------------------------------------
Oracle Systems Corp.(1) 120,000 4,500,000
--------------------------------------------------------------------------------------------------------
Pyxis Corp.(1) 210,000 3,990,000
--------------------------------------------------------------------------------------------------------
Reynolds & Reynolds Co., Cl. A 75,000 1,734,375
--------------------------------------------------------------------------------------------------------
Sybase, Inc.(1) 49,000 2,401,000
-----------
33,165,500
</TABLE>
<PAGE>
Oppenheimer Time Fund
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SYSTEMS--3.7% Cabletron Systems, Inc.(1) 23,000 $
2,222,375
-------------------------------------------------------------------------------------------------------
First Data Corp. 125,000 5,171,875
-------------------------------------------------------------------------------------------------------
Sensormatic Electronics Corp. 160,000 4,600,000
------------
11,994,250
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: American Power Conversion Corp.(1) 65,000 1,048,125
INSTRUMENTATION--3.0% -------------------------------------------------------------------------------------------------------
Analog Devices, Inc.(1) 32,000 920,000
-------------------------------------------------------------------------------------------------------
Linear Technology Corp. 45,500 2,002,000
-------------------------------------------------------------------------------------------------------
Molex, Inc., Cl. A 155,000 5,696,250
------------
9,666,375
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: Applied Materials, Inc.(1) 50,000 2,137,500
SEMICONDUCTORS--0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--2.1% LDDS Communications, Inc., Cl. A(1) 381,774
6,681,045
- -----------------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
NATURAL GAS--0.5% Equitable Resources, Inc. 45,000 1,546,875
------------
Total Common Stocks (Cost $222,610,897) 255,552,772
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $292,584,810) 101.6%
326,609,048
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6) (5,072,922)
NET ASSETS 100.0% $321,536,126
</TABLE>
(1) Non-income producing security.
(2) Restricted security--See Note 6 of Notes to
Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 1994
<TABLE>
==========================================================
==========================================================
===============
<S> <C>
ASSETS Investments, at value (cost $292,584,810)--see accompanying statement $326,609,048
-------------------------------------------------------------------------------------------------------
Cash 776,689
-------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 3,127,502
Shares of beneficial interest sold 106,582
Dividends and interest 45,403
-------------------------------------------------------------------------------------------------------
Other 96,951
------------
Total assets 330,762,175
==========================================================
==========================================================
===============
LIABILITIES Options written, at value (premiums received $206,111)--
see accompanying statement--Note 4 215,325
-------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 7,011,815
Shares of beneficial interest redeemed 1,768,741
Service plan fees--Note 5 57,084
Other 173,084
------------
Total liabilities 9,226,049
==========================================================
==========================================================
===============
NET ASSETS $321,536,126
============
==========================================================
==========================================================
===============
COMPOSITION OF Paid-in capital $256,898,698
NET ASSETS -------------------------------------------------------------------------------------------------------
Undistributed net investment loss (105,145)
-------------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment and written option transactions 30,727,549
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and options written--Note 3 34,015,024
------------
Net assets--applicable to 20,814,080 shares of beneficial interest outstanding $321,536,126
============
==========================================================
==========================================================
===============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
$15.45
==========================================================
==========================================================
===============
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus sales charge of 5.75% of offering price)
$16.39
</TABLE>
STATEMENT OF OPERATIONS For the Year Ended June 30, 1994
<TABLE>
==========================================================
==========================================================
===============
<S> <C>
INVESTMENT INCOME Interest $ 1,554,492
-------------------------------------------------------------------------------------------------------
Dividends 1,273,807
------------
Total income 2,828,299
==========================================================
==========================================================
===============
EXPENSES Management fees--Note 5 2,848,414
-------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 270,842
-------------------------------------------------------------------------------------------------------
Service plan fees--Note 5 241,045
-------------------------------------------------------------------------------------------------------
Shareholder reports 84,568
-------------------------------------------------------------------------------------------------------
Legal and auditing fees 59,469
-------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 53,169
-------------------------------------------------------------------------------------------------------
Custodian fees and expenses 30,053
-------------------------------------------------------------------------------------------------------
Other 68,737
------------
Total expenses 3,656,297
==========================================================
==========================================================
===============
NET INVESTMENT LOSS (827,998)
==========================================================
==========================================================
===============
REALIZED AND UNREALIZED Net realized gain (loss) from:
GAIN (LOSS) ON INVESTMENTS Investments 40,977,001
AND OPTIONS WRITTEN Closing of option contracts written--Note 4 (1,931,520)
------------
Net realized gain 39,045,481
-------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments and options written (45,046,554)
------------
Net realized and unrealized loss on investments and options written (6,001,073)
==========================================================
==========================================================
===============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(6,829,071)
============
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1994 1993
==========================================================
==========================================================
===============
<S> <C> <C> <C>
OPERATIONS Net investment income (loss) $ (827,998) $ 48,866
-------------------------------------------------------------------------------------------------------
Net realized gain on investments and options written 39,045,481 17,485,143
-------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments and options written (45,046,554) 49,454,166
------------ ------------
Net increase (decrease) in net assets resulting from operations (6,829,071) 66,988,175
==========================================================
==========================================================
===============
DIVIDENDS AND Dividends from net investment income ($.054 per share) --
(1,210,998)
DISTRIBUTIONS TO -------------------------------------------------------------------------------------------------------
SHAREHOLDERS Dividends in excess of net investment income ($.002 per share) (47,909)
--
-------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments and
options written ($1.226 and $.792 per share, respectively) (25,770,289) (17,728,325)
==========================================================
==========================================================
===============
BENEFICIAL INTEREST Net decrease in net assets resulting from beneficial
TRANSACTIONS interest transactions (16,255,516) (7,584,627)
==========================================================
==========================================================
===============
NET ASSETS Total increase (decrease) (48,902,785) 40,464,225
-------------------------------------------------------------------------------------------------------
Beginning of year 370,438,911 329,974,686
------------- -------------
End of year (including (accumulated net investment loss)
undistributed net investment income of ($105,145) and
$336,671, respectively) $321,536,126 $370,438,911
=============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1994 1993 1992 1991 1990
==========================================================
========================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $17.06 $14.84 $14.37 $16.71 $17.38
- --------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income --(1) --(1) .14 .40 .54
Net realized and unrealized
gain(loss) on investments and
options written (.38) 3.06 1.24 (.25) .62
------ ------ ------ ------ ------
Total income (loss) from
investment operations (.38) 3.06 1.38 .15 1.16
- --------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- (.05) (.22) (.52) (.51)
Dividends in excess of net
investment income --(1) -- -- -- --
Distributions from net realized
gain on investments and options
written (1.23) (.79) (.69) (1.97) (1.32)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.23) (.84) (.91) (2.49) (1.83)
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $15.45 $17.06 $14.84 $14.37 $16.71
====== ====== ====== ====== ======
==========================================================
========================================
TOTAL RETURN, AT NET ASSET
VALUE(2) (3.40)% 20.95% 9.28% 2.46% 6.91%
==========================================================
========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (in thousands) $321,536 $370,439 $329,975 $309,390 $335,026
- --------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $387,363 $358,834 $358,097 $310,040 $328,266
- --------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of year (in thousands) 20,814 21,710 22,242 21,526 20,050
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (.21)% .01% .80% 2.48% 3.12%
Expenses .94% 1.00% .96% .96% .94%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 62.7% 61.7% 86.3% 107.5% 115.7%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1989 1988 1987 1986 1985
==========================================================
========================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $15.50 $20.59 $20.15 $14.17 $12.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .48 .30 .15 .22 .33
Net realized and unrealized
gain(loss) on investments and
options written 2.35 (.99) 2.60 6.17 2.50
------ ------ ------ ------ ------
Total income (loss) from
investment operations 2.83 (.69) 2.75 6.39 2.83
- --------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.42) (.27) (.23) (.31) (.21)
Dividends in excess of net
investment income -- -- -- -- --
Distributions from net realized
gain on investments and options
written (.53) (4.13) (2.08) (.10) (.45)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.95) (4.40) (2.31) (.41) (.66)
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $17.38 $15.50 $20.59 $20.15 $14.17
====== ====== ====== ====== ======
==========================================================
========================================
TOTAL RETURN, AT NET ASSET
VALUE(2) 19.48% (2.79)% 16.31% 46.39% 25.01%
==========================================================
========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (in thousands) $319,789 $318,293 $347,503 $301,887 $222,423
- --------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $294,079 $311,729 $292,151 $239,231 $194,346
- --------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of year (in thousands) 18,401 20,539 16,877 14,981 15,693
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 2.74% 1.83% .85% 1.42% 2.60%
Expenses 1.00% .97% .94% .96% .95%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 67.4% 102.6% 47.0% 106.7% 175.8%
</TABLE>
1. Less than $.005 per share.
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
year. Sales charges are not reflected in the total returns.
3. 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, 1994 were $214,351,214
and $270,797,541, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Time 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 following is a summary of
significant accounting policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the
closing bid or asked price or the last sale price on the prior trading
day. Long-term debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Long-term debt securities which cannot
be valued by the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices obtained from two
active market makers in such securities. 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. An option is valued
based upon the last sales price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the
value is based upon the last sale on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid or asked price closest
to the last reported sale price is used.
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.
- -----------------------------------------------------------------------
- ---------------------------
OPTIONS WRITTEN. The Fund may write covered call and put options. When an
option is written, the Fund receives a premium and becomes obligated to
sell the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an
unfavorable change in the price of the security underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling or purchasing a security at a price different from the current
market value. All securities covering call options written are held in
escrow by the custodian bank and the Fund maintains liquid assets
sufficient to cover written put options in the event of exercise by the
holder.
- -----------------------------------------------------------------------
- ---------------------------
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, 1994, a provision of $18,391 was made for the
Fund's projected benefit obligations, resulting in an accumulated
liability of $117,741 at June 30, 1994. No payments have been made under
the plan.
- -----------------------------------------------------------------------
- ---------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
- -----------------------------------------------------------------------
- ---------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective July 1,
1993, the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies.
As a result, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial
statement amounts and distributions determined in accordance with income
tax regulations. Accordingly, subsequent to June 30, 1993, amounts have
been reclassified to reflect a decrease in paid-in capital of $35,773, a
decrease in undistributed net investment loss of $390,026, and an increase
in undistributed capital gain on investments of $425,799. During the year
ended June 30, 1994, Time Fund generated a net operating loss. As a
result, in accordance with Statement of Position 93-2, paid-in capital was
reduced by $809,607, and undistributed net investment loss was increased
by the same amount.
Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the
life of the respective securities, in accordance with federal income tax
requirements. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
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, 1994 YEAR ENDED JUNE 30, 1993
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 3,714,136 $ 65,700,854 3,409,926 $55,175,337
Dividends and distributions
reinvested 1,329,264 24,485,036 1,111,804 18,044,576
Redeemed (5,939,332) (106,441,406) (5,053,807) (80,804,540)
---------- ------------ ---------- -----------
Net increase (decrease) (895,932) $(16,255,516) (532,077) $(7,584,627)
========== ============
========== ===========
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At June 30, 1994, net unrealized appreciation on investments of
$34,015,024 was composed of gross appreciation of $46,435,098, and gross
depreciation of $12,420,074.
4. CALL OPTION ACTIVITY
Call option activity for the year ended June 30, 1994 was as follows:
<TABLE>
<CAPTION>
NUMBER AMOUNT OF
OF OPTIONS PREMIUMS
---------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1993 -- $ --
Options written 594 206,111
Options cancelled in closing
purchase transactions -- --
---------- -----------
Options outstanding at June 30, 1994 594 $206,111
==========
===========
</TABLE>
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which 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, 1994, commissions (sales charges paid by
investors) on sales of Fund shares totaled $629,755, of which $168,109
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
service plan, the Fund may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund
(prior to July 1, 1994, reimbursements were made with respect to shares
sold subsequent to April 1, 1991), including amounts paid to brokers,
dealers, banks and other institutions. During the year ended June 30,
1994, OFDI paid $4,498 to an affiliated broker/dealer as reimbursement for
personal service and maintenance expenses.
6. RESTRICTED SECURITIES
The Fund owns securities purchased in private placement transactions,
without registration under the Securities Act of 1993 (the Act). The
securities are valued under methods approved by the Board of Trustees as
reflecting fair value. The Fund intends to invest no more than 10% of its
net assets (determined at the time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Restricted and
illiquid securities amount to $19,045, or 0% of the Fund's net assets, at
June 30, 1994.
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT JUNE 30,
1994
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clinicorp, Inc. 3/23/93 $ 5.50 $ 0.15
----------------------------------------------------------------------------------------------
Grupo Carso SA, ADS 9/24/91-1/26/93 $ 9.48 $18.04
----------------------------------------------------------------------------------------------
Grupo Televisa SA, ADS 12/9/91-12/11/91 $26.45 $50.75
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
