JP CAPITAL APPRECIATION FUND, INC.
100 North Greene Street, Greensboro, North Carolina 27401
1-800-458-4498
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held December 3, 1996
To owners of variable annuity contracts issued by Jefferson-Pilot Life
Insurance Company ("JPLIC") entitled to give voting instructions in
connection with Jefferson-Pilot Separate Account A and Jefferson-Pilot
Separate Account B.
Notice is hereby given that a Special Meeting of the Shareholders of JP
Capital Appreciation Fund, Inc. ("JP Fund"), an open-end, management
investment company, will be held at the Jefferson-Pilot Building (4th
Floor, Room B-2), 100 North Greene Street, Greensboro, North Carolina
27401 at 10:00 A.M., local time, on December 3, 1996, and any adjournments
thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon the approval or disapproval of the
Agreement and Plan of Reorganization dated as of October 8, 1996 (the
"Reorganization Agreement") by and among JP Fund, Jefferson-Pilot
Corporation, Oppenheimer Variable Account Funds, on behalf of its
series Oppenheimer Growth Fund ("Oppenheimer Fund"), and
OppenheimerFunds, Inc., and the transactions contemplated thereby
(the "Reorganization"), including (i) the transfer of substantially
all the assets of JP Fund to Growth Fund in exchange for shares of
Oppenheimer Fund, (ii) the distribution of such shares of Oppenheimer
Fund to shareholders of JP Fund in liquidation of JP Fund, and (iii)
the cancellation of the outstanding shares of JP Fund ("Proposal 1");
2. To elect to the Board of Directors five (5) directors to hold office
until the earlier of (i) the dissolution of JP Fund or (ii) the next
annual meeting of shareholders of JP Fund called for the purpose of
electing directors, or until their successors are elected and
qualified ("Proposal 2");
3. To ratify or reject the selection of McGladrey & Pullen LLP as JP
Fund's independent auditors for the current fiscal year ("Proposal
3"); and
4. To act upon such other matters as may properly come before the
Meeting.
JPLIC, Jefferson-Pilot Separate Account A (a separate account of JPLIC)
and Jefferson-Pilot Separate Account B (a separate account of JPLIC) are
the only shareholders of JP Fund. However, JPLIC hereby solicits and
agrees to vote the shares of JP Fund at the Meeting in accordance with
timely instructions received from owners of variable annuity contracts
having contract values allocated to Separate Account A and Separate
Account B invested in such shares.
As a variable annuity contract owner of record at the close of business
on October 10, 1996, you have the right to instruct JPLIC as to the manner
in which shares of JP Fund attributable to your variable annuity contract
should be voted. To assist you in giving your instructions, a Voting
Instruction Form is enclosed that reflects the number of shares of JP Fund
for which you are entitled to give voting instructions. In addition, the
Proposals are more fully described in the accompanying Proxy Statement and
Prospectus and a copy of the Reorganization Agreement is attached thereto.
Please read the Proxy Statement and Prospectus carefully before sending
JPLIC your Voting Instruction Form. The Board of Directors of JP Fund
recommends a vote in favor of each Proposal and to elect each of the
nominees as Director.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED VOTING INSTRUCTION FORM AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
By Order of the Board of Directors,
J. Gregory Poole, Secretary
October 28, 1996
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of substantially all
the assets of JP Capital Appreciation Fund, Inc. ("JP Fund") to
Oppenheimer Growth Fund ("Oppenheimer Fund"), the issuance of shares of
Oppenheimer Fund to JP Fund for distribution to its shareholders including
Jefferson-Pilot Life Insurance Company, Jefferson-Pilot Separate Account
A and Jefferson-Pilot Separate Account B and the cancellation of the
outstanding shares of JP Fund. The number of shares of Oppenheimer Fund
that will be received by shareholders of JP Fund will be determined on the
basis of the relative net asset values of Oppenheimer Fund and JP Fund.
Although the number of shares of Oppenheimer Fund issued to a shareholder
of JP Fund may be greater or fewer than the number of JP Fund shares that
he or she holds, the value of the shares of Oppenheimer Fund issued in the
Reorganization will be equal to the value of his or her JP Fund shares.
The Reorganization has been proposed in connection with a proposed
acquisition by OppenheimerFunds, Inc. ("OFI") of the assets of JP
Investment Management Company ("JPM"), the investment adviser to JP Fund.
OFI is discussed in greater detail below.
Owners of Jefferson-Pilot Life Insurance Company ("JPLIC") variable
annuity contracts ("variable contracts") under which contract values are
indirectly invested in JP Fund, are directed to read the accompanying
Proxy Statement and Prospectus for further information about the
Reorganization and related matters. Additional information about
Oppenheimer Fund is set forth in its accompanying Prospectus.
2. What are the reasons for the Reorganization?
Jefferson-Pilot Corporation ("JPC"), in the course of a review of its
business, concluded that it should invest its capital resources in its
core insurance business and communications operations rather than
investing in the expansion of mutual fund assets being managed by JPM (or
another investment management subsidiary). Because managing mutual fund
investment portfolios in an efficient and profitable manner can only be
achieved by managing aggregate assets significantly in excess of the
amount of assets currently being managed by JPM, JPC has decided to sell
the assets of JPM and thereby leave the business of managing mutual fund
investment portfolios. This decision requires that alternative
arrangements be made for the management of the assets of the four mutual
funds (including JP Fund) managed by JPM. The Reorganization would result
in OFI taking over management of the investment portfolio of JP Fund when
JPM is sold.
3. What benefits to owners of variable contracts may result from this
Reorganization?
The Board of Directors of JP Fund has determined that, among other things,
the Reorganization would afford variable contract owners, as indirect
investors in Oppenheimer Fund, the capabilities and resources of OFI and
its affiliates in the area of equity investment management, shareholder
services and marketing.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by the respective
investment advisers to JP Fund and Oppenheimer Fund and not JP Fund or
Oppenheimer Fund.
5. Who is OppenheimerFunds, Inc.?
OFI and its subsidiaries are engaged principally in the business of
managing, distributing and servicing registered investment companies. OFI
has operated as an investment adviser since 1959. OFI is indirectly
controlled by Massachusetts Mutual Life Insurance Company. As of
September 30, 1996, OFI and a subsidiary had assets of more than $55
billion under management in more than 60 mutual funds.
6. Where can I get prospectuses and other information on Oppenheimer Fund
or other Oppenheimer Funds available as investment options under my
variable contract?
Call Jefferson-Pilot Investor Services, Inc. at 1-(800)458-4498. They
will be pleased to supply you with prospectuses and other documentation
with respect to such Oppenheimer funds.
7. How will the Reorganization affect my variable contract and my
relationship with Jefferson-Pilot Life Insurance Company?
As an owner of a variable contract with contract value indirectly invested
in JP Fund on the Record Date, the Reorganization will result in such
contract value being indirectly invested in Oppenheimer Fund. After the
Reorganization, variable contract owners will be able to allocate net
purchase payments and transfer contract values to Sub-Accounts of
Jefferson-Pilot Separate Account A ("Account A") and Jefferson-Pilot
Separate Account B ("Account B") that invest in Oppenheimer Fund and JP
Fund will not be an investment option under variable contracts. Your
variable contract will not change in any other way and your relationship
with Jefferson-Pilot will not change at all as a result of the
Reorganization.
8. Will this Reorganization result in any tax liability to JP Fund,
Oppenheimer Fund or to me as a variable contract owner?
The Reorganization is structured in a manner that is intended to qualify
for federal income tax purposes as a tax-free reorganization. The
aggregate tax basis of Oppenheimer Fund shares received in the
Reorganization will be the same as the aggregate tax basis of JP Fund
shares held on your behalf prior to the Reorganization, and the holding
period of the shares of Oppenheimer Fund received in the Reorganization
will include the period during which JP Fund shares were held on your
behalf provided that those JP Fund shares were held as capital assets.
Moreover, the Reorganization will not have an adverse impact on the status
of the variable contracts under which contract values are indirectly
invested in JP Fund.
You should consult your tax adviser regarding the effect, if any, of the
Reorganization in light of your individual circumstances. Since the
foregoing only relates to the federal income tax consequences of the
Reorganization, you should also consult your tax adviser as to state and
local tax consequences, if any, of the Reorganization.
<PAGE>
JP CAPITAL APPRECIATION FUND, INC.
100 North Greene Street, Greensboro, North Carolina 27401
1-800-458-4498
PROXY STATEMENT
OPPENHEIMER GROWTH FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished on behalf of the
Board of Directors (the "Board") of JP Capital Appreciation Fund, Inc.
("JP Fund"), an open-end, management investment company, by Jefferson-
Pilot Life Insurance Company ("JPLIC") to owners of variable annuity
contracts issued by JPLIC and having contract values on the Record Date
(as defined below) allocated to Jefferson-Pilot Separate Account A
("Account A") and Jefferson-Pilot Separate Account B ("Account B")
invested in shares of JP Fund ("variable contracts").
This Proxy Statement and Prospectus is being furnished in connection with
the solicitation of voting instructions from owners of such variable
contracts ("variable contract owners") for use at the Special Meeting of
Shareholders of JP Fund to be held at the Jefferson-Pilot Building (4th
Floor, Room B-2), 100 North Greene Street, Greensboro, North Carolina,
27401, at 10:00 A.M., local time, on December 3, 1996, and any
adjournments thereof (the "Meeting"). The Board has set October 10, 1996,
as the date for the determination of JP Fund shareholders entitled to
notice of, and to vote at, the Meeting (the "Record Date"). It is
expected that this Proxy Statement and Prospectus will be mailed to
variable contract owners on or about October 28, 1996. Although JPLIC is
the sole record owner of JP Fund shares, variable contract owners are
permitted to give JPLIC voting instructions. Variable contract owners are
sometimes referred to in this Proxy Statement and Prospectus as
"shareholders".
At the Meeting, shareholders of JP Fund will be asked to consider and vote
upon the approval or disapproval of the Agreement and Plan of
Reorganization, dated as of October 8, 1996 (the "Reorganization
Agreement"), by and among JP Fund, Jefferson-Pilot Corporation ("JPC"),
Oppenheimer Variable Account Funds, on behalf of its series, Oppenheimer
Growth Fund ("Oppenheimer Fund"), and OppenheimerFunds, Inc. ("OFI"), and
the transactions contemplated by the Reorganization Agreement (the
"Reorganization").
The Reorganization Agreement provides for the transfer of substantially
all the assets of JP Fund to Oppenheimer Fund in exchange for shares of
Oppenheimer Fund having a value equal to the aggregate net asset value of
the outstanding shares of JP Fund, the distribution of such shares of
Oppenheimer Fund to JPLIC, Account A and Account B in liquidation of JP
Fund and the cancellation of the outstanding shares of JP Fund. A copy
of the Reorganization Agreement is attached hereto as Exhibit A and is
incorporated by reference herein. As a result of the proposed
Reorganization, each shareholder of JP Fund will receive that number of
shares of Oppenheimer Fund having an aggregate net asset value equal to
the net asset value of such shareholder's shares of JP Fund. This
transaction has been structured in a manner intended to qualify as a tax-
free reorganization for federal income tax purposes. See "Approval or
Disapproval of the Reorganization." At the Meeting, shareholders of JP
Fund will also be asked to elect five directors and ratify the selection
of independent auditors.
JPLIC and Account A and Account B of JPLIC are the sole record holders of
shares of JP Fund. However, variable contract owners are the beneficial
owners of shares held by Account A and Account B. JPLIC will vote the
shares of JP Fund at the Meeting in accordance with the timely
instructions received from variable contract owners entitled to give
voting instructions under variable contracts. JPLIC will vote shares
attributable to variable contracts for which no voting instructions are
received in proportion (for, against or abstain) to those for which
instructions are received. JPLIC also will vote shares not attributable
to variable contracts (i.e., representing seed money investments in JP
Fund made by JPLIC) in proportion to those for which instructions are
received from variable contract owners. If a Voting Instruction Form is
received that does not specify a choice, JPLIC will consider its timely
receipt as an instruction to vote in favor of the proposal(s) to which it
relates and for each nominee as director. In certain circumstances, JPLIC
may have the right to disregard voting instructions, from certain variable
contract owners. JPLIC does not believe that these circumstances exist
with respect to matters currently before shareholders. Variable contract
owners may revoke voting instructions given to JPLIC at any time prior to
the Meeting by notifying the Secretary of JP Fund in writing.
Oppenheimer Fund's investment objective is to seek capital appreciation
by emphasizing investments in securities of well-known and established
companies. Current income is a secondary consideration in the selection
of portfolio securities for Oppenheimer Fund. JP Fund's primary
investment objective is to seek long term capital appreciation; current
income through the receipt of interest or dividends from investments is
only a secondary objective. JP Fund proposes to achieve these objectives
by investing substantially all of its assets in common stocks of companies
recognized as leaders in their respective industries as more fully
described herein. Shareholders of JP Fund should consider the differences
in investment objectives and policies of Oppenheimer Fund and JP Fund.
See "Synopsis - Investment Objectives and Policies," "Principal Risk
Factors" and "Comparison Between Oppenheimer Fund and JP Fund - Comparison
of Investment Objectives, Policies and Restrictions."
Oppenheimer Fund has filed with the Securities and Exchange Commission
(the "SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of shares of Oppenheimer Fund to
be offered to the shareholders of JP Fund pursuant to the Reorganization
Agreement. This Proxy Statement and Prospectus relating to the
Reorganization also constitutes a Prospectus of Oppenheimer Fund filed as
part of such Registration Statement. Information contained or incorporated
by reference herein relating to Oppenheimer Fund has been prepared by and
is the responsibility of Oppenheimer Fund. Information contained or
incorporated by reference herein relating to JP Fund has been prepared by
and is the responsibility of JP Fund.
This Proxy Statement and Prospectus sets forth concisely information about
Oppenheimer Fund that a prospective investor should know before voting on
the Reorganization. The following documents have been filed with the SEC
and are available without charge upon written request to JP Investment
Management Company, the investment adviser and transfer agent for JP Fund,
at P.O. Box 21008, North Carolina 27420, or by calling 1-800-458-4498 (a
toll-free number): (i) a Prospectus for JP Fund, dated May 1, 1996, as
supplemented October 8, 1996 (information about JP Fund is incorporated
herein by reference to JP Fund's May 1, 1996 Prospectus, as supplemented)
and (ii) a Statement of Additional Information about JP Fund, dated May
1, 1996 (the "JP Fund Additional Statement"). The most recent Annual
Report and Semi-Annual Report for JP Fund, dated as of December 31, 1995
and June 30, 1996, respectively, are also available without charge upon
request to JPIS by calling 1-800-458-4498 (toll-free).
The following documents have been filed with the SEC and are available
without charge upon written request to the transfer agent for Oppenheimer
Fund, OppenheimerFunds Services ("OFS"), at P.O. Box 5270, Denver,
Colorado 80217, or by calling 1-800-525-7048 (a toll free number): (i) a
Prospectus for the Trust, dated May 1, 1996, as revised October 28, 1996
and as supplemented October 28, 1996, which is incorporated herein by
reference as it relates to the Oppenheimer Fund series of the Trust (the
shares of the owner series of Oppenheimer Variable Account Funds are not
being offered pursuant to the Reorganization) and a copy of which also
accompanies this Proxy Statement and Prospectus; (ii) a Statement of
Additional Information about the Trust, dated May 1, 1996 (the "The Trust
Additional Statement"), which contains more detailed information about
Oppenheimer Fund and its management, and (iii) a Statement of Additional
Information relating to the Reorganization described in this Proxy
Statement and Prospectus (the "Reorganization Additional Statement"),
dated October 18, 1996, incorporated herein by reference and filed as part
of the Registration Statement, which includes, among other things, the
Prospectus for JP Fund, the JP Fund Additional Statement and the
Oppenheimer Fund Additional Statement.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of Oppenheimer Fund are not deposits or obligations of any bank,
are not guaranteed or endorsed by any bank, and are not insured by the
F.D.I.C. or any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated October 28, 1996.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
Expenses of Oppenheimer Fund and JP Fund; Pro Forma Expenses
Examples
SYNOPSIS
Purpose of the Meeting
Parties to the Reorganization
The Reorganization
Vote Required
Tax Consequences of the Reorganization
Dissenters' Rights
Investment Objectives and Policies
Investment Advisory Fees
Purchases and Redemptions
PRINCIPAL RISK FACTORS
Stock Investment Risks
Foreign Securities
Small, Unseasoned Companies
Borrowing for Leverage
Options and Futures; Derivatives
APPROVAL OR DISAPPROVAL OF THE REORGANIZATION (Proposal 1)
Background
Acquisition Agreement
Board Approval of the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Dissenters' Rights
Capitalization Table (Unaudited)
COMPARISON BETWEEN OPPENHEIMER FUND AND JP FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
Oppenheimer Fund Performance
Other Investors in Oppenheimer Fund
Additional Comparative Information
ELECTION OF DIRECTORS (Proposal 2)
Information Concerning the Board
Officers of JP Fund
Other Information
RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT AUDITORS (Proposal
3)
INFORMATION CONCERNING THE MEETING
The Meeting
Record Date; Vote Required; Share Information
Voting Instructions
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
SHAREHOLDER PROPOSALS
OTHER BUSINESS
EXHIBIT A - Agreement and Plan of Reorganization, dated as of October 8,
1996, by and among Oppenheimer Variable Account Funds, on
behalf of Oppenheimer Growth Fund, JP Capital Appreciation
Fund, Inc., OppenheimerFunds, Inc. and Jefferson-Pilot
Corporation
ENCLOSURE- Prospectus of the Trust, dated May 1, 1996, as revised October
28, 1996 and as supplemented October 28, 1996.
<PAGE>
COMPARATIVE FEE TABLES
Expenses of Oppenheimer Fund and JP Fund; Pro Forma Expenses
Shareholders of the funds do not pay any sales load, redemption fee or
exchange fee. See the Account A prospectus or the Account B variable
contract, as applicable, for fees that apply to variable contract owners.
Each fund pays a variety of expenses directly for management of its
assets, administration, and other services, and those expenses are
reflected in the net asset value per share of each of Oppenheimer Fund and
JP Fund. The following calculations are based on the expenses of JP Fund
and Oppenheimer Fund for the 12 months ended December 31, 1995 and the six
months ended June 30, 1996. These amounts are shown as a percentage of
the average net assets of JP Fund and Oppenheimer Fund for those periods
(for the six months ended June 30, 1996, the percentages are annualized).
Proforma expenses for the combined fee after giving effect to the
Reorganization are not shown as they do not differ from the fees indicated
below for Oppenheimer Fund. The table does not reflect expenses that
apply at the separate account level or that are charged by Account A and
Account B or by JPLIC under the variable contracts.
<TABLE>
<CAPTION>
JP Fund Oppenheimer Fund
12 months 6 months 12 months 6 months
ended ended ended ended
12/31/95 6/30/96(1) 12/31/95 6/30/96(1)
<S> <C> <C> <C> <C>
Management Fees 0.50% 0.50% 0.75% 0.75%
Other Expenses 0.12% 0.10% 0.04% 0.03%
Total Fund Operating
Expenses 0.62% 0.60% 0.79% 0.78%
</TABLE>
(1) Annualized
Examples
To attempt to show these expenses over time, the examples shown below have
been created. Assume that you make a $1,000 investment in either JP Fund
or Oppenheimer Fund and that the annual return is 5% and that the
operating expenses for each fund are the ones shown in the chart above for
the six months ended June 30, 1996 and the 12 months ended December 31,
1995.
Based on the rate of "Total Fund Operating Expenses" shown above for the
six months ended June 30, 1996, if you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Fund $8 $25 $43 $97
JP Fund $6 $19 $33 $75
</TABLE>
Based on the rate of "Total Fund Operating Expenses" shown above for the
12 months ended December 31, 1995, if you were to redeem your shares at
the end of each period shown below, your investment would incur the
following expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION> 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Fund $8 $25 $44 $98
JP Fund $6 $20 $35 $77
</TABLE>
<PAGE>
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of JP Fund to assist them in
determining whether to approve or disapprove the Reorganization. This
synopsis is only a summary and is qualified in its entirety by the more
detailed information contained in or incorporated by reference in this
Proxy Statement and Prospectus and the Reorganization Agreement which is
Exhibit A hereto. Shareholders should carefully review this Proxy
Statement and Prospectus and the Reorganization Agreement in their
entirety and, in particular, the current Prospectus of the Trust which
accompanies this Proxy Statement and Prospectus and is incorporated by
reference herein.
Purpose of the Meeting
At the Meeting, shareholders of JP Fund will be asked to approve or
disapprove the Reorganization. In addition, shareholders will be
requested to elect five directors of JP Fund and ratify the selection of
JP Fund's independent auditors.
Parties to the Reorganization
Oppenheimer Fund is a series of the Trust, Oppenheimer Variable Account
Funds, a diversified, open-end, management investment company organized
in 1984 as a multi-series Massachusetts business trust. Oppenheimer Fund
was organized in 1984 and is one of nine separate series of the Trust.
Oppenheimer Fund is located at 3410 South Galena Street, Denver, Colorado
80231. OFI acts as investment adviser to Oppenheimer Fund. OFI is
located at Two World Trade Center, New York, New York 10048-0203.
Additional information about Oppenheimer Fund is set forth below.
JP Fund is a diversified, open-end, management investment company
organized in 1982 as a North Carolina corporation. JP Fund is located at
100 North Greene Street, Greensboro, North Carolina 27420. JP Investment
Management Company ("JPM") acts as investment adviser and transfer agent
to JP Fund. JPM is located at 100 North Greene Street, Greensboro, North
Carolina 27401. Additional information about JP Fund is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of JP Fund to Oppenheimer Fund in exchange for shares of
Oppenheimer Fund and the assumption by Oppenheimer Fund of certain
liabilities of JP Fund. JP Fund will retain a small Cash Reserve
sufficient to pay any liabilities and expenses of dissolution. The
Reorganization Agreement also provides for the distribution by JP Fund of
these shares of Oppenheimer Fund to JP Fund shareholders in liquidation
of JP Fund. As a result of the Reorganization, each JP Fund shareholder
will receive that number of full and fractional Oppenheimer Fund shares
equal in value to such shareholder's pro rata interest in the net assets
transferred to Oppenheimer Fund as of the Valuation Date (as hereinafter
defined). For further information about the Reorganization see "Approval
or Disapproval of the Reorganization" below.
For the reasons set forth below under "Approval or Disapproval of the
Reorganization - Board Approval of the Reorganization," the Board,
including the Directors who are not "interested persons" of JP Fund (the
"Independent Directors"), as that term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), has concluded that the
Reorganization is in the best interests of JP Fund and its shareholders
and that the interests of existing JP Fund shareholders will not be
diluted as a result of the Reorganization, and recommends approval of the
Reorganization by JP Fund shareholders. The Board of Trustees of the
Trust has also approved the Reorganization and determined that the
interests of existing Oppenheimer Fund shareholders will not be diluted
as a result of the Reorganization. If the Reorganization is not approved,
JP Fund will continue in existence and the Board will determine whether
to pursue alternative actions. The section below entitled "Approval or
Disapproval of the Reorganization" sets forth certain information with
respect to the background of the Reorganization, including other
transactions and agreements entered into, or contemplated to be entered
into, by OFI, JPM and certain affiliates of JPM.
Vote Required
Approval of the Reorganization will require the affirmative vote of a
majority of the shares of JP Fund entitled to vote at the Meeting. See
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, JP Fund and
Oppenheimer Fund will have received an opinion of Sutherland, Asbill &
Brennan, tax counsel to JP Fund, to the effect that the Reorganization
will qualify as a tax-free reorganization for federal income tax purposes.
As a result of such tax-free reorganization, no gain or loss would be
recognized by JP Fund, Oppenheimer Fund, or the shareholders of either
fund for federal income tax purposes. Moreover, the Reorganization will
not have an adverse impact on the tax status of the variable contracts
under which contract values are indirectly invested in JP Fund. For
further information about the tax consequences of the Reorganization, see
"Approval or Disapproval of the Reorganization -Tax Aspects of the
Reorganization" below.
Dissenters' Rights
Dissenters' rights of appraisal are generally not available to
shareholders of JP Fund with respect to the Reorganization. See, "The
Reorganization - Dissenters' Rights."
Investment Objectives and Policies
Oppenheimer Fund's investment objective is a fundamental policy, and JP
Fund's investment objectives and policies are also fundamental policies.
Fundamental policies are those that cannot be changed without the approval
of shareholders of that fund. Oppenheimer Fund's investment policies
described below are not fundamental unless this Proxy Statement and
Prospectus indicates a particular policy is fundamental.
Oppenheimer Fund seeks to achieve capital appreciation by emphasizing
investments in securities of well-known and established companies. Such
securities generally have a history of earnings and dividends and are
issued by seasoned companies (having an operating history of at least five
years, including predecessors). Current income is a secondary
consideration in the selection of Oppenheimer Fund's portfolio securities.
Oppenheimer Fund's investments may also include securities of "growth-
type" companies.
JP Fund's primary investment objective is long-term capital appreciation.
Current income through the receipt of interest or dividends from
investments is only a secondary objective. JP Fund proposes to achieve
these objectives by investing substantially all its assets in publicly-
held common stocks of companies recognized as leaders in their respective
industries with proven and capable management and that are providing
significant products and services to their customers. JP Fund's
investments will be made predominantly in securities listed on registered
securities exchanges, but it may purchase securities traded in the over-
the-counter market. Investments may be made in other equity securities,
including rights, warrants, preferred stock and those debt securities
convertible into or carrying rights, warrants, or options to purchase
common stock or to participate in earnings. JP Fund may also hold cash or
invest in short-term securities.
Oppenheimer Fund's and JP Fund's investments may also include securities
of foreign governments and companies (limited, in the case of JP Fund, to
securities issued by Canadian companies) and, subject to certain
limitations, repurchase agreements. Oppenheimer Fund may also write
covered call options and use certain derivative investments, including
options and futures, because they offer the potential for increased income
and principal value, and may use hedging instruments to try to manage
investment risks.
Shareholders of JP Fund should consider the differences in investment
objectives and policies between JP Fund and Oppenheimer Fund, including
the ability of Oppenheimer Fund to employ a speculative investment method
known as borrowing for leverage. Oppenheimer Fund invests in a wider
variety of securities, such as certain hedging instruments and derivative
investments, some of which have greater investment risks than the types
of securities JP Fund usually holds. See "Principal Risk Factors" and
"Comparison Between Oppenheimer Fund and JP Fund - Comparison of
Investment Objectives, Policies and Restrictions."
Investment Advisory Fees
Oppenheimer Fund and JP Fund each obtain investment management services
from their respective investment advisers pursuant to the terms of their
respective investment advisory agreements. Each agreement provides that
a management fee is payable to the investment adviser monthly.
Oppenheimer Fund pays a management fee to OFI computed on its net asset
value as of the close of business each day, which fee declines on
additional assets as Oppenheimer Fund increases its asset base, at the
annual rate of 0.75% of the first $200 million of net assets, 0.72% of the
next $200 million, 0.69% of the next $200 million, 0.66% of the next $200
million, and 0.60% of net assets over $800 million. The management fee
payable by JP Fund to JPM is at an annual rate of 1/2 of 1% of JP Fund's
average daily net asset value. JPM is reimbursed by JP Fund for
performing certain shareholder accounting services. JPM has contractually
agreed that if in any fiscal year the total of JP Fund's ordinary business
expenses (with specified exceptions) exceeds 1% of JP Fund's average daily
net asset value, JPM will pay the excess by reducing its management fee
by a corresponding amount. OFI has voluntarily undertaken that the total
expenses of Oppenheimer Fund in any fiscal year will not exceed 2.5% of
the first $30 million of average net assets, 2.0% of the next $70 million
and 1.5% of average net assets over $100 million and OFI's management fee
will be reduced or eliminated during any fiscal year in which the payment
of such fee would cause Oppenheimer Fund's expenses to exceed this
limitation. OFI's undertaking to Oppenheimer Fund is revocable and may
be changed or eliminated at any time. Neither fund's management fees were
reduced during the past fiscal year.
Purchases and Redemptions
Purchases. Shares of Oppenheimer Fund are currently offered only for
purchase by separate accounts as an investment medium for variable life
insurance policies and variable annuity contracts, and separate accounts
for retirement plans. Purchases of JP Fund's shares are currently
restricted to the separate accounts that are sponsored by the insurance
subsidiaries of JPC and any of their affiliates and to pension plans for
employees of said companies and their affiliates. Shares of JP Fund and
Oppenheimer Fund are offered at their respective offering price, which is
net asset value (without sales charge).
Redemptions. Shares of Oppenheimer Fund and shares of JP Fund may be
redeemed at their respective net asset values per share calculated after
the redemption order is received and accepted.
Oppenheimer Fund may redeem accounts valued at less than $200 if the
account has fallen below such stated amount for reasons other than market
value fluctuations. For JP Fund, the corresponding minimum is $250 once
the account has been open at least 12 months.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
Oppenheimer Fund, JP Fund shareholders should carefully consider the
following summary of risk factors, relating to both Oppenheimer Fund and
JP Fund, in addition to the other information set forth in this Proxy
Statement and Prospectus. Additional information of risk factors for each
fund is set forth in the respective Prospectus of each fund and in
addition for Oppenheimer Fund, the Trust Additional Statement.
As a general matter, Oppenheimer Fund and JP Fund are intended for
investors seeking capital appreciation and, secondarily, current income,
who are willing to accept greater risks of loss in the hopes of greater
gains. There is no assurance that either Oppenheimer Fund or JP Fund will
achieve its investment objectives and investment in the funds is subject
to investment risks, including the possible loss of the principal
invested.
Stock Investment Risks
Because the funds may invest a substantial portion of their assets in
stocks, the value of a fund's portfolio will be affected by changes in the
stock markets. At times, the stock markets can be volatile, and stock
prices can change substantially. This market risk will affect the fund's
net asset value per share, which will fluctuate as the values of the
fund's portfolio securities change.
Foreign Securities
Oppenheimer Fund may invest in equity (and debt) securities issued or
guaranteed by foreign governments or foreign companies or other agencies;
it is currently intended that such investments will not exceed 25% of
Oppenheimer Fund's total assets. JP Fund may not invest in foreign
securities other than securities issued by Canadian companies. In
summary, foreign securities markets may be less liquid and more volatile
than the markets in the U.S. Risks of foreign securities investing may
include foreign withholding taxation, currency blockage, currency exchange
costs, difficulty in obtaining and enforcing judgments against foreign
issuers, relatively greater brokerage and custodial costs, risk of
expropriation or nationalization of assets, less publicly available
information, and differences between domestic and foreign legal, auditing,
brokerage and economic standards. In addition, there are risks of changes
in foreign currency values. A change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar value
of a fund's securities denominated in a foreign currency. Both funds'
investment income and proceeds from foreign securities may be received in
foreign currencies and the funds will be required to absorb the cost of
currency fluctuations. If a fund suffers a loss on foreign currencies
after it has distributed its income during the year, the fund may find
that it has distributed more income than was available from actual
investment income, and the shareholders will have received a return of
capital. The foreign securities Oppenheimer Fund may invest in, such as
emerging market securities, have speculative characteristics and involve
more risk than other foreign securities, including extended settlement
periods for securities transactions, increased illiquidity and increased
volatility.
Small, Unseasoned Companies
The funds may invest in securities of companies that have been in
operation for less than three years (including the operations of
predecessors). Securities of these companies may have limited liquidity
(which means that a fund may have difficulty selling them at an acceptable
price when it wants to) and the prices of these securities may be
volatile. Oppenheimer Fund currently intends to invest no more than 5%
of its net assets in the next year in the securities of small, unseasoned
issuers. JP Fund is prohibited from investing more than 5% of its assets
in the securities of such issuers.
Borrowing for Leverage
Oppenheimer Fund may borrow up to 5% of the value of its total assets from
banks to buy securities, but 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 Oppenheimer
Fund to greater risks and costs than funds that do not borrow. These
risks may include the possibility that Oppenheimer Fund's net asset value
per share will fluctuate more than the net asset value of funds that do
not borrow, since Oppenheimer Fund pays interest on borrowings and
interest expense affects Oppenheimer Fund's share price. JP Fund is not
permitted to borrow for leverage and may only borrow money in an amount
up to 5% of its total assets for extraordinary or emergency purposes.
Options and Futures; Derivatives
Oppenheimer Fund may purchase and sell certain kinds of futures contracts,
put and call options, forward contracts and options on securities,
broadly-based stock indices, stock index futures and foreign currency.
The foregoing instruments, referred to as "hedging instruments," may be
considered derivative investments. Oppenheimer Fund may also invest in
certain derivative investments because they offer the potential for
increased income and principal value. Hedging instruments and derivative
investments and their special risks are described below in "Comparison
Between Oppenheimer Fund and JP Fund."
APPROVAL OR DISAPPROVAL OF THE REORGANIZATION
(Proposal 1)
Background
JPC, in the course of a review of its business, concluded that it should
concentrate on its core insurance business and communications operations
and not continue, through its existing subsidiaries, in the business of
managing mutual fund investment portfolios. JPC is a publicly-held
holding company that is the parent of JPM. In addition to JP Fund, JPM
manages another mutual fund, JP Investment Grade Bond Fund, Inc. (with JP
Fund, the "Insurance Funds") that sells its shares exclusively to Account
A and Account B to support variable annuity contracts. JPM also manages
two mutual funds that are sold on a retail basis through a broker-dealer
network. In aggregate, these four mutual funds had net assets at
September 30, 1996 of approximately $175 million. Managing mutual fund
investment portfolios in an efficient and profitable manner requires
significant assets per fund and in the aggregate. Usually several billion
dollars in aggregate net assets is necessary to cover normal operating
costs and provide resources for capital investment in new products and
services. With regard to retail mutual funds, financing certain classes
of shares and providing sales support to dealers are additional expenses
that can only be supported from a relatively large asset base.
Consequently, it has become increasingly difficult for a relatively small
mutual fund operation such as that managed by JPM to compete. JPC
evaluated the capital investment that would be required of it or its
subsidiaries to achieve such an asset base and determined that: (1) the
best investment of its resources would not be in expanding the mutual fund
assets under JPM's management, and (2) if, through JPM (or another
subsidiary), it could not be extremely competitive in the business of
managing mutual fund investment portfolios, it should sell the assets of
JPM and facilitate making other arrangements for the management of the
assets of the four mutual funds (including JP Fund) managed by JPM.
Sometime after these determinations by JPC were made, representatives of
JPC and JPM met with OFI to discuss OFI's acquiring JPM's mutual fund-
related assets. Representatives of OFI and JPM held meetings beginning
in December 1995. Following the negotiation of the terms of an
acquisition agreement and related agreements, an acquisition agreement
(the "Acquisition Agreement") was executed by OFI, JPC, JPM and JPLIC on
September 24, 1996.
The Reorganization described in this Proxy Statement and Prospectus is one
aspect of the overall Acquisition (as hereinafter defined) contemplated
by the Acquisition Agreement described below. The consummation of the
Reorganization is one condition, among others, to the closing of the
Acquisition. Likewise, the consummation of the Acquisition is one
condition, among others, to the closing of the Reorganization.
Accordingly, unless the parties otherwise agree, the Reorganization may
not be effected, despite shareholder approval, if the Acquisition does not
close. In such case, JP Fund will continue in existence and the Board
will take such further action as it, in its discretion, deems necessary
or advisable. The description of the Acquisition Agreement set forth
below is a summary only.
Acquisition Agreement
The Acquisition Agreement contemplates the sale to OFI of all the assets
of JPM (the "Purchased Assets") and the assumption by OFI of certain
liabilities of JPM and JPC relating to the Purchased Assets ("Assumed
Liabilities") (the foregoing sale and assumption constitute the
"Acquisition"). The Acquisition Agreement contemplates that each of the
four mutual funds advised by JPM (including JP Fund) (each, a "Reorganized
Fund") will be reorganized with a mutual fund currently advised by OFI.
A condition to the obligation of the parties to close under the
Acquisition Agreement (the "Acquisition Closing") is the approval of the
reorganizations of the Reorganized Funds (including the Reorganization
described in this Proxy Statement and Prospectus) by their respective
shareholders and the approval of the reorganizations of the Insurance
Funds by applicable state insurance regulatory authorities. The
Acquisition Agreement sets forth certain other conditions to each party's
obligation to close.
JPM, JPC and JPLIC have agreed pursuant to an Agreement Not to Compete not
to, among other things, sell or offer to sell shares of or other security
interests in investment companies or investment oriented insurance
policies to persons who were shareholders of a Reorganized Fund or owned
variable annuity contracts issued by JPLIC invested in the Insurance
Funds, in each case, immediately prior to the reorganization of such fund
for a period to end on the fourth anniversary of the Acquisition Closing.
Further, JPM, JPC and JPLIC may not act as an investment adviser to funds
established, formed, sold, sponsored or distributed by them and their
affiliates with certain exceptions. OFI, on the one hand, and JPM, JPC
and JPLIC, on the other, have agreed to indemnify the other for certain
liabilities.
Board Approval of the Reorganization
At its meeting on August 26, 1996, the Board, including the Independent
Directors, unanimously approved the Reorganization and the Reorganization
Agreement, determined that the Reorganization is in the best interests of
JP Fund and its shareholders and resolved to recommend that JP Fund
shareholders vote for approval of the Reorganization. The Board further
determined that the Reorganization would not result in dilution of JP
Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed, with
the assistance of independent legal counsel, materials furnished by OFI
and JPM. These materials included financial statements as well as other
written information regarding OFI and its personnel, operations and
financial condition. The Board also reviewed the same type of information
about JPM. Consideration was given to comparative information concerning
other mutual funds with similar investment objectives to JP Fund and
Oppenheimer Fund. The Board also considered information with respect to
the relative historical performance of JP Fund, Oppenheimer Fund and other
mutual funds having similar investment objectives. The Board also
reviewed and discussed the terms and provisions of the investment advisory
agreement pursuant to which OFI provides investment management services
to Oppenheimer Fund and compared and contrasted them to the existing
management arrangements for JP Fund as well as the management arrangements
of other similar mutual funds, particularly with respect to the allocation
of various types of expenses, levels of fees and resulting expense ratios.
In reaching its determination, the Board gave careful consideration to a
number of factors. First, the Board evaluated the entire Reorganization
in light of the fact that JPC intends to sell JPM or otherwise leave the
business of managing mutual fund investment portfolios. Therefore, new
arrangements for the management of JP Fund assets would have to be
obtained either by the Reorganization or some other means. Second, the
Board carefully considered the similarities and differences of the
investment objectives, policies and methods of JP Fund and Oppenheimer
Fund. The Board also carefully considered the fact that the
Reorganization would afford variable contract owners, as indirect
investors in the Oppenheimer Fund, the capabilities and resources of OFI
and its affiliates in the area of investment management and shareholder
servicing. Finally, the Board carefully considered the terms and
conditions of the Reorganization, including that: (1) there would be no
sales charge imposed in effecting the Reorganization, (2) the
Reorganization is intended to qualify as a tax-free exchange, and (3) OFI
and JPM would pay all expenses of the reorganization and Oppenheimer Fund
and JP Fund would not pay any of these expenses. The Board also
considered that the annual operating expenses for Oppenheimer Fund are
higher, as a percentage of net assets, and would be higher on a pro forma
basis after giving effect to the Reorganization, than the operating
expenses of JP Fund due to the fact that Oppenheimer Fund is subject to
a higher management fee rate than JP Fund. For operating expenses and
other expense information relating to Oppenheimer Fund and JP Fund, see
"Comparative Fee Tables - Expenses of Oppenheimer Fund and JP Fund; Pro
Forma Expenses."
The Board was also advised regarding the provisions of Section 15(f) of
the 1940 Act as they relate to the Acquisition. Section 15(f) of the 1940
Act provides, in effect, that an investment adviser of a registered
investment company, or an affiliated person of such adviser, may receive
any amount or benefit in connection with the sale of the adviser's
business provided that two conditions are satisfied. First, an "unfair
burden" must not be imposed on the investment company for which the
investment adviser acts in such capacity as a result of the sale, or any
express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" as defined in the 1940 Act, includes any
arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or successor advisers), or any
interested person of such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from any person in connection with
the purchase or sale of securities or other property to, from or on behalf
of the investment company (other than ordinary fees for bona fide
principal underwriting services), or from the investment company or its
securities holders (other than fees for bona fide investment advisory and
other services).
Management of the Reorganized Funds (including JP Fund) and management of
the mutual funds managed by OFI into which the Reorganized Funds will be
reorganized (including Oppenheimer Fund) are aware of no circumstances
arising from the Acquisition or preparatory transactions to the
Acquisition that might result in the imposition of an "unfair burden" on
the Reorganized Funds (including JP Fund) or the mutual funds managed by
OFI into which the Reorganized Funds will be reorganized (including
Oppenheimer Fund). Moreover, the Acquisition Agreement provides that OFI,
JPM and JPC will conduct their businesses (and use their reasonable
efforts to cause their respective affiliates to conduct their businesses)
so as to assure, insofar as is in their control, that no "unfair burden"
will be imposed on the Reorganized Fund (including JP Fund) or any mutual
fund managed by OFI into which a Reorganized Fund would be reorganized
(including Oppenheimer Fund) as a result of the transactions contemplated
by the Acquisition Agreement.
The second condition of Section 15(f) is that during the three-year period
immediately following a transaction to which Section 15(f) is applicable,
at least 75% of the subject investment company's board of directors must
not be "interested persons" (as defined in the 1940 Act) of the investment
company's investment adviser or predecessor adviser. The current
composition of the Board of Trustees of each mutual fund managed by OFI
into which a Reorganized Fund would be organized (including Oppenheimer
Fund) is already so composed.
After consideration of the above factors, and such other factors and
information as the directors deemed relevant, the Board, including the
Independent Directors, unanimously approved the Reorganization and the
Reorganization Agreement and voted to recommend its approval to the
shareholders of JP Fund.
The Trust's Board of Trustees, on behalf of Oppenheimer Fund, including
the trustees who are not "interested persons" of Oppenheimer Fund,
unanimously approved the Reorganization and the Reorganization Agreement
and determined that the Reorganization is in the best interests of
Oppenheimer Fund and its shareholders. The Board of Trustees further
determined that the Reorganization would not result in dilution of the
Oppenheimer Fund shareholders' interests. The Board of Trustees
considered, among other things, that an increase in Oppenheimer Fund's
asset base as a result of the Reorganization could benefit Oppenheimer
Fund shareholders due to the economies of scale available to a larger
fund. Over time, these economies of scale may result in slightly lower
costs per account for each Oppenheimer Fund shareholder through lower
operating expenses and transfer agency expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified in its
entirety by reference to the Reorganization Agreement (a copy of which is
set forth in full as Exhibit A to this Proxy Statement and Prospectus).
The Reorganization Agreement contemplates a reorganization under which (1)
substantially all of the assets of JP Fund would be transferred to
Oppenheimer Fund in exchange for shares of Oppenheimer Fund having a value
equal to the value of the JP Fund assets transferred, (2) these shares
would be distributed among shareholders of JP Fund in liquidation of JP
Fund and (3) the outstanding shares of JP Fund would be cancelled. Prior
to the Closing Date (as hereinafter defined), which is expected to be
within 10 business days after JP Fund shareholder approval of the
Reorganization is obtained, JP Fund will endeavor to discharge all of its
liabilities and obligations when and as due prior to such date.
Oppenheimer Fund will not assume any liabilities or obligations of JP Fund
except for portfolio securities purchased which have not settled in the
ordinary course of business. In this regard, JP Fund will retain a cash
reserve (the "Cash Reserve") in an amount which is deemed sufficient in
the discretion of the Board for the payment of (a) JP Fund's expenses of
liquidation (if any) and (b) JP Fund's liabilities, other than those
assumed by Oppenheimer Fund. The Cash Reserve will be accounted for as
a liability of JP Fund in determining its net asset value. The number of
full and fractional shares of Oppenheimer Fund to be issued to JP Fund
will be determined on the basis of Oppenheimer Fund's and JP Fund's
relative net asset values per share, computed as of the close of business
of The New York Stock Exchange Inc. on the business day preceding the
Closing Date (the "Valuation Date"). The Closing Date for the
Reorganization will be the date of the closing of the Acquisition under
the Acquisition Agreement or such other date as may be mutually agreed
upon in writing.
The valuation procedures set forth in the Trust's Prospectus and the Trust
Additional Statement will be utilized to determine the value of JP Fund's
assets to be transferred to Oppenheimer Fund pursuant to the
Reorganization, the value of Oppenheimer Fund's assets and the net asset
value of shares of Oppenheimer Fund. Such values will be computed by JPM
and OFI, respectively, as of the Valuation Date in a manner consistent
with OFI's regular practice in pricing Oppenheimer Fund.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, on and after the Closing Date,
Oppenheimer Fund will be in compliance with all of its investment policies
and restrictions. JP Fund will recognize capital gain or loss on any
sales made pursuant to this condition. If JP Fund realizes net gain from
the sale of securities, such gain, to the extent not offset by capital
loss carry-forwards, will be distributed to shareholders prior to the
Closing Date and will be taxable to shareholders as long-term capital gain
or, if the assets disposed of had not been held for more than one year,
as ordinary income. For a discussion of the tax consequences of such
distributions to variable contract owners, see "Tax Aspects of the
Reorganization" below and "Federal Tax Status" in the Account A current
prospectus. Except for sales, if any, made pursuant to the foregoing
condition or in the ordinary course of business, JP Fund does not expect
to sell any of its portfolio securities prior to the Closing Date. Except
for dispositions to be made in the ordinary course of business or in an
amount deemed not to be significant, Oppenheimer Fund has no present
intention of disposing of the assets of JP Fund to be acquired in the
Reorganization.
Contemporaneously with the closing, JP Fund will be liquidated (except for
the Cash Reserve) and JP Fund will distribute or cause to be distributed
pro rata to JP Fund shareholders of record on the Valuation Date the full
and fractional shares of Oppenheimer Fund received by JP Fund. Upon such
liquidation, all issued and outstanding shares of the JP Fund will be
cancelled on JP Fund's books and JP Fund shareholders will have no further
rights as shareholders of JP Fund. To assist JP Fund in the distribution
of Oppenheimer Fund shares, Oppenheimer Fund will, in accordance with a
shareholder list supplied by JP Fund, cause Oppenheimer Fund's transfer
agent to credit and confirm an appropriate number of shares of Oppenheimer
Fund to each shareholder of JP Fund. After the closing of the
Reorganization, JP Fund will not conduct any business except in connection
with the winding up of its affairs.
Under the Reorganization Agreement, within one year after the Closing
Date, JP Fund shall either (i) transfer any remaining amount of the Cash
Reserve to Oppenheimer Fund, if such remaining amount (as reduced by the
estimated cost of distributing it to shareholders) is not material (as
defined below), or (ii) distribute such remaining amount to the
shareholders of JP Fund who were such on the Valuation Date. Such
remaining amount shall be deemed to be material if the amount to be
distributed, after deducting the estimated expenses of the distribution,
equals or exceeds one cent per share of JP Fund outstanding on the
Valuation Date. After this transfer or distribution and after all final
reports and tax returns have been filed and the winding up of JP Fund's
affairs has been completed, JP Fund will be dissolved as a corporation
under North Carolina law.
The consummation of the Reorganization is subject to the conditions set
forth in the Reorganization Agreement, including, without limitation,
approval of the Reorganization by JP Fund's shareholders. Notwithstanding
approval of JP Fund's shareholders, the Reorganization may be terminated
at any time prior to the Closing Date (1) by mutual written consent of JP
Fund, and the Trust, on behalf of Oppenheimer Fund, (2) by JP Fund or the
Trust, on behalf of Oppenheimer Fund, if the Closing shall not have
occurred on or before December 31, 1996, (3) by JP Fund or the Trust, on
behalf of Oppenheimer Fund, if the other party shall fail to perform in
any material respect its agreements contained in the Reorganization
Agreement required to be performed on or prior to the Closing Date, the
other party materially breaches any representation, warranty, or covenant
contained in the Reorganization Agreement, the JP Fund shareholders fail
to approve the Reorganization Agreement, or if a condition in the
Reorganization Agreement expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met prior to the Closing Date, or (4) if a
suspension in the redemption of shares shall continue for 60 days beyond
the Valuation Date. The Reorganization Agreement will automatically
terminate prior to the Closing if the Acquisition Agreement is terminated
or the Acquisition is not consummated. Termination of the Reorganization
Agreement pursuant to (1), (2) or (4) above, or an automatic termination
as described in the preceding sentence, will terminate all obligations of
the parties thereto and there will be no liability for damages. In such
case JP Fund and Oppenheimer Fund will be reimbursed for its expenses
incurred with respect to the Reorganization by JPM and OFI, respectively.
In the event of a termination pursuant to (3) above, all obligations of
Oppenheimer Fund and JP Fund under the Reorganization Agreement will be
terminated without liability for damages except that the party in breach
(other than a breach due to JP Fund shareholders not approving the
Reorganization) of the Reorganization Agreement will, upon demand,
reimburse (such reimbursement to be made by such party's investment
adviser) the non-breaching party for all expenses and reasonable out-of-
pocket fees (if any) incurred in connection with the transactions
contemplated by the Reorganization Agreement.
Pursuant to the Reorganization Agreement, JPC has agreed to indemnify and
hold harmless JP Fund, Oppenheimer Fund, their investment advisers and
their respective trustees, officers and shareholders against claims
resulting from certain actions or a failure to act by JP Fund and OFI has
agreed to indemnify and hold harmless JP Fund and its investment adviser
and their respective directors, officers and shareholders against claims
resulting from certain actions or a failure to act by Oppenheimer Fund.
In addition, JPC has separately agreed with JP Fund and the Independent
Directors that, if indemnification from the assets of JP Fund or liability
insurance is not available to the Independent Directors after the Closing
Date, JPC will indemnify and hold the Independent Directors harmless to
the same extent as provided under the JP Fund's Articles of Incorporation.
Approval of the Reorganization will require the vote specified below in
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the shareholders
of JP Fund, the Board will consider other possible courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, JP Fund will declare a dividend in an
amount large enough so that it will have declared a dividend of all of its
investment company taxable income and net capital gain, if any, for the
taxable period ending on or around the Closing Date (determined without
regard to any deduction for dividends paid). Such dividends will be
included in the taxable income of JP Fund's shareholders as ordinary
income and long-term capital gain, respectively.
The exchange of the assets of JP Fund for shares of Oppenheimer Fund and
the assumption by Oppenheimer Fund of certain liabilities of JP Fund is
intended to qualify for federal income tax purposes as a reorganization
under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). JP Fund has represented to Sutherland, Asbill & Brennan,
tax counsel to JP Fund, that there is no plan or intention by any JP Fund
shareholder who owns 5% or more of JP Fund's outstanding shares and, to
JP Fund's best knowledge, there is no plan or intention on the part of the
remaining JP Fund shareholders, to redeem, sell or otherwise dispose of
a number of Oppenheimer Fund shares received in the transaction that would
reduce JP Fund shareholders' ownership of Oppenheimer Fund shares to a
number of shares having a value, as of the Closing Date, of less than 50%
of the value of all the formerly outstanding JP Fund shares as of the same
date. JP Fund has also represented that Oppenheimer Fund will acquire at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by JP Fund immediately
prior to the Reorganization. JP Fund and Oppenheimer Fund have each
further represented to Sutherland, Asbill & Brennan the fact that, as of
the Closing Date, JP Fund and Oppenheimer Fund will qualify as regulated
investment companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code. As of the Record Date, JPLIC and Account
A and Account B of JPLIC were the only record shareholders of JP Fund.
As a condition to the closing of the Reorganization, Oppenheimer Fund and
JP Fund will receive the opinion of Sutherland, Asbill & Brennan to the
effect that, based on the Reorganization Agreement, information given by
JPC, the above representations and other representations as such firm
shall reasonably request, existing provisions of the Code, Treasury
Regulations issued thereunder, current Revenue Rulings, Revenue Procedures
and court decisions, for federal income tax purposes:
(a) The reorganization contemplated by the Reorganization Agreement will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C)
of the Code and JP Fund and Oppenheimer Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by Oppenheimer Fund upon the
receipt of the assets transferred to it by JP Fund in exchange for shares
of Oppenheimer Fund and the assumption by Oppenheimer Fund of certain
identified liabilities of JP Fund. (Section 1032)
(c) No gain or loss will be recognized by JP Fund upon the transfer of its
assets to Oppenheimer Fund in exchange solely for shares of Oppenheimer
Fund and the assumption by Oppenheimer Fund of certain identified
liabilities of JP Fund (if any) and the subsequent distribution by JP Fund
of such shares to the shareholders of JP Fund. (Section 361)
(d) No gain or loss will be recognized by JP Fund shareholders upon the
exchange of the JP Fund shares solely for the shares of Oppenheimer Fund.
(Section 354)
(e) The basis of the shares of Oppenheimer Fund to be received by each JP
Fund shareholder pursuant to the reorganization will be the same as the
adjusted basis of that shareholder's JP Fund shares surrendered in
exchange therefor. (Section 358)
(f) The holding period of shares of Oppenheimer Fund to be received by
each JP Fund shareholder will include the shareholder's holding period for
the JP Fund shares surrendered in exchange therefor, provided such JP Fund
shares were held as capital assets on the Closing Date. (Section 1223)
(g) Oppenheimer Fund's basis for the assets transferred to it by JP Fund
will be the same as JP Fund's tax basis for the assets immediately prior
to the reorganization. (Section 362(b))
(h) Oppenheimer Fund's holding period for the transferred assets will
include JP Fund's holding period therefor. (Section 1223)
(i) Oppenheimer Fund will succeed to and take into account the items of
JP Fund described in Section 381(c) of the Code, including the earnings
and profits, or deficit therein, of JP Fund as of the Closing Date,
subject to the conditions and limitations specified in Sections 381, 382,
383 and 384 of the Code.
(j) No gain or loss will be recognized by owners of variable contracts
issued by JPLIC through Account A and Account B or the transfer of JP
Fund's assets to Oppenheimer Fund in exchange solely for the shares of
Oppenheimer Fund and Oppenheimer Fund's assumption of certain JP Fund
liabilities (if any) and the subsequent distribution by JP Fund of those
shares to Account A and Account B.
Owners of variable contracts should consult their tax advisers regarding
the effect, if any, of the Reorganization in light of their individual
circumstances, which may be affected by the type of variable contract they
own or by their status. See also "Federal Tax Status" in the Account A
prospectus. Since the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, shareholders of JP Fund
should also consult their tax advisers as to state and local tax
consequences, if any, of the Reorganization.
Dissenters' Rights
Under the North Carolina Business Corporation Act (the "NCBCA"), the state
statute governing JP Fund, shareholders of a company acquired in a
reorganization who do not vote to approve the reorganization could have,
under certain circumstances, "appraisal rights" (where they may elect to
have the "fair value" of their shares as of the day prior to such
reorganization, determined in accordance with the NCBCA, judicially
appraised and paid to them). Variable contract owners, however, do not
have such rights under the NCBCA.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Oppenheimer Fund and JP
Fund and indicates the pro forma combined capitalization as of June 30,
1996 as if the Reorganization had occurred on that date.
<TABLE>
<CAPTION>
Net Asset
Shares Value
Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer Fund $144,722,208 5,972,737 $24.23
JP Fund $ 81,751,500 4,205,010 $19.44
Pro Forma Combined
Fund* $226,473,708 9,346,716 $24.23
</TABLE>
- ------------------
*Reflects issuance of 3,373,979 shares of Oppenheimer Fund in a tax-free
exchange for the net assets of JP Fund, aggregating $81,751,500 for shares
of JP Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at June 30, 1996 would have been .78%.
COMPARISON BETWEEN Oppenheimer FUND AND JP FUND
Comparative information about Oppenheimer Fund and JP Fund is presented
below. More complete information about Oppenheimer Fund and JP Fund is
set forth in their respective Prospectuses (which, as to Oppenheimer Fund,
accompanies this Proxy Statement and Prospectus and is incorporated herein
by reference) and Statements of Additional Information. To obtain copies
of either Prospectus, see "Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, Oppenheimer Fund seeks to achieve capital
appreciation by investing in securities of well-known and established
companies. Current income is a secondary consideration in the selection
of Oppenheimer Fund's portfolio securities. JP Fund's primary investment
objective is long-term capital appreciation; current income through the
receipt of interest or dividends from investments is only a secondary
objective. In seeking their investment objectives, which are fundamental
policies, Oppenheimer Fund and JP Fund employ the investment policies as
described in detail below.
Oppenheimer Fund. Oppenheimer Fund seeks its investment objective by
emphasizing investment in common stocks issued by well-known and
established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (having an
operating history of at least five years, including predecessors).
Oppenheimer Fund may also invest in securities of "growth-type companies".
Such issuers typically are those whose goods or services have relatively
favorable long-term prospects for increasing demand, or ones which develop
new products, services or markets and normally retain a relatively large
part of their earnings for research, development and investment in capital
assets. They may include companies in the natural resources fields or
those developing industrial applications for new scientific knowledge
having potential for technological innovation, such as nuclear energy,
oceanography, business services and new customer products. With respect
to the percentage of assets that may be invested in the securities of one
or more issuers, Oppenheimer Fund is subject to certain diversification
requirements as set forth in "Investment Restrictions" below.
JP Fund. JP Fund proposes to achieve its investment objectives by
investing substantially all its assets in common stocks of companies
recognized as leaders in their respective industries with proven and
capable management and that are providing significant products and
services to their customers. JP Fund's investments will be made
predominantly in securities listed on registered securities exchanges, but
it may purchase securities traded in the over-the-counter market.
Investments may be made in other equity securities, including rights,
warrants, preferred stock and those debt securities convertible into or
carrying rights, warrants, or options to purchase common stock or to
participate in earnings. JP Fund may also hold cash or invest in short-
term securities. JP Fund's investments (other than cash and U.S.
Government securities) are diversified among the securities issued by
different companies and governments to the extent that no more than 5% of
its total assets may be invested in securities issued by any one issuer.
In addition, JPM generally selects investments for JP Fund from among many
different industries and may invest up to 25% of JP Fund's assets in a
single industry.
Special Investment Methods
Oppenheimer Fund and JP Fund may use certain special investment methods
as summarized below.
Loans. Oppenheimer Fund may lend its portfolio securities to brokers,
dealers and other financial institutions, subject to certain conditions.
Oppenheimer Fund must receive collateral for the loans. Oppenheimer Fund
presently does not intend that the value of portfolio securities loaned
will exceed 5% of the value of the total assets of Oppenheimer Fund in the
coming year and is otherwise subject to a 25% limit with respect to such
loans. JP Fund is prohibited from making loans except to the extent of
investing in repurchase agreements or purchasing a portion of an issue of
a debt security distributed to the public.
Repurchase Agreements. Both Oppenheimer Fund and JP Fund may enter into
repurchase agreements. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on
the delivery date, the funds may experience costs or delays in disposing
of the collateral and may experience losses to the extent that the
proceeds from the sale of the collateral is less than the repurchase
price.
There is no limit on the amount of either fund's net assets that may be
subject to repurchase agreements of seven days or less. Neither fund will
purchase illiquid or restricted securities (which are subject to legal or
contractual restrictions on resale) that will cause more than 10% of its
net assets to be invested in such securities. As to Oppenheimer Fund,
this percentage limit may increase to 15% with respect to all illiquid or
restricted securities if approved by its Board of Trustees. Repurchase
agreements with maturities longer than seven days are considered illiquid.
JP Fund has no present intention of acquiring restricted securities. For
Oppenheimer Fund, certain restricted securities, eligible for resale to
qualified institutional purchasers, are not subject to the foregoing
limitation. However, investing in such restricted securities could have
the effect of increasing the level of fund illiquidity to the extent that
qualified institutional buyers become, for a time uninterested in
purchasing thee securities.
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 its
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. Oppenheimer Fund may not sell
securities short except that it may sell securities short in
collateralized transactions referred to as "short sales against-the-box."
No more than 15% of Oppenheimer Fund's net assets will be held as
collateral for such short sales at any one time. JP Fund may not enter
into these transactions.
Hedging. Oppenheimer Fund may purchase and sell: futures contracts that
relate to broadly-based securities indices; certain put and call options;
and options on securities, stock index futures, broadly-based stock
indices, and foreign currency. These are all referred to as "hedging
instruments." Oppenheimer Fund does not use hedging instruments for
speculative purposes. Up to 100% of Oppenheimer Fund's total assets may
be subject to covered calls. Oppenheimer Fund may only purchase a call
or put if, after such purchase, the value of all call and put options held
by Oppenheimer Fund would not exceed 5% of Oppenheimer Fund's total
assets. Further, Oppenheimer Fund will not write puts if, as a result,
more than 50% of its net assets would be required to be segregated to
cover the puts. Other limits on the use of hedging instruments are
described in the Trust's Prospectus and the Trust Additional Statement.
JP Fund does not invest in hedging instruments.
Hedging instruments may be used to manage Oppenheimer Fund's exposure to
the possibility that the prices of its portfolio securities may decline,
or to establish a position in the securities market as a temporary
substitute for purchasing individual securities; to hedge the Fund's
portfolio against price fluctuations; and to increase the Fund's exposure
to the securities market. Forward contracts are used to try to manage
foreign currency risks on the Fund's foreign investments. Oppenheimer
Fund's foreign currency options are used to try to protect against
declines in the dollar value of foreign securities Oppenheimer Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Oppenheimer Fund may write covered call options to provide
income for liquidity purposes or to raise cash to distribute to
shareholders.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If Oppenheimer Fund uses a hedging instrument at
the wrong time or judges market conditions incorrectly, hedging strategies
may reduce the Fund's return. Oppenheimer 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 options, futures and forward
contracts are subject to special tax rules that may affect the amount,
timing and character of Oppenheimer Fund's distributions to its
shareholders. There are also special risks in particular hedging
strategies. If a covered call written by Oppenheimer Fund is exercised
on an investment that has increased in value, Oppenheimer Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price.
Derivative Investments. Oppenheimer Fund can invest in a number of
different kinds of "derivative investments." Some types of derivatives
are hedging instruments and may be used for hedging purposes, as described
above. Oppenheimer Fund may invest in others because they offer the
potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed security or contract the
performance of which is linked to the performance of another investment
or security, such as an option contract, futures contract, index, currency
or commodity. In the broadest sense, derivative investments include the
hedging instruments in which Oppenheimer Fund may invest. Other types of
derivatives in which Oppenheimer Fund may invest include index-linked or
commodity-linked notes, debt exchangeable for common stock, equity-linked
debt securities and currency indexed securities. JP fund does not have a
policy with regard to investments in such other types of derivatives
investments such as hedging instruments. Nonetheless, JP Fund has never
invested in such derivative investments and JPM has no intention of having
JP Fund invest in such investments.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the investment adviser 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 these risks can
mean that Oppenheimer Fund will realize less income than expected from its
investments, or that it can lose part or all of the value of its
investments, which will affect its share price.
When-Issued and Delayed Delivery Transactions. JP Fund and Oppenheimer
Fund may purchase securities on a "when-issued" basis and may purchase or
sell such securities on a "delayed delivery" basis. These terms refer to
securities that have been created and for which a market exists, but which
are not available for immediate delivery or are to be delivered at a later
date. There may be a risk of loss to either fund if the value of the
security changes prior to the settlement date. Although JP Fund may
purchase securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis, it has not done so to date and
JPM has no intention of having JP Fund do so in the foreseeable future.
Investment Restrictions
Both Oppenheimer Fund and JP Fund have certain investment restrictions
that, together with their respective investment objectives are fundamental
policies changeable only by shareholder approval. The investment
restrictions of Oppenheimer Fund and JP Fund are set forth below.
Oppenheimer Fund cannot: (1) with respect to 75% of its total assets,
invest in securities (except those of the U.S. Government or its agencies
or instrumentalities) of any issuer if immediately thereafter, either (a)
more than 5% of Oppenheimer Fund's total assets would be invested in
securities of that issuer, or (b) Oppenheimer Fund would then own more
than 10% of that issuer's voting securities or 10% in principal amount of
the outstanding debt securities of that issuer; (2) lend money except in
connection with the acquisition of debt securities which Oppenheimer
Fund's investment policies and restrictions permit it to purchase;
Oppenheimer Fund may also make loans of portfolio securities; (3) pledge,
mortgage or hypothecate any assets to secure a debt; the escrow
arrangements which are involved in options trading are not considered to
involve such a mortgage, hypothecation or pledge; (4) deviate from the
percentage requirements and other restrictions listed under "Warrants and
Rights," and the first paragraph under "Special Risks-Borrowing for
Leverage" of the Trust Prospectus; (5) invest in oil or gas exploration
or development programs; (6) invest in real estate or in interests in real
estate, but may purchase securities of issuers holding real estate or
interests therein; (7) invest in companies for the purpose of acquiring
control of management thereof; (8) 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; (9) invest or hold securities of any issuer if
those officers and trustees or directors of the Trust or its adviser
owning individually more than 1/2 of 1% of the securities of such issuer
together own more than 5% of the securities of such issuer; or (10) invest
in other open-end investment companies, or invest more than 5% of its net
assets at the time of purchase in closed-end investment companies,
including small business investment companies, nor make any such
investments at commission rates in excess of normal brokerage commissions.
JP Fund cannot: (1) issue senior securities; (2) purchase securities on
margin or sell short, except it may obtain such short-term credits as are
necessary for the clearance of transactions; (3) write, purchase or sell
puts, calls or combinations thereof; (4) borrow money except that, as a
temporary measure for extraordinary or emergency purposes and not for
investment purposes, JP Fund may borrow up to 5% of the value of its total
assets; (5) act as an underwriter of securities of other issuers, except
JP Fund may invest up to 10% of the value of its net assets (at time of
investment) in portfolio securities which JP Fund might not be free to
sell to the public without registration of such securities under the
Securities Act of 1933; (6) purchase or sell real estate or interests in
real estate, nor interests in real estate investment trusts or real estate
limited partnerships (however, JP Fund may purchase interests in real
estate investment trusts whose securities are registered under the
Securities Act of 1933 and are readily marketable); (7) engage in the
purchase and sale of commodities or commodity contracts; (8) make loans,
except to the extent that either of the following is deemed to constitute
a loan: (a) purchase of a portion of an issue of a debt security
distributed to the public; or (b) investment in "repurchase agreements";
(9) purchase the securities (except U.S. Government securities) of any one
issuer if immediately after and as a result of such purchase (a) the value
of the holdings of JP Fund in the securities of such issuer exceeds 5% of
the value of JP Fund's total assets, or (b) JP Fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer; (10) purchase the securities of open-end investment companies
(except JP Fund may purchase the securities of other investment companies
provided that (a) immediately after such purchase JP Fund and companies
controlled by JP Fund, or other investment companies having the same
investment adviser as JP Fund, do not own more than 10% of the investment
company whose securities are being purchased; (b) JP Fund cannot invest
more than 10% of its total assets in the securities of other investment
companies; and (c) such purchases are made in the open market where no
commission or profit to a sponsor or dealer results other than the
customary broker's commission; notwithstanding the foregoing, restrictions
10(a), 10(b) and 10(c) do not apply in connection with a merger,
consolidation, or plan of reorganization); (11) mortgage, pledge,
hypothecate, or in any manner transfer, as security for indebtedness, any
securities owned or held by JP Fund; (12) participate on a joint or joint
and several basis in any trading account in securities or effect a short
sale of any security, except in connection with an underwriting in which
it is a participant in the circumstances specified in "5" above; and (13)
purchase or retain the securities of any issuer if those officers and
directors of JP Fund, its adviser or underwriter owning individually more
than 0.5% of the securities of such issuer together own more than 5% of
the securities of such issuer. As non-fundamental policies changeable
without shareholder approval, JP Fund cannot: (a) invest in companies for
the purpose of exercising control or management; (b) invest in foreign
securities other than securities issued by Canadian companies; and (c)
invest in interests of oil, gas or other mineral exploration or
development programs (including oil, gas or mineral leases).
Oppenheimer Fund Performance
Oppenheimer Fund does not maintain a fixed dividend rate and there can be
no assurance as to the payment of any dividends or the realization of any
capital gains.
During Oppenheimer Fund's fiscal year ended December 31, 1995, Oppenheimer
Fund's strategy of looking for growth at reasonable prices lead it to
invest substantially in the technology and financial services sectors.
Oppenheimer Fund's investment performance will vary over time depending
on market conditions, the composition of the portfolio and expenses. Past
performance should not be considered a prediction of future performance.
Included in the prospectus for the Trust, a copy of which accompanies this
Proxy Statement and Prospectus and those portions that pertain to
Oppenheimer Fund being incorporated herein by reference, in the section
entitled "Performance of the Funds," is a performance graph which depicts
the performance of a hypothetical $10,000 investment in shares of
Oppenheimer Fund over a ten-year period through December 31, 1995.
Oppenheimer 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 measurement of the performance of the U.S. equity securities
market. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none
of the data below shows the effect of taxes. Oppenheimer Fund's
performance data reflects reinvestment of all dividends and capital gains
distributions, and the effect of fund business and operating expenses.
While index comparisons may be useful to provide a benchmark for
Oppenheimer Fund's performance, it must be noted that Oppenheimer Fund's
investments are not limited to the securities in the S&P 500 index.
Moreover, the index data does not reflect any assessment of the risk of
the investments included in the index.
Information on JP Fund performance is set forth in JP Fund's current
Prospectus and in its Annual Report as of December 31, 1995, which may be
obtained without charge as set forth in "Miscellaneous - Public
Information." Such information is incorporated herein by reference.
Other Investors in Oppenheimer Fund
Shares of Oppenheimer Fund are sold to separate accounts of insurance
companies that are not affiliated with JPLIC or each other, a practice
known as "shared funding." They are also sold to separate accounts to
serve as the underlying investment for both variable annuity contracts and
variable life insurance contracts, a practice known as "mixed funding."
As a result, there is a possibility that a material conflict may arise
between the interests of owners of various different types of variable
contracts, whose contract values are indirectly invested in Oppenheimer
Fund. Likewise, there is a possibility that a material conflict may arise
between the interests of owners of variable contracts having contract
values indirectly invested in Oppenheimer Fund through a separate account
of one insurance company and the interests of owners of other variable
contract whose contract values are indirectly invested in the fund through
one or more separate accounts or other insurance companies. Shares of
Oppenheimer Fund may also be sold to separate accounts of certain pension
and retirement plans qualifying under Section 401 of the Code. As a
result, there is a possibility that a material conflict may arise between
the interests of owners of various types of variable contracts (including
variable contracts issued by insurance companies other than JPLIC), and
such retirement plans or participants in such retirement plans. There are
certain other risks associated with mixed and shared funding and with the
sale of shares to qualified pension and retirement plans. These are
discussed in Oppenheimer Fund's prospectus under the caption "Other
Investment Restrictions".
Additional Comparative Information
General. For a discussion of the organization and operation of
Oppenheimer Fund, including brokerage practices, see "Investment
Objectives and Policies" and "How the Funds are Managed" in the Trust's
current Prospectus and "Brokerage Policies of the Funds" in the Trust
Additional Statement. For a discussion of the organization and operation
of JP Fund, including brokerage practices, see "Investment Objectives and
Policies," and "Who Manages The Funds" in JP Fund's current Prospectus and
"Brokerage" in the JP Fund Additional Statement.
Financial Information. For certain financial information about
Oppenheimer Fund and JP Fund, see as to Oppenheimer Fund "Financial
Highlights" and "Performance of the Funds" in Oppenheimer Fund's current
Prospectus, and as to JP Fund, "Condensed Financial Information" and
"Performance" in JP Fund's current Prospectus.
Management of Oppenheimer Fund and JP Fund. For information about the
management of Oppenheimer Fund and JP Fund, including their respective
Boards of Trustees or Directors, investment adviser and portfolio
managers, see, as to Oppenheimer Fund, "How the Funds are Managed" in the
Trust's current Prospectus and "How the Funds are Managed," "Trustees and
Officers of the Trust" and "The Manager and Its Affiliates" in the Trust's
Additional Statement, and as to JP Fund "Portfolio Managers" and "Who
Manages the Funds" in JP Fund's current Prospectus and "The Investment
Adviser," and "The Fund's Directors and Officers" in the JP Fund
Additional Statement.
Description of Shares of Oppenheimer Fund and JP Fund. Oppenheimer Fund
is a series of the Trust, Oppenheimer Variable Account Funds, a
Massachusetts business trust. Oppenheimer Fund and its shareholders are
governed principally by the Trust's Declaration of Trust, and ByLaws and
other governing documents. Each share of Oppenheimer Fund represents an
interest in Oppenheimer Fund proportionately equal to the interest of each
other share and entitles the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to a vote at
shareholder meetings. Shares of Oppenheimer Fund and of the Trust's other
series vote together in the aggregate on certain matters at shareholder
meetings, such as the election of Trustees and ratification of appointment
of auditors. Shareholders of a particular series vote separately on
proposals which affect that series, and shareholders of a series which is
not affected by that matter are not entitled to vote on the proposal.
Shareholders of Oppenheimer Fund together with shareholders of the Trust's
other series have the right, under certain circumstances, to remove a
Trustee and will be assisted in communicating with other shareholders for
such purpose.
Oppenheimer Fund is authorized to issue an unlimited number of shares of
beneficial interest. Shares are freely transferable and shares do not
have cumulative voting rights or preemptive or subscription rights.
Oppenheimer Fund is governed by a Board of Trustees that has the power,
without shareholder approval, to establish and designate one or more
series. Oppenheimer Fund has only one class of shares which are offered
for purchase only by separate accounts such as Separate Account A. Under
certain circumstances, a shareholder of Oppenheimer Fund may be held
personally liable as a partner for the obligations of Oppenheimer Fund,
and under the Trust's Declaration of Trust, such a shareholder is entitled
to indemnification rights by Oppenheimer Fund; the risk of a shareholder
incurring any such loss is limited to the remote circumstances in which
Oppenheimer Fund is unable to meet its obligations. For further
information about the shares of Oppenheimer Fund, see "How the Fund is
Managed" in the Trust's current Prospectus and the Trust Additional
Statement.
JP Fund is a North Carolina corporation with 10,000,000 shares of common
stock, par value $1.00 per share, authorized. JP Fund has only one class
of shares, which are offered for sale only by Account A and Account B.
JP Fund and its shareholders are governed by its Articles of Incorporation
and By-Laws and by the NCBCA. Each share entitles the holder to
participate equally in dividends and distributions declared by JP Fund and
in its remaining net assets on liquidation after satisfaction of
outstanding liabilities. JP Fund shares are fully paid and nonassessable
when issued; have no preemptive or conversion rights; are transferable
without restriction; and are redeemable at net asset value. On matters
submitted for a shareholder vote, each shareholder is entitled to one vote
for each share owned. Fractional shares have proportionately the same
rights as do full shares.
Oppenheimer Fund is not required to hold, and does not plan to hold,
regular annual meetings of shareholders. In contrast, JP Fund is required
to hold an annual meeting of shareholders each year or in lieu thereof,
a special meeting of shareholders.
Dividends, Distributions and Taxes. The Trust intends to declare
dividends from net investment income on an annual basis. Any net long-
term and short-term capital gains may be distributed by Oppenheimer Fund
annually in December and supplemental distributions of capital gains and
ordinary income may be made following the end of Oppenheimer Fund's fiscal
year. JP Fund's policy is to pay dividends from net investment income
semi-annually in February and August. Each December each Fund makes a
distribution of the capital gains, if any realized during the 12-month
period ended the preceding October 31. For a discussion of the policies
of Oppenheimer Fund and JP Fund with respect to dividends and
distributions, and a discussion of the tax consequences of an investment
in Oppenheimer Fund and JP Fund, see as to Oppenheimer Fund "Dividends,
Capital Gains and Taxes" in the Oppenheimer Fund current Prospectus and
as to JP Fund "Dividends, Distribution and Taxes" in the JP Fund current
Prospectus. For a discussion of the tax consequences of an investment in
Account A, see "Federal Tax Status" in the Account A current Prospectus.
Purchases and Redemptions of Shares. Information on purchases and
redemptions of shares of Oppenheimer Fund and JP Fund is provided under
"Synopsis -- Purchases and Redemptions" in this Proxy Statement and
Prospectus. For an additional discussion of how shares of Oppenheimer Fund
and JP Fund may be purchased and redeemed, see, as to Oppenheimer Fund,
"How to Buy Shares," and "How to Sell Shares," in the Trust's current
Prospectus and the Trust Additional Statement and, as to JP Fund, "How to
Purchase Shares," and "How to Redeem Shares" in JP Fund's current
Prospectus.
Shareholder Inquiries. For a description of how shareholder inquiries
should be made, see as to Oppenheimer Fund, "How the Funds are Managed"
in the Trust's current Prospectus and, as to JP Fund, the back cover page
of the JP Fund current Prospectus.
The Board of Directors recommends that shareholders approve the
Reorganization Agreement.
ELECTION OF DIRECTORS
(Proposal 2)
The Board of directors of JP Fund recommends that shareholders elect the
following nominees to serve as the 5 directors of the full Board of
directors of JP Fund: John C. Ingram, J. Lee Lloyd, Richard W. McEnally,
William E. Moran and E.J. Yelton. Each of the nominees is presently a
Director of JP Fund and has been previously elected by shareholders of JP
Fund. If elected, the directors will serve until the earlier of the
dissolution of JP Fund or the next shareholder meeting called for the
purpose of electing directors, or until the election and qualification of
their successors. If the enclosed voting instructions is duly executed
and received in time for the Meeting, and if no contrary specification is
made as provided therein, it will be voted in favor of the election as
directors of the foregoing nominees. If any nominee should be unwilling
or unable to serve, which is not now anticipated, the Proxy may be voted
with discretionary authority for a substitute or substitutes as shall be
designated by the Board of Directors. Certain information concerning the
directors and executive officers of JP Fund is set forth below.
Information Concerning the Board
JP Fund's current Board of directors consists of 5 directors, all of whom
are elected at annual meetings. The Board of directors does not have a
standing audit, nominating or compensation committee. The following list
of JP Fund's directors and executive officers, all of whom are also
directors and/or officers of JP Investment Grade Bond Fund, Inc.,
Jefferson-Pilot Investment Grade Bond Fund, Inc., and Jefferson-Pilot
Capital Appreciation Fund, Inc. (collectively with JP Fund, the
"Jefferson-Pilot Funds"), includes information as to their principal
occupations during the past five years and their principal affiliations.
<TABLE>
<CAPTION>
Name and Other Position/Office Principal Occupation(s) Officer or
Information with JP Fund During the Past 5 Years Director Since
<S> <C> <C>
John C. Ingram* Director Senior Vice President, 1989
3802 Woodcote Dr. JPLIC since November 1988.
Greensboro, N.C.
Age-52
J. Lee Lloyd Director Managing Director, Lloyd & Company 1994
16 Irving Park Lane since April 1991.
Greensboro, NC 27455
Age-36
Richard W. McEnally Director Professor of Investment Banking, 1984
401 Brookside Drive University of North Carolina at
Chapel Hill, NC at Chapel Hill.
Age-54
William E. Moran Director Senior Vice President, Connors 1983
5206 Barnfield Road Investor Service, Inc.
Greensboro, NC since January 1995; prior thereto, Chancellor,
Age-64 University of North Carolina at
Greensboro.
W. Hardee Mills, Jr. Vice President Vice President, JPLIC 1987
5 St. Francis Court since February 1994; prior
Greensboro, NC 27408 thereto, Second Vice President,
Age-46 JPLIC.
J. Gregory Poole Secretary Assistant Secretary of JPC and 1994
1805 Gate Post Drive Associate Counsel and Assistant
Greensboro, NC 27455 Secretary of JPLIC since February
Age-32 1994; prior thereto, various
positions at JPLIC.
E.J. Yelton* Director, Senior Vice President - Investments 1994
3204 St. Regis Road President, of JPC and Executive Vice President
Greensboro, NC 27408 Treasurer - Investments of JPLIC since October
Age-57 1993; prior thereto, President and
CEO, ING North America
Investment Centre/Member of
ING Group (investment banking firm).
</TABLE>
* Messrs. Ingram and Yelton are directors that are "interested persons"
(as that term is defined in the 1940 Act) of JP Fund due to the following
positions with JPM and JPC: Mr. Ingram -Senior Vice President, Treasurer
and Director of JPM, and Mr. Yelton - President and Director, JPM and
Senior Vice President - Investments, JPC.
The nominees for directors are beneficial owners of the following
shares in JPC, the parent of JP Fund's investment adviser: Yelton,
54,900; Ingram, 26,010; Moran, None; Lloyd, None; and McEnally, None.
Officers of JP Fund
The following officers of JP Fund also serve as officers and/or directors
of JPM and JPIS: E.J. Yelton, President and Treasurer of JP Fund, is
President and a Director of JPM and a Director of JPIS; W. Hardee Mills,
Jr., Vice President of JP Fund, is Vice President of JPM and J. Gregory
Poole, Secretary of JP Fund, is Secretary of JPIS and JPM. Messrs.
Yelton, Poole and Mills hold positions with the other Jefferson-Pilot
Funds similar to the positions held with JP Fund. The other Jefferson-
Pilot Funds have the same investment adviser as JP Fund.
The following table provides information regarding the compensation each
nominee for director was paid by JP Fund and the other Jefferson-Pilot
Funds for the year ended December 31, 1995.
<TABLE>
<CAPTION> COMPENSATION TABLE
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Retirement Estimated Annual Total Compensation
Person, Compensation Benefits Accrued as Benefits upon From Jefferson-Pilot
Position from JP Fund Part of JP Fund Expenses Retirement______ Funds
<S> <C> <C> <C>
John C. Ingram $0 $0 $0 $0
Director
J. Lee Lloyd 1,220 0 0 4,880
Director
Richard W. McEnally 1,220 0 0 4,880
Director
William E. Moran 1,220 0 0 4,880
Director
E.J. Yelton 0 0 0 0
Director,
President,
Treasurer
</TABLE>
Other Information
The Board of Directors met five times during the fiscal year ended
December 31, 1995 and all of the Directors were present for at least 75%
of those meetings. During the year ended December 31, 1995, directors who
are not employed by JP Fund or its affiliates received a $100 director's
fee for each meeting attended, amounting to an aggregate of $500. In
addition, each of the Independent Directors receives a fee of $720 per
year payable in equal monthly installments.
As of the Record Date, none of JP Fund's directors or officers owned
Account A or Account B contracts holding JP Fund shares.
JP Fund's investment adviser and transfer agent is JPM, P.O. Box 21008,
Greensboro, North Carolina 27401, a North Carolina corporation organized
on January 13, 1970. JPM is a wholly-owned subsidiary of JPC, an
insurance holding company. JPM presently serves the other Jefferson-Pilot
Funds in these capacities as well.
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, MO
64105-1716 (phone: 1-800-292-6701), serves as JP Fund's custodian.
RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT AUDITORS
(Proposal 3)
The Board of Directors of JP Fund recommends that the shareholders ratify
the selection of McGladrey & Pullen LLP ("McGladrey & Pullen"), Certified
Public Accountants, to continue to serve as the independent auditors of
JP Fund for the fiscal year ending December 31, 1996. That firm or its
predecessor has served as JP Fund's independent auditors from the time of
JP Fund's incorporation on July 19, 1982. JP Fund has been advised by
McGladrey & Pullen that neither the said firm nor any of its members have
a direct or indirect financial interest in JP Fund. McGladrey & Pullen
also serves as independent auditors for JPM. Representatives of McGladrey
& Pullen are not expected to be present at the Meeting but will be
available should any matter arise requiring their presence.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at the Jefferson-Pilot Building (4th Floor, Room
B-2), 100 North Greene Street, Greensboro, North Carolina 27401, at 10:00
A.M., local time, on December 3, 1996. At the Meeting, JP Fund
shareholders will be asked to consider and vote upon approval or
disapproval of the Reorganization Agreement, and the transactions
contemplated thereby, including the transfer of substantially all the
assets of JP Fund to Oppenheimer Fund in exchange for shares of
Oppenheimer Fund, the distribution by JP Fund of such shares to its
shareholders in liquidation of JP Fund and the cancellation of the
outstanding shares of JP Fund. At the meeting, shareholders of JP Fund
will also be asked to elect five directors and ratify or reject the
selection of independent accountants.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on October 10, 1996 as the
Record Date for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. The affirmative vote of a majority of the
JP Fund shares entitled to vote at the Meeting is required for approval
of Proposal 1. The affirmative vote of a majority of JP Fund shares voted
(in person or by proxy) at the Meeting, if a quorum is present at the
Meeting, is required to approve Proposal 3. A plurality of all the votes
cast at the Meeting, if a quorum is present at the Meeting, is sufficient
to elect the nominees for director (Proposal 2). JPLIC will be entitled
to one vote for each share and a fractional vote for each fractional share
held of record at the close of business on the Record Date. Only JP Fund
shareholders will vote on the Reorganization and the other Proposals. The
vote of shareholders of Oppenheimer Fund is not being solicited.
At the close of business on the Record Date, there were approximately
4,286,880 shares of JP Fund issued and outstanding. The presence in
person or by proxy of the holders of one-third of JP Fund's shares
constitutes a quorum for the transaction of business at the Meeting. As
of the Record Date, JPLIC owned of record all of JP Fund's outstanding
shares; the beneficial owners of all of JP Fund's outstanding shares (with
the exception of less than 1% beneficially owned by JPLIC) are the owners
of variable contracts issued by JPLIC through Account A and Account B.
To the knowledge of JP Fund, as of the Record Date, none of such
beneficial owners owned beneficially 5% or more of the outstanding JP Fund
shares.
As of the close of business on the Record Date, there were approximately
6,554,048 shares of Oppenheimer Fund issued and outstanding. As of the
Record Date, the holders of 5% or more of the outstanding shares of
Oppenheimer Fund were separate accounts of (i) Bankers Security Life
Insurance Society, Arlington, VA, which owned 1,526,739.691 shares
(10.9%); (ii) The Life Insurance Company of Virginia, Richmond, VA which
owned 3,827,660.950 shares (27.1%); (iii) Aetna Life Insurance and Annuity
Company, Hartford, CT which owned 1,645,577.855 shares (11.7%); and (iv)
Massachusetts Mutual Life Insurance Company, Springfield, MA
("MassMutual") and subsidiary insurance companies of MassMutual which
owned 7,102,760.877 shares (50.4%). OFI is wholly-owned by Oppenheimer
Acquisition Corp., a holding company controlled by MassMutual. As of the
Record Date, the officers and Trustees of the Trust beneficially owned as
a group less than 1% of the outstanding shares of the Trust and
Oppenheimer Fund.
Voting Instructions
JPLIC is the sole record holder and JPLIC, Account A and Account B of
JPLIC are the only beneficial shareholders of JP Fund. JPLIC will vote the
shares of JP Fund at the Meeting in accordance with the timely
instructions received from persons entitled to give voting instructions
under variable contracts. JPLIC will vote shares attributable to variable
contracts as to which no voting instructions are received in proportion
(for, against or abstain) to those for which instructions are received.
JPLIC also will vote shares not attributable to variable contracts (i.e,
representing seed money investments in JP Fund made by JPLIC) in
proportion to those for which instructions are received from owners. If
a Voting Instruction Form is received that does not specify a choice,
JPLIC will consider its timely receipt as an instruction to vote in favor
of the proposal(s) to which it relates. Variable contract owners may
revoke voting instructions given to JPLIC at any time prior to the Meeting
by notifying the Secretary of JP Fund in writing.
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be borne by OFI and JPM.
Similarly, any costs associated with documents included in that mailing,
such as existing prospectuses or annual reports, will be borne by OFI and
JPM. In addition to the solicitation of proxies by mail, proxies may be
solicited by officers and employees of JPM or JPM affiliates, personally
or by telephone or telecopy.
In addition to the proxy solicitation expenses (as described above), OFI
and JPM will bear the cost of the tax opinion, as well as any other
expenses associated with the Reorganization, including legal and
accounting expenses.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by Oppenheimer Fund in its
financial statements similar to a pooling without restatement. Further
financial information as to JP Fund is contained in JP Fund's current
Prospectus, which is available without charge upon written request to JPIS
at P.O. Box 22086, Greensboro, North Carolina 27420, and in its audited
financial statements as of December 31, 1995, which are included in the
JP Fund Additional Statement. Financial information for Oppenheimer Fund
is contained in its current Prospectus accompanying this Proxy Statement
and Prospectus and incorporated herein as to information with respect to
Oppenheimer Fund, and in its audited financial statements as of December
31, 1995, which are included in the Trust Additional Statement.
Public Information
Additional information about Oppenheimer Fund and JP Fund is available,
as applicable, in the following documents: (1) the Trust's Prospectus
dated May 1, 1996, as revised October 28, 1996 and as supplemented October
28, 1996, accompanying this Proxy Statement and Prospectus and
incorporated by reference herein as to information with respect to
Oppenheimer Fund; (2) JP Fund Prospectus dated May 1, 1996, as
supplemented October 8, 1996, which may be obtained without charge by
writing to JPIS at the address indicated above; (3) the Trust's Annual
Report as of December 31, 1995 and Semi-Annual Report as of June 30, 1996,
which may be obtained without charge by writing to OFS at the address on
the cover of this Proxy Statement and Prospectus; and (4) JP Fund's Annual
Report as of December 31, 1995 and Semi-Annual Report as of June 30, 1996,
which may be obtained without charge by writing to JPIS at the address
indicated above. All of the foregoing documents may be obtained by calling
the toll-free number for Oppenheimer Fund and JP Fund, as applicable, on
the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Reorganization Additional Statement, which is incorporated herein by
reference and includes the Trust Additional Statement, the JP Fund
Prospectus dated May 1, 1996, as supplemented October 8, 1996, the JP Fund
Additional Statement and the Annual Reports and Semi-Annual Reports
described in the preceding paragraph: the organization and operation of
Oppenheimer Fund and JP Fund; more information on investment policies,
practices and risks; information about the Board of Trustees of the Trust
and the Board of Directors of JP Fund, and their responsibilities; a
further description of the services provided by Oppenheimer Fund's and JP
Fund's respective investment adviser and transfer and shareholder
servicing agent; dividend policies; tax matters; and an explanation of the
method of determining the offering price of the shares of Oppenheimer Fund
and JP Fund. The Reorganization Additional Statement may be obtained by
calling 1-800-525-7098 ( a toll-free number).
Oppenheimer Fund and JP Fund are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance
therewith, file reports and other information with the SEC. Proxy
material, reports and other information about Oppenheimer Fund and JP Fund
which are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its
regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to present a proposal for action at the next
annual meeting of shareholders of JP Fund (if one is held) and who wishes
to have it set forth in a proxy statement and identified in the form of
proxy prepared by JP Fund must notify JP Fund in such a manner so that
such notice is received by JP Fund by December 31, 1996, and in such form
as is required under the rules and regulations promulgated by the SEC.
OTHER BUSINESS
Management of JP Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, and it is the intention of
the persons named as attorneys-in-fact in the proxy to vote this proxy in
accordance with their judgment on such matters if no voting instructions
are provided.
By Order of the Board of Directors
J. Gregory Poole, Secretary
October 28, 1996
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
October 8, 1996 by and between JP Capital Appreciation Fund, Inc. ("JP
Fund"), a North Carolina corporation, Oppenheimer Variable Account Funds
(the "Oppenheimer Trust"), a Massachusetts business trust, on behalf of
its series Oppenheimer Growth Fund ("Oppenheimer Fund"), and (solely for
purposes of Section 21 of this Agreement) Jefferson-Pilot Corporation
("JPC"), a North Carolina corporation, and OppenheimerFunds, Inc. ("OFI"),
a Colorado corporation.
W I T N E S S E T H:
WHEREAS, JP Fund and Oppenheimer Fund are each open-end investment
companies of the management type; and
WHEREAS, JP Fund and Oppenheimer Fund desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"), of JP Fund through the acquisition by
Oppenheimer Fund of substantially all of the assets of JP Fund in exchange
solely for voting shares of beneficial interest ("shares") of Oppenheimer
Fund and the assumption by Oppenheimer Fund of certain liabilities of JP
Fund, which shares of Oppenheimer Fund are thereafter to be distributed
by JP Fund pro rata to its shareholders in complete liquidation of JP Fund
and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. JP Fund and Oppenheimer Fund hereby adopt this Agreement and
Plan of Reorganization (the "Agreement") pursuant to Section 368(a)(1) of
the Code as follows: The reorganization will be comprised of the
acquisition by Oppenheimer Fund of substantially all of the assets of JP
Fund in exchange for the issuance of shares of Oppenheimer Fund to JP Fund
and the assumption by Oppenheimer Fund of certain liabilities of JP Fund,
followed by the distribution by JP Fund of such shares of Oppenheimer Fund
to the shareholders of JP Fund in exchange for their shares of JP Fund,
all upon and subject to the terms hereinafter set forth.
2. On the Closing Date (as hereinafter defined) (i) JP Fund shall
transfer and deliver (or cause to be so transferred and delivered) to
Oppenheimer Fund, free and clear of all liens, encumbrances, restrictions
and claims (other than Assumed Liabilities (as hereinafter defined)), the
assets of JP Fund including but not limited to portfolio securities, cash
(excluding the Cash Reserve as defined below), cash equivalents and
receivables as the same shall exist on that date (the "Assets") and (ii)
Oppenheimer Fund shall deliver to JP Fund (in accordance with Section 5
hereof) in exchange therefor, the shares of Oppenheimer Fund to be issued
hereunder. The Assets shall exclude a cash reserve (the "Cash Reserve")
which shall be retained by JP Fund for the payment by it in respect of the
Liabilities (as hereinafter defined) of JP Fund, if any, and which Cash
Reserve shall not exceed the amount contemplated by Section 10E. The
aggregate number of shares of Oppenheimer Fund to be delivered by
Oppenheimer Fund at the Closing (as hereinafter defined) shall be such
number as shall have, as of the Valuation Date, an aggregate net asset
value equal to the value of the Assets so transferred and delivered. Such
Oppenheimer Fund shares shall be issued without the imposition of any
sales charge or load. Oppenheimer Fund agrees that, if the reorganization
becomes effective, Oppenheimer Fund will treat each shareholder of JP Fund
who received any of Oppenheimer Fund's shares as a result of the
reorganization as having made the minimum initial purchase of shares of
Oppenheimer Fund received by such shareholder for the purpose of making
additional investments in shares of Oppenheimer Fund, regardless of the
value of the shares of Oppenheimer Fund received. Promptly following the
execution of the Agreement, JP Fund shall provide Oppenheimer Fund with
a list of the Assets including, as to portfolio securities, a description
thereof, units held and their value, as of the most reasonably practicable
date.
3. The net asset value of shares of Oppenheimer Fund and the value
of the Assets shall in each case be determined as of the close of business
of The New York Stock Exchange on the business day immediately preceding
the Closing Date (the "Valuation Date"). The foregoing valuations shall
be prepared using the procedures set forth in Oppenheimer Fund's then
current prospectus and statement of additional information and shall be
computed in accordance with the regular practice and pricing services
utilized by OppenheimerFunds, Inc. in pricing the Oppenheimer Fund. In
accordance with the foregoing, Oppenheimer Fund and JP Fund shall each
respectively prepare a report setting forth, as of the Valuation Date, its
respective total net assets, the number of its shares outstanding, the net
asset value of Oppenheimer Fund shares or the net asset value of JP Fund
shares, respectively, and as to each of its portfolio securities, the
cusip or ticket number, description thereof, units held and value
determined as aforesaid (the "Valuation Report"). A Valuation Report shall
be delivered by each of Oppenheimer Fund and JP Fund to the other on the
Closing Date.
JP Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to JP Fund's
shareholders all of JP Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing of the transactions contemplated herein (the
"Closing") shall be at the office of OppenheimerFunds, Inc., Two World
Trade Center, Suite 3400, New York, New York 10048, at the date and time
of the closing of the acquisition contemplated by that certain Acquisition
Agreement (the "Acquisition Agreement") dated September 24, 1996 by and
among OFI, JP Investment Management Company ("JPM"), Jefferson-Pilot Life
Insurance Company and JPC (or such other date, time and place as JP Fund
and Oppenheimer Fund may otherwise designate) (the "Closing Date").
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the "1940
Act"), or any rule, regulation or order thereunder, suspended the
redemption of its shares or postponed payment therefor, the Closing Date
shall be postponed until the first business day after the date when JP
Fund and Oppenheimer Fund have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a period of
60 days beyond the Valuation Date, then the other party to the Agreement
shall be permitted to terminate the Agreement as set forth in Section 20.
5. Shares of Oppenheimer Fund representing the number of shares
of Oppenheimer Fund being delivered against the Assets, registered in the
name of JP Fund, shall be transferred to JP Fund on the Closing Date. In
connection with the Closing, JP Fund shall distribute on a pro rata basis
to the shareholders of JP Fund on the Valuation Date the shares of
Oppenheimer Fund received by JP Fund on the Closing Date in exchange for
the Assets in complete liquidation of JP Fund; for the purpose of the
distribution by JP Fund of shares of Oppenheimer Fund to its shareholders,
Oppenheimer Fund will promptly cause its transfer agent to: (a) credit an
appropriate number of shares of Oppenheimer Fund on the books of
Oppenheimer Fund to each shareholder of JP Fund in accordance with a list
(the "Shareholder List") of JP Fund shareholders received from JP Fund;
and (b) confirm an appropriate number of shares of Oppenheimer Fund to
each shareholder of JP Fund; certificates for shares of Oppenheimer Fund
will be issued upon written request of a former shareholder of JP Fund and
surrender of the JP Fund certificates but only for whole shares, with
fractional shares credited to the name of the shareholder on the books of
Oppenheimer Fund. JP Fund covenants and agrees to cause the cancellation
of all of its outstanding shares upon the Closing.
The Shareholder List shall be certified by the Secretary of JP Fund
and by an authorized signatory of Investors Fiduciary Trust Company, JP
Fund's transfer agent, and shall indicate, as of the Valuation Date, the
name, address and taxpayer identification number of each shareholder of
JP Fund, indicating his or her share balance. JP Fund agrees to supply the
Shareholder List to Oppenheimer Fund not later than the Closing Date in
such form (including computer diskette) as Oppenheimer Fund shall request.
JP Fund further agrees to deliver to Oppenheimer Fund or its designee (i)
on or before the Closing Date all such other information and documents
available to JP Fund relating to such shareholders as may be necessary for
Oppenheimer Fund and its designee to perform all necessary shareholder
accounting, communication and related services subsequent to the Closing
and (ii) as soon as practicable after the Closing all original
documentation (including Internal Revenue Service forms, certificates and
correspondence) relating to the taxpayer identification numbers of JP Fund
shareholders on the Shareholder List and their liability for or exemption
from backup withholding. Shareholders of JP Fund holding certificates
representing their shares shall not be required to surrender their
certificates to anyone in connection with the reorganization. After the
Closing Date, however, it will be necessary for such shareholders to
surrender their certificates in order to redeem, transfer, exchange or
pledge the shares of Oppenheimer Fund which they received.
The share transfer books of JP Fund will be permanently closed
as of the Valuation Date and only redemption requests received in proper
form on or prior to the Valuation Date shall be fulfilled by JP Fund;
redemption requests received by JP Fund after that date shall be treated
as requests for the redemption of the shares of Oppenheimer Fund that
shall have been distributed to the shareholder in question as set forth
in this Section 5.
6. Within one year after the Closing Date, JP Fund shall (a) either
pay or make provision for payment of all of its Liabilities (other than
Assumed Liabilities) and (b) either (i) transfer any remaining amount of
the Cash Reserve to Oppenheimer Fund, if such remaining amount (as reduced
by the estimated cost of distributing it to shareholders) is not material
(as defined below) or (ii) distribute such remaining amount to the
shareholders of JP Fund on the Valuation Date. Such remaining amount shall
be deemed to be material if the amount to be distributed, after deduction
of the estimated expenses of the distribution, equals or exceeds one cent
per share of JP Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
JP Fund and Oppenheimer Fund as to their respective portfolios so that,
after the Closing, Oppenheimer Fund will not hold assets inconsistent with
its investment objectives and will be in compliance with all of its
investment policies and restrictions.
8. Portfolio securities or written evidence acceptable to
Oppenheimer Fund of record ownership thereof by The Depository Trust
Company or through the Federal Reserve Book Entry System or any other
depository approved by JP Fund pursuant to Rule 17f-4 and Rule 17f-5 under
the 1940 Act shall be endorsed and delivered, or transferred by
appropriate transfer or assignment documents, by JP Fund on the Closing
Date to Oppenheimer Fund, or at its direction, to Oppenheimer Fund's
custodian bank, in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers
and shall be accompanied by all necessary state transfer stamps, if any.
The cash of JP Fund shall be delivered on the Closing Date to Oppenheimer
Fund by bank wire or inter-bank transfer of immediately available funds
to Oppenheimer Fund's custodian bank payable to the order of Oppenheimer
Fund for the account of Oppenheimer Fund.
If, at the Closing Date, JP Fund is unable to make delivery
under this Section 8 to Oppenheimer Fund of any of its portfolio
securities or cash for the reason that any of such securities purchased
by JP Fund, or the cash proceeds of a sale of portfolio securities, prior
to the Closing Date have not yet been delivered in the ordinary course of
business to it or JP Fund's custodian, then the delivery requirements of
this Section 8 with respect to said undelivered securities or cash will
be waived and JP Fund will deliver to Oppenheimer Fund by or on the
Closing Date and with respect to said undelivered securities or cash
executed copies of an agreement or agreements of assignment as to such
securities or cash proceeds in a form reasonably satisfactory to
Oppenheimer Fund, together with such other documents, including a due bill
or due bills and brokers' confirmation slips as may reasonably be required
by Oppenheimer Fund.
9. Oppenheimer Fund shall not assume and shall not otherwise be
responsible for any liabilities (except the obligations, if any, to pay
the purchase price of portfolio securities purchased by JP Fund which have
not settled in the ordinary course of business ("Assumed Liabilities")),
taxes, obligations, expenses, contracts, claims, commitments, agreements
and arrangements relating to (i) the Assets or (ii) JP Fund, its
predecessors, affiliates, directors, officers, employees and agents, in
each case whether fixed, contingent, accrued or otherwise ("Liabilities").
JP Fund expressly agrees to remain liable for and discharge all its
Liabilities whether incurred prior to or subsequent to the Closing Date.
With respect to any expenses applicable to, or incurred by JP Fund and
Oppenheimer Fund hereto in connection with entering into and carrying out
the provisions of the Agreement ("Expenses"), including legal, accounting
and registration fees and Blue Sky expenses and expenses of the proxy
solicitation, including the cost of printing and mailing the Proxy
Statement and Prospectus (as hereinafter defined) and related proxy
materials, it is hereby agreed that except as otherwise provided in
Section 20 of the Agreement, the respective investment adviser for
Oppenheimer Fund and JP Fund shall reimburse the Fund for which it acts
as investment adviser for such Fund's Expenses and, as to the rights and
obligations of said investment advisers inter se, the terms of the
Acquisition Agreement shall govern. It is understood and acknowledged that
in no event shall JP Fund or Oppenheimer Fund be liable for the payment
of any Expenses.
10. As soon as practicable JP Fund shall (i) after it fulfills its
obligations set forth in Section 6 hereof, file Articles of Dissolution
with the North Carolina Secretary of State (the "Department") and (ii)
file an application for an order of the Securities and Exchange Commission
("SEC") pursuant to Section 8(f) of the 1940 Act, declaring that it has
ceased to be an investment company, and shall take, in accordance with
North Carolina law and the 1940 Act, all such other actions as may be
necessary or appropriate to effect a complete liquidation and dissolution
of JP Fund and to deregister JP Fund under the 1940 Act.
11. Any reporting, filing or other obligation of JP Fund under the
federal securities laws and state laws shall remain the responsibility of
JP Fund until it is deregistered under the 1940 Act or liquidated and
dissolved, respectively.
12. The obligations of Oppenheimer Fund hereunder shall be subject
to the following conditions:
A. The shareholders of JP Fund shall have approved the
Agreement and the transactions contemplated herein; such shareholder
approval shall have been by the affirmative vote of a majority of the
outstanding voting shares of JP Fund in conformity with the provisions of
the North Carolina Business Corporation Act ("NCBCA") at a meeting for
which proxies have been solicited by the Proxy Statement and Prospectus
(as hereinafter defined); and JP Fund shall have furnished to Oppenheimer
Fund copies of resolutions with respect to each of the foregoing and
copies of resolutions of the Board of Directors of JP Fund with respect
to approvals of the Agreement and the transactions contemplated herein,
in each case certified by the Secretary or an Assistant Secretary of JP
Fund.
B. Oppenheimer Fund shall have received an opinion of counsel
to JP Fund dated the Closing Date, to the effect that: (i) JP Fund is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of North Carolina with full powers to carry on its
business as described by its charter and then being conducted and to enter
into and perform the Agreement (North Carolina counsel may be relied upon
in delivering such opinion); (ii) all action necessary to make the
Agreement, according to its terms, valid, binding and enforceable on JP
Fund and to authorize effectively the transactions contemplated by the
Agreement have been taken by JP Fund; (iii) the Agreement has been duly
authorized, executed and delivered by JP Fund and, assuming due
authorization, execution and delivery of the Agreement by Oppenheimer
Trust, constitutes a valid and binding obligation of JP Fund, enforceable
against JP Fund in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
and similar laws affecting creditors rights and remedies generally and
subject, as to enforceability, to general principles of equity regardless
of whether enforcement is sought in a proceeding at law or in equity (the
"Bankruptcy Exception"); and (iv) the execution and delivery of the
Agreement does not, and the consummation of the transactions contemplated
by the Agreement will not, conflict with, or result in any violation of,
or constitute a default (with or without notice or lapse of time, or both)
under (a) the Certificate of Incorporation or By-Laws of JP Fund, (b) any
loan, credit agreement, note, bond, mortgage, indenture, lease or contract
applicable to JP Fund, its assets and properties (other than any such
conflicts, violations or defaults that individually or in the aggregate
would not have a material adverse effect on JP Fund or prevent
consummation of the transactions contemplated hereby), or (c) any
judgment, order or decree to which JP Fund is subject or any state or
federal law or regulation applicable to JP Fund or its assets and
properties.
C. The representations and warranties of JP Fund contained
herein shall be true and correct at and as of the Closing Date (with all
representations and warranties that were made as of the date of the
Agreement or as of another date being made again as of the Closing Date)
and JP Fund shall have performed, in all material respects, each of the
covenants required to be performed by JP Fund at or prior to Closing, and
Oppenheimer Fund shall have been furnished with a certificate of the
President, or a Vice President, or the Secretary or the Assistant
Secretary or the Treasurer of JP Fund, dated the Closing Date, to that
effect.
D. On the Closing Date, JP Fund shall have furnished to
Oppenheimer Fund a certificate of the Treasurer or Assistant Treasurer of
JP Fund as to the amount of the capital loss carry-over, if any, and net
unrealized appreciation or depreciation, if any, with respect to JP Fund
as of the Closing Date.
E. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of JP Fund at the close
of business on the Valuation Date.
F. A Registration Statement on Form N-14 (the "N-14
Registration Statement") filed by Oppenheimer Trust under the Securities
Act of 1933, as amended (the "1933 Act"), containing a preliminary form
of the proxy statement and prospectus required under the 1940 Act to
request the approval of shareholders of JP Fund of the reorganization
contemplated in the Agreement, shall have become effective under the 1933
Act not later than December 31, 1996.
G. On the Closing Date, Oppenheimer Fund shall have received
a letter of a senior executive officer of JPM in form acceptable to
Oppenheimer Fund, stating that between the date of the Agreement and the
Closing Date there has been no material adverse change in the Assets, the
operations or the financial condition of JP Fund (it being understood that
a decrease in the size of JP Fund due to a diminution in the value of its
portfolio and/or redemption of its shares shall not be considered a
material adverse change) and that nothing has come to his or her attention
which would indicate that as of the Closing Date there were any
Liabilities of JP Fund not fully covered by the Cash Reserve or expected
not to be so covered or pending or threatened claims, actions, suits,
proceedings or investigations with respect to or affecting JP Fund, or any
director, officer, employee or agent of JP Fund.
H. Oppenheimer Fund shall have received an opinion, dated the
Closing Date, of Sutherland, Asbill & Brennan, to the same effect as the
opinion contemplated by Section 13E of the Agreement.
I. Except as otherwise provided in the last paragraph of
Section 8, Oppenheimer Fund shall have received at the Closing all of the
Assets to be conveyed hereunder, free and clear of all liens,
encumbrances, security interests, restrictions and limitations whatsoever
except the Assumed Liabilities.
J. At or prior to the Closing Date, JP Fund shall have
delivered to Oppenheimer Fund two copies of a list setting forth the
securities, cash and receivables then owned by JP Fund and the respective
federal income tax bases thereof.
13. The obligations of JP Fund hereunder shall be subject to the
following conditions:
A. Oppenheimer Fund shall have furnished to JP Fund copies of
resolutions of the Board of Trustees of Oppenheimer Trust with respect to
approvals of the Agreement and the transactions contemplated herein
certified by the Secretary or an Assistant Secretary of Oppenheimer Trust.
B. JP Fund's shareholders shall have approved the Agreement
and the transactions contemplated hereby, by an affirmative vote of a
majority of the outstanding voting shares of JP Fund.
C. JP Fund shall have received an opinion of counsel to
Oppenheimer Fund dated the Closing Date, to the effect that (i)
Oppenheimer Fund is a series of Oppenheimer Trust, a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts with full powers to carry on its business
as described by its charter and then being conducted and to enter into and
perform the Agreement (Massachusetts counsel may be relied upon in
delivering such opinion); (ii) all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable upon Oppenheimer
Trust and to authorize effectively the transactions contemplated by the
Agreement have been taken by Oppenheimer Trust; (iii) the shares of
Oppenheimer Fund to be issued hereunder are duly authorized and when
issued as provided for herein will be validly issued, fully-paid and non-
assessable, except as otherwise set forth on Schedule 13C hereto with
respect to potential liability of shareholders of a Massachusetts business
trust (Massachusetts counsel may be relied upon in delivering such
opinion); (iv) the Agreement has been duly authorized, executed and
delivered by Oppenheimer Trust on behalf of Oppenheimer Fund and, assuming
due authorization, execution and delivery of the Agreement by JP Fund,
constitutes a valid and binding obligation of Oppenheimer Trust,
enforceable against Oppenheimer Trust in accordance with its terms,
subject to the Bankruptcy Exception and (v) the execution and delivery of
the Agreement does not, and consummation of the transactions contemplated
by the Agreement will not, conflict with, or result in any violation of,
or constitute a default (with or without notice or lapse of time, or both)
under: (a) the Declaration of Trust or By-Laws of Oppenheimer Trust, (b)
any loan, credit agreement, note, bond, mortgage, indenture, lease, or
contract applicable to Oppenheimer Fund, its assets and properties (other
than any such conflicts, violations or defaults that individually or in
the aggregate would not have a material adverse effect on Oppenheimer Fund
or prevent consummation of the transactions contemplated hereby), or (c)
any judgment, order of decree to which Oppenheimer Fund is subject or any
state or federal law or regulation applicable to Oppenheimer Fund or its
assets and properties.
D. The representations and warranties of Oppenheimer Trust on
behalf of Oppenheimer Fund contained herein shall be true and correct at
and as of the Closing Date (with all representations and warranties that
were made as of the date of the Agreement or as of another date being made
again as of the Closing Date), and Oppenheimer Trust shall have performed,
in all material respects, each of the covenants required to be performed
by Oppenheimer Trust at or prior to Closing, and JP Fund shall have been
furnished with a certificate of the President, a Vice President or the
Secretary or an Assistant Secretary or the Treasurer of Oppenheimer Trust
to that effect dated the Closing Date.
E. JP Fund shall have received an opinion of Sutherland,
Asbill & Brennan to the effect that the Federal tax consequences of the
transaction, if carried out in the manner outlined in the Agreement and
in accordance with (i) JP Fund's representation that there is no plan or
intention by any JP Fund shareholder who owns 5% or more of JP Fund's
outstanding shares, and, to JP Fund's best knowledge, there is no plan or
intention on the part of the remaining JP Fund shareholders, to redeem,
sell, exchange or otherwise dispose of a number of Oppenheimer Fund shares
received in the transaction that would reduce JP Fund shareholders'
ownership of Oppenheimer Fund shares to a number of shares having a value,
as of the Closing Date, of less than 50% of the value of all of the
formerly outstanding JP Fund shares as of the same date, (ii) the
representation that Oppenheimer Fund will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market value
of the gross assets held by JP Fund immediately prior to the
reorganization, (iii) the representation by each of JP Fund and
Oppenheimer Fund that, as of the Closing Date, JP Fund and Oppenheimer
Fund will qualify as regulated investment companies and will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code, and (iv)
such other representations as shall be made by each of JP Fund and
Oppenheimer Fund to Sutherland, Asbill & Brennan and accompany or be set
forth in the opinion, will generally be as follows:
(a) The reorganization contemplated by the Agreement will constitute
a "reorganization" within the meaning of Section 368(a)(1)(C) of the
Code and JP Fund and Oppenheimer Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by Oppenheimer Fund upon the
receipt of the assets transferred to it by JP Fund in exchange for
shares of Oppenheimer Fund and the assumption by Oppenheimer Fund of
certain identified liabilities of JP Fund. (Section 1032)
(c) No gain or loss will be recognized by JP Fund upon the transfer
of its assets to Oppenheimer Fund in exchange solely for shares of
Oppenheimer Fund and the assumption by Oppenheimer Fund of certain
identified liabilities of JP Fund (if any) and the subsequent
distribution by JP Fund of such shares to the shareholders of JP
Fund. (Section 361)
(d) No gain or loss will be recognized by JP Fund shareholders upon
the exchange of the JP Fund shares solely for the shares of
Oppenheimer Fund. (Section 354)
(e) The basis of the shares of Oppenheimer Fund received by each JP
Fund shareholder pursuant to the reorganization will be the same as
the adjusted basis of that shareholder's JP Fund shares surrendered
in exchange therefor. (Section 358)
(f) The holding period of shares of Oppenheimer Fund to be received
by each JP Fund shareholder will include the shareholder's holding
period for the JP Fund shares surrendered in exchange therefor,
provided such JP Fund shares were held as capital assets on the
Closing Date. (Section 1223)
(g) Oppenheimer Fund's basis for the assets transferred to it by JP
Fund will be the same as JP Fund's tax basis for the assets
immediately prior to the reorganization. (Section 362(b))
(h) Oppenheimer Fund's holding period for the transferred assets will
include JP Fund's holding period therefor. (Section 1223)
(i) Oppenheimer Fund will succeed to and take into account the items
of JP Fund described in Section 381(c) of the Code, including the
earnings and profits, or deficit in earnings and profits, of JP Fund
as of the date of the transaction, subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code.
(j) No gain or loss will be recognized by the owners of variable
contracts issued by Jefferson-Pilot Life Insurance Company through
the variable account on the transfer of JP Fund's assets to
Oppenheimer Fund in exchange solely for shares of Oppenheimer Fund
and Oppenheimer Fund's assumption of certain JP Fund liabilities (if
any) and the subsequent distribution by JP Fund of those shares to
the variable account.
Notwithstanding anything herein to the contrary, neither Oppenheimer Fund
nor JP Fund may waive the material conditions set forth in this Section
13E although the actual wording of such opinion may differ to the extent
agreed to by Oppenheimer Fund and JP Fund.
F. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of JP Fund at the close
of business on the Valuation Date.
G. The N-14 Registration Statement shall have become effective
under the 1933 Act not later than December 31, 1996.
H. JP Fund shall acknowledge receipt of the shares of
Oppenheimer Fund.
I. On the Closing Date, JP Fund shall have received a letter
of a senior officer of OFI in form acceptable to JP Fund, stating that
between the date of the Agreement and the Closing Date there has been no
material adverse change in the operations or financial condition of
Oppenheimer Fund (it being understood that a decrease in the size of
Oppenheimer Fund due to a diminution in the value of its portfolio and/or
redemption of its shares shall not be considered a material adverse
change) and that nothing has come to his or her attention that would
indicate that as of the Closing Date there were any pending or threatened
litigation or claims with respect to Oppenheimer Fund.
14. JP Fund hereby represents and warrants that:
A. The financial statements of JP Fund as at December 31, 1995
(audited) and June 30, 1996 (unaudited) heretofore furnished to
Oppenheimer Fund, present fairly the financial position, results of
operations, and changes in net assets of JP Fund as of such dates, in
conformity with generally accepted accounting principles applied on a
basis consistent with the preceding year and six-month period; and that
from December 31, 1995 through the date hereof there has not been any
material adverse change in the Assets, the operations or financial
condition of JP Fund, it being agreed that a decrease in the size of JP
Fund due to a diminution in the value of its portfolio and/or redemption
of its shares shall not be considered a material adverse change.
B. JP Fund has good and valid title to the Assets, subject to
no liens, security interests or other encumbrances, and contingent upon
approval of the Agreement and the transactions contemplated hereby by JP
Fund's shareholders, JP Fund has authority to transfer the Assets to be
conveyed hereunder free and clear of all liens, encumbrances, security
interests, restrictions and limitations whatsoever (excluding the Assumed
Liabilities).
C. The Prospectus of JP Fund dated May 1, 1996, as amended and
supplemented on October 8, 1996, and Statement of Additional Information
of JP Fund dated May 1, 1996, contained in JP Fund's Registration
Statement under the 1933 Act, as amended, are true, correct and complete,
conform to the requirements of the 1933 Act and the 1940 Act and do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement of JP Fund,
as amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and the 1940 Act, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
was, as of its filing, and continues to be, in full force and effect.
D. There is no material Liability of JP Fund in existence
except as set forth in the financial statements of JP Fund as at December
31, 1995 and June 30, 1996 and as of such dates there were no Liabilities
of JP Fund (contingent or otherwise) not disclosed therein that would be
required in conformity with generally accepted accounting principles to
be disclosed therein. No such material Liability of JP Fund has arisen
since December 31, 1995 and June 30, 1996 except as set forth on Exhibit
14D hereto. There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of JP Fund, threatened by,
against or involving JP Fund or any director, officer, employee, or agent
of JP Fund. JP Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects, or is likely to materially and
adversely affect, its business or its ability to consummate the
transactions herein contemplated.
E. There are no contracts, agreements or commitments in
existence, whether written or oral, to which JP Fund (or a predecessor)
is a party or has succeeded to a party by assumption or assignment or in
which it has a beneficial interest other than the Agreement and those
entered into by JP Fund in the ordinary conduct of its business and JP
Fund has delivered or made available to Oppenheimer Fund, as to each such
contract, agreement or other commitment, a true and complete copy or
description thereof and as to any oral contract, agreement or other
commitment, a true and complete description thereof.
F. JP Fund is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of North
Carolina, with the requisite corporate power and authority to enter into
and perform the Agreement and, subject to approval of its shareholders,
to consummate the transactions contemplated hereby; all corporate action
necessary to make the Agreement, according to its terms, valid, binding
and enforceable on JP Fund and to authorize the transactions contemplated
by the Agreement, including without limitation necessary approvals of the
Board of Directors of JP Fund, have been taken by JP Fund subject to
approval of the Agreement by the shareholders of JP Fund; the Agreement
has been duly executed and delivered by JP Fund and constitutes a valid
and binding obligation of JP Fund, enforceable against JP Fund in
accordance with its terms, subject to the approval of its shareholders and
the Bankruptcy Exception; and the execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated by the
Agreement will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both)
under (a) the Certificate of Incorporation or By-Laws of JP Fund, or (b)
any loan, credit agreement, note, bond, mortgage, indenture, lease or
contract applicable to JP Fund, its assets and properties (other than any
such conflicts, violations or defaults that individually or in the
aggregate would not have a material adverse effect on JP Fund or prevent
consummation of the transactions contemplated hereby), or (c) any
judgment, order or decree to which JP Fund is subject or any state or
federal law or regulation applicable to JP Fund or its assets and
properties.
G. All Federal and other tax returns and reports of JP Fund
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of JP Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of JP Fund ended
December 31, 1995 have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when
due. There are no claims, levies, liabilities or amounts due for
corporate, excise, income or other federal, state or local taxes
outstanding or threatened against JP Fund (other than those reflected in
its most recent audited financial statements) and to the best of JP Fund's
knowledge there are no facts that might form the basis for such claims,
levies, liabilities or amounts due.
H. JP Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, JP Fund has met the
requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company and JP Fund intends to meet such
requirements with respect to its current taxable year.
I. All issued and outstanding shares of common stock of JP
Fund, par value $1.00 per share, are, and at the Closing Date will be,
duly authorized and validly issued and outstanding, fully paid and non-
assessable with no personal liability attaching to the ownership thereof.
All such shares will, at the time of Closing, be held by the persons or
entities and in the amounts set forth on the Shareholder List submitted
to Oppenheimer Fund pursuant to Section 5. There are no outstanding
rights, options, warrants, conversion rights, preemptive rights or
agreements with respect to shares of JP Fund. Set forth on Exhibit 14I
hereto are the names, addresses and share ownership amounts of each
shareholder of JP Fund that beneficially (as that term is defined pursuant
to Section 13(d) of the Securities Exchange Act of 1934, as amended, and
the rules thereunder) owns 1% or more of JP Fund's outstanding shares.
J. The copies of the Certificate of Incorporation and By-laws
of JP Fund, and all amendments thereto, previously delivered to
Oppenheimer Fund are true, complete and correct.
K. There is no plan or intention by any JP Fund shareholder
who owns 5% or more of JP Fund's outstanding shares, and, to JP Fund's
best knowledge, there is no plan or intention on the part of the remaining
JP Fund shareholders, to redeem, sell, exchange or otherwise dispose of
a number of Oppenheimer Fund shares received in the transaction that would
reduce JP Fund shareholders' ownership of Oppenheimer Fund shares to a
number of shares having a value, as of the Closing Date, of less than 50%
of the value of all of the formerly outstanding JP Fund shares as of the
same date. With respect to the foregoing representation, attached hereto
as Exhibit 14K are true and complete copies of representation letters
signed by each such 5% or greater shareholder.
L. There are no unresolved or outstanding shareholder claims
or complaints related to JP Fund other than as disclosed by JP Fund in
writing to Oppenheimer Fund and which are determined by Oppenheimer Fund
to not be material with respect to the Agreement and the transactions
contemplated herein.
M. Except as previously disclosed to Oppenheimer Fund in
writing, and except as have been corrected as required by applicable law,
there have been no miscalculations of the net asset value of JP Fund
during the twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the applicable provisions
of the 1940 Act.
N. All of the issued and outstanding shares of JP Fund have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws, are registered under the 1933 Act, the 1940 Act and in all
jurisdictions in which they are required to be registered under state
securities laws and other laws, and said registrations, including any
periodic reports or supplemental filings, are complete, current and have
been continuously effective, all fees required to be paid have been paid,
and JP Fund is not subject to any stop order and is fully qualified to
sell its shares in each state in which its shares have been registered.
O. JP Fund has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered investment
company in compliance with the requirements of Section 31 of the 1940 Act
and the Rules thereunder.
P. No violation of applicable federal, state and local
statute, law or regulation, exists that individually, or in the aggregate,
would have a material adverse effect on the business or operations of JP
Fund.
Q. JP Fund is in compliance with its investment objectives,
policies and restrictions as described in its current Prospectus and
Statement of Additional Information.
R. JP Fund is duly registered under the 1940 Act and such
registration has not been revoked or rescinded and is in full force and
effect.
S. Except for the shareholder approvals specified in Section
12F, no consent, approval, governmental filing, authorization or permit
from any person or entity is necessary for the execution and delivery of
the Agreement and the consummation of the transactions contemplated by the
Agreement.
15. Oppenheimer Trust on behalf of Oppenheimer Fund hereby
represents and warrants that:
A. The financial statements of Oppenheimer Fund as at December
31, 1995 (audited) and June 30, 1996 (unaudited) heretofore furnished to
JP Fund, present fairly the financial position, results of operations, and
changes in net assets of Oppenheimer Fund, as of such dates, in conformity
with generally accepted accounting principles applied on a basis
consistent with the preceding year and six-month period; and that from
December 31, 1995 through the date hereof there has not been any material
adverse changes in the business or financial condition of Oppenheimer
Fund, it being understood that a decrease in the size of Oppenheimer Fund
due to a diminution in the value of its portfolio and/or redemption of its
shares shall not be considered a material or adverse change.
B. The Prospectus of Oppenheimer Fund, dated May 1, 1996, and
the Statement of Additional Information of Oppenheimer Fund, dated May 1,
1996, contained in Oppenheimer Trust's Registration Statement under the
1933 Act, are true, correct and complete, conform to the requirements of
the 1933 Act and the 1940 Act and do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Registration Statement of Oppenheimer Trust, as amended, was, as of the
date of the filing of the last Post-Effective Amendment, true, correct and
complete, conformed to the requirements of the 1933 Act and the 1940 Act
and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
C. Oppenheimer Fund is a series of Oppenheimer Trust, a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with the
requisite power and authority granted to business trusts to enter into and
perform the Agreement and consummate the transactions contemplated hereby;
all necessary action necessary to make the Agreement, according to its
terms, valid, binding and enforceable on Oppenheimer Trust on behalf of
Oppenheimer Fund and to authorize the transactions contemplated by the
Agreement, including without limitation necessary approvals of the Board
of Trustees of Oppenheimer Trust, have been taken by Oppenheimer Trust;
the Agreement has been duly executed and delivered by Oppenheimer Trust
on behalf of Oppenheimer Fund and constitutes a valid and binding
obligation of Oppenheimer Fund, enforceable against Oppenheimer Trust in
accordance with its terms, subject to the Bankruptcy Exception; and the
execution and delivery of the Agreement does not, and the consummation of
the transactions contemplated by the Agreement will not, conflict with,
or result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under (a) the Declaration of Trust or
By-Laws of Oppenheimer Trust, or (b) any loan, credit agreement, note,
bond, mortgage, indenture, lease or contract applicable to Oppenheimer
Fund, its assets and properties (other than any such conflicts, violations
or defaults that individually or in the aggregate would not have a
material adverse effect on Oppenheimer Fund or prevent consummation of the
transactions contemplated hereby), or (c) any judgment, order or decree
to which Oppenheimer Fund is subject or any state or federal law or
regulation applicable to Oppenheimer Fund or its assets and properties.
D. All Federal and other tax returns and reports of
Oppenheimer Fund required by law to be filed have been filed, and all
Federal and other taxes shown due on said returns and reports have been
paid or provision shall have been made for the payment thereof and to the
best of the knowledge of Oppenheimer Fund no such return is currently
under audit and no assessment has been asserted with respect to such
returns and to the extent such tax returns with respect to the taxable
year of Oppenheimer Fund ended December 31, 1995 have not been filed, such
returns will be filed when required and the amount of tax shown as due
thereon shall be paid when due.
E. Oppenheimer Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its operations,
Oppenheimer Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and
Oppenheimer Fund intends to meet such requirements with respect to its
current taxable year.
F. Oppenheimer Fund (i) at the time of the reorganization will
have no plan or intention to dispose of any of the assets transferred by
JP Fund, other than in the ordinary course of business, and (ii) has no
plan or intention to redeem or reacquire any of the shares issued by it
in the reorganization other than pursuant to valid requests of
shareholders.
G. After consummation of the transactions contemplated by the
Agreement and for a period of one year thereafter, Oppenheimer Fund
intends to operate its business in a substantially unchanged manner
subject to such changes as may be required in the ordinary course of its
business or as may be approved by the Board of Trustees of Oppenheimer
Trust.
H. The copies of the Declaration of Trust and By-Laws of
Oppenheimer Trust, and any amendments thereto, previously delivered to JP
Fund by Oppenheimer Fund are true, complete and correct.
I. The shares of Oppenheimer Fund which it issues to JP Fund
pursuant to the Agreement will be duly authorized, validly issued, fully-
paid and non-assessable, except as otherwise set forth in Schedule 13C
hereto with respect to potential liability of shareholders of a
Massachusetts business trust, will conform to the description thereof
contained in Oppenheimer Trust's Registration Statement and will be duly
registered under the 1933 Act.
J. All of the issued and outstanding shares of Oppenheimer
Fund have been offered and sold in compliance in all material respects
with applicable registration requirements of the 1933 Act and state
securities laws, are registered in all jurisdictions in which they are
required to be registered and such registrations, including any periodic
reports or supplemental filings, are complete, current and have been
continuously effective, all fees required to be paid have been paid, and
Oppenheimer Fund is not subject to any stop order and is fully qualified
to sell its shares in each state in which its shares are currently sold.
K. Oppenheimer Trust is duly registered under the 1940 Act and
such registration has not been revoked or rescinded and is in full force
and effect.
16. (a) Each party hereby represents to the other that no broker
or finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby.
(b) Oppenheimer Trust on behalf of Oppenheimer Fund represents
and warrants that the information concerning it in the Proxy Statement and
Prospectus will not as of the date of the Proxy Statement and Prospectus
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements concerning it therein in light of the circumstances in which
they are made not misleading. Oppenheimer Trust on behalf of Oppenheimer
Fund represents and warrants that its financial statements in the N-14
Registration Statement (described below) fairly present the information
shown in accordance with generally accepted accounting principles applied
on a basis consistent with previous periods.
(c) JP Fund represents and warrants that the information
concerning it in the Proxy Statement and Prospectus will not as of the
date of the Proxy Statement and Prospectus contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements concerning it therein in light
of the circumstances in which they are made not misleading. JP Fund
represents and warrants that its financial statements in the N-14
Registration Statement fairly present the information shown in accordance
with generally accepted accounting principles applied on a basis
consistent with previous periods.
17. Oppenheimer Trust on behalf of Oppenheimer Fund agrees that it
will prepare and file the N-14 Registration Statement which shall contain
a preliminary form of Proxy Statement and Prospectus contemplated by Rule
145 under the 1933 Act. JP Fund shall be responsible for preparation of
the notice of meeting, Proxy Statement and Prospectus and form of proxy
to be sent to JP Fund shareholders. The final form of such Proxy Statement
and Prospectus is referred to in the Agreement as the "Proxy Statement and
Prospectus." Each party agrees that it will use its best efforts to have
the N-14 Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement and
Prospectus as may be necessary or desirable in this connection.
18. (a) JP Fund covenants and agrees to afford to Oppenheimer Fund,
its counsel, accountants and other representatives reasonable access,
during normal business hours throughout the period prior to the Closing
Date, to the books, records, employees and representatives of JP Fund.
(b) JP Fund covenants and agrees that during the period from
the date hereof until the Closing Date its investment objectives,
investment policies and investment restrictions, as disclosed in its most
current Prospectus dated May 1, 1996, as amended and supplemented on
October 8, 1996, and Statement of Additional Information, dated May 1,
1996, will not be changed in any manner whatsoever except pursuant to a
statutory amendment or regulatory requirement during such time and upon
prior notice to Oppenheimer Fund.
(c) JP Fund covenants that during the period from the date
hereof until the Closing Date, except as approved in writing by
Oppenheimer Fund or expressly provided for in the Agreement, JP Fund (i)
will not conduct its business other than in the ordinary course
substantially in the manner heretofore conducted and consistent with JP
Fund's investment objectives, policies and restrictions as set forth in
its most current Prospectus dated May 1, 1996, as amended and supplemented
on October 8, 1996, and Statement of Additional Information, dated May 1,
1996, (ii) will not permit or allow any of the Assets to be subjected to
any encumbrance, (iii) will not enter into any material transaction or
otherwise incur any material Liability other than in the normal course of
business consistent with past practice, (iv) will not declare, set aside
or pay any dividend or make any other distribution except for payment of
its dividends in ordinary course consistent with past practice and except
for the final dividend and distribution to be made pursuant to Section 3
of the Agreement, and (v) will not agree, whether in writing or otherwise,
to do any of the foregoing. Notwithstanding the foregoing, JP Fund
covenants that (x) between the date of the Agreement and the Closing Date,
promptly following any transaction involving an acquisition or disposition
by JP Fund of portfolio securities, JP Fund shall provide to Oppenheimer
Fund a written report detailing such transaction and (y) upon the written
request of Oppenheimer Fund, to promptly sell one or more portfolio
securities acquired by JP Fund between the date of the Agreement and the
Closing Date and (z) to transfer to Oppenheimer Fund on the Closing Date
only those Assets the acquisition of which will permit Oppenheimer Fund
to be in compliance with all of its investment policies and restrictions.
(d) JP Fund covenants and agrees to comply with all applicable
laws, rules and regulations.
(e) JP Fund covenants and agrees to maintain in the ordinary
course of business consistent with past practice its books and records
through to the date of its dissolution and liquidation and to prepare and
file all documents, reports and instruments and take such action,
including, without limitation, under the federal securities laws and state
laws, that is required or appropriate to be filed or taken by it prior to,
and/or in connection with, its dissolution and liquidation.
19. (a) Oppenheimer Fund covenants that during the period from the
date hereof until the Closing Date it will conduct its business in the
ordinary course, it being understood that such ordinary course of business
will include customary dividends and other distributions and such changes,
if any, that have been approved by trustees of Oppenheimer Fund of which
JP Fund has been advised.
(b) Oppenheimer Fund covenants and agrees to comply with all
applicable laws, rules and regulations.
20. The Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing (i)
by the mutual written consent of Oppenheimer Trust on behalf of
Oppenheimer Fund and JP Fund, (ii) by either Oppenheimer Trust on behalf
of Oppenheimer Fund or JP Fund, by notice in writing to the other, if the
Closing shall not have occurred on or before December 31, 1996, (iii) by
either Oppenheimer Trust on behalf of Oppenheimer Fund or JP Fund, by
notice in writing to the other, if (A) the other party shall fail to
perform in any material respect its agreements contained herein required
to be performed on or prior to the Closing Date, (B) the other party
materially breaches or shall have breached any of its representations,
warranties or covenants contained herein, (C) the JP Fund shareholders
fail to approve the Agreement or (D) any other condition herein expressed
to be precedent to the obligations of the terminating party has not been
met (other than through the failure of the terminating party to comply
with its obligations under the Agreement) and it reasonably appears that
it will not or cannot be met prior to the Closing Date or (iv) pursuant
to Section 4 of the Agreement. Termination of the Agreement pursuant to
(i), (ii) or (iv) shall terminate all obligations of the parties hereunder
and there shall be no liability for damages on the part of Oppenheimer
Fund, JP Fund or their respective trustees, directors or officers to any
other party or its trustees, directors, or officers and it is understood
and agreed that each party shall be reimbursed for its Expenses pursuant
to Section 9 of the Agreement. Termination of the Agreement pursuant to
(iii) shall terminate all obligations of Oppenheimer Fund and JP Fund
hereunder and there shall be no liability for damages on the part of
Oppenheimer Fund, Oppenheimer Trust or JP Fund or their respective
trustees, directors or officers to any other party or its trustees,
directors or officers, except that the party in breach of the Agreement
shall, upon demand, reimburse the non-breaching party for all Expenses,
including reasonable out-of-pocket expenses and fees incurred in
connection with the transactions contemplated by the Agreement, and the
provisions of Section 9 as to Expenses shall be of no force or effect. For
the purposes of the foregoing sentence, the non-fulfillment of the
condition requiring approval of JP Fund shareholders set forth in Sections
10A and 11B shall not be deemed a breach entitling a party to
reimbursement of fees and expenses.
The Agreement shall automatically terminate prior to the Closing in
the event the Acquisition Agreement is terminated or the acquisition
contemplated by the Acquisition Agreement is not consummated, and in such
event all obligations of Oppenheimer Fund and JP Fund shall terminate and
there shall be no liability on the part of Oppenheimer Fund, Oppenheimer
Trust or JP Fund or their respective trustees, directors or officers to
the other or its respective trustees, directors or officers, it being
understood and agreed that each party shall be reimbursed for its Expenses
pursuant to Section 9 of the Agreement.
21. (a) JPC shall indemnify and hold harmless JP Fund, Oppenheimer
Trust, Oppenheimer Fund, their investment advisers and their respective
trustees, directors, officers and shareholders, against any and all claims
to the extent such claims are based upon, arise out of or relate to (i)
any untruthful or inaccurate representation made by JP Fund in the
Agreement or any breach by JP Fund of any warranty or any failure by JP
Fund to perform or comply with any of its obligations, covenants,
conditions or agreements set forth in the Agreement or (ii) the failure
of JP Fund to comply with applicable legal requirements, including,
without limitation, registration under the 1933 Act and the 1940 Act and
state securities laws. Notwithstanding the foregoing, JPC shall not be
obligated to so indemnify any officer or director of JP Fund if such
claims result from such person's willful misfeasance, bad faith or gross
negligence.
(b) OFI shall indemnify and hold harmless JP Fund and its
investment adviser and their respective directors, officers and
shareholders, against any and all claims to the extent such claims are
based upon, arise out of or relate to any untruthful or inaccurate
representation made by Oppenheimer Trust in the Agreement or any breach
by Oppenheimer Trust of any warranty or any failure by Oppenheimer Trust
to perform or comply with any of its obligations, covenants, conditions
or agreements set forth in the Agreement. Notwithstanding the foregoing,
OFI shall not be obligated to so indemnify any officer or director of JP
Fund or its investment adviser if such claims result from such person's
willful misfeasance, bad faith or gross negligence.
(c) As used in this section, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands, claims,
penalties, assessments, judgments, actions, proceedings and suits of
whatever kind and nature and all costs and expenses (including, without
limitation, reasonable attorneys' fees).
22. The Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
23. All prior or contemporaneous agreements and representations are
merged into the Agreement, which constitutes the entire contract between
the parties hereto. No amendment or modification hereof shall be of any
force and effect unless in writing and signed by the parties and no party
shall be deemed to have waived any provision herein for its benefit unless
it executes a written acknowledgement of such waiver.
24. JP Fund understands that the obligations of Oppenheimer Trust
under the Agreement are not binding upon any Trustee or shareholder of
Oppenheimer Trust and Oppenheimer Fund personally, but bind only
Oppenheimer Trust, Oppenheimer Fund and Oppenheimer Fund's property. JP
Fund represents that it has notice of the provisions of the Declaration
of Trust of Oppenheimer Trust disclaiming shareholder and Trustee
liability for acts or obligations of Oppenheimer Trust.
25. Neither of the parties shall make any press release of the
transactions contemplated by the Agreement, or any discussion in
connection therewith, without the prior written consent of the other
party, which consent shall not be unreasonably withheld. The preceding
sentence shall not apply to any disclosures required to be made by
applicable laws, as determined by counsel; however, the applicable party
shall consult with the other party concerning the timing and content of
such disclosure before making it.
26. The representations, warranties and covenants set forth in the
Agreement shall survive the closing.
27. The Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflicts of
laws principles of such State.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to
be executed and attested by its officers thereunto duly authorized on the
date first set forth above.
Attest: JP CAPITAL APPRECIATION FUND, INC.
/s/ J. Gregory Poole By: /s/ E. J. Yelton
President
Attest: OPPENHEIMER VARIABLE ACCOUNT FUNDS,
ON BEHALF OF OPPENHEIMER GROWTH FUND
/s/ Robert G. Zack By: /s/ Andrew J. Donohue
Secretary & Vice President
Attest: For purposes of Section 21 only:
JEFFERSON-PILOT CORPORATION
/s/ J. Gregory Poole By: /s/ E. J. Yelton
Senior Vice President
Attest: For purposes of Section 21 only:
OPPENHEIMERFUNDS, INC.
/s/ Robert G. Zack By: /s/ Andrew J. Donohue
Executive Vice President
<PAGE>
JP Capital Appreciation Fund, Inc.
VOTING INSTRUCTIONS FORM FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD DECEMBER 3, 1996
The undersigned variable contract owner indirectly invested in JP Capital
Appreciation Fund, Inc. ("JP Fund"), does hereby direct Jefferson-Pilot
Life Insurance Company "JPLIC") to vote shares of JP Fund held to support
his or her variable contract at the Special Meeting of Shareholders of JP
Fund to be held on December 3, 1996, at the Jefferson-Pilot Building (4th
Floor, Room B-2), 100 North Greene Street, Greensboro, North Carolina
27420 at 10:00 A.M., local time, and at all adjournments thereof, and to
vote the shares held in the name of JPLIC for the undersigned on the
record date for said meeting on the Proposals specified on the reverse
side.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO RECOMMENDS A VOTE
FOR THE PROPOSALS ON THE REVERSE SIDE AND THE ELECTION OF EACH NOMINEE AS
DIRECTOR. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE
REVERSE SIDE OR FOR EACH PROPOSAL AND THE ELECTION OF EACH NOMINEE AS
DIRECTOR IF NO CHOICE IS INDICATED.
Please mark your voting instructions form, date and sign it on the reverse
side and return it promptly in the accompanying envelope, which requires
no postage if mailed in the United States.
Proposal 1:
To consider and vote upon the approval or disapproval of the Agreement and
Plan of Reorganization dated as of October 8, 1996 (the "Reorganization
Agreement") by and among JP Fund, Jefferson-Pilot Corporation, Oppenheimer
Variable Account Funds, on behalf of its series Oppenheimer Growth Fund
("Oppenheimer Fund"), and OppenheimerFunds, Inc., and the transactions
contemplated thereby, including (i) the transfer of substantially all the
assets of JP Fund to Oppenheimer Fund in exchange for shares of
Oppenheimer Fund, (ii) the distribution of such shares of Oppenheimer Fund
to shareholders of JP Fund in liquidation of JP Fund, and (iii) the
cancellation of the outstanding shares of JP Fund.
FOR____ AGAINST____ ABSTAIN____
Proposal 2:
To elect to the Board of Directors the following five (5) directors to
hold office until the earlier of (i) the dissolution of JP Fund or (ii)
the next annual meeting of shareholders of JP Fund called for the purpose
of electing directors, or until their successors are elected and
qualified.
A) E.J. Yelton D) William Edward Moran
B) John C. Ingram E) J. Lee Lloyd
C) Richard Wolcott McEnally
_______For all nominees listed ____WITHHOLD AUTHORITY
except as marked to the contrary at to vote for all nominees
left. Instruction: To withhold listed at left.
authority to vote for any individual
nominee, line out that nominee's name
at left.
Proposal 3:
To ratify or reject the selection of McGladrey & Pullen LLP as JP Fund's
independent auditors for the current fiscal year.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1996
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Supplement Dated October 28, 1996
to the Prospectus dated May 1, 1996, revised October 28, 1996
This Prospectus may be used to offer or sell shares of only the following
Funds:
Oppenheimer Bond Fund
Oppenheimer Growth Fund
October 28, 1996 PS0600.007 JP
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Prospectus dated May 1, 1996
Revised, October 28, 1996
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end
investment company consisting of nine separate funds (collectively, the
"Funds"):
OPPENHEIMER MONEY FUND ("Money Fund") seeks the maximum current income
from investments in "money market" securities consistent with low capital
risk and the maintenance of liquidity. Its shares are neither insured nor
guaranteed by the U.S. Government, and there is no assurance that this
Fund will be able to maintain a stable net asset value of $1.00 per share.
OPPENHEIMER HIGH INCOME FUND ("High Income Fund") seeks a high level of
current income from investment in high yield fixed-income securities.
High Income Fund's investments include unrated securities or high risk
securities in the lower rating categories, commonly known as "junk bonds,"
which are subject to a greater risk of loss of principal and nonpayment
of interest than higher-rated securities. These securities may be
considered to be speculative.
OPPENHEIMER BOND FUND ("Bond Fund") primarily seeks a high level of
current income from investment in high yield fixed-income securities rated
"Baa" or better by Moody's or "BBB" or better by Standard & Poor's.
Secondarily, this Fund seeks capital growth when consistent with its
primary objective.
OPPENHEIMER CAPITAL APPRECIATION FUND ("Capital Appreciation Fund") seeks
to achieve capital appreciation by investing in "growth-type" companies.
OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital
appreciation by investing in securities of well-known established
companies.
OPPENHEIMER MULTIPLE STRATEGIES FUND ("Multiple Strategies Fund") seeks
a total investment return (which includes current income and capital
appreciation in the value of its shares) from investments in common stocks
and other equity securities, bonds and other debt securities, and "money
market" securities.
OPPENHEIMER GROWTH & INCOME FUND ("Growth & Income Fund") seeks a high
total return (which includes growth in the value of its shares as well as
current income) from equity and debt securities. From time to time this
Fund may focus on small to medium capitalization common stocks, bonds and
convertible securities.
OPPENHEIMER GLOBAL SECURITIES FUND ("Global Securities Fund") seeks long-
term capital appreciation by investing a substantial portion of its assets
in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have
appreciation possibilities. Current income is not an objective. These
securities may be considered to be speculative.
OPPENHEIMER STRATEGIC BOND FUND ("Strategic Bond Fund") seeks a high level
of current income principally derived from interest on debt securities and
seeks to enhance such income by writing covered call options on debt
securities. The Fund intends to invest principally in: (i) foreign
government and corporate debt securities, (ii) U.S. Government securities,
and (iii) lower-rated high yield domestic debt securities, commonly known
as "junk bonds", which are subject to a greater risk of loss of principal
and nonpayment of interest than higher-rated securities. These securities
may be considered to be speculative.
Shares of the Funds are sold only to provide benefits under variable
life insurance policies and variable annuity contracts (collectively, the
"Accounts"). The Accounts invest in shares of one or more of the Funds
in accordance with allocation instructions received from Account owners.
Such allocation rights are further described in the accompanying Account
Prospectus. Shares are redeemed to the extent necessary to provide
benefits under an Account.
This Prospectus explains concisely what you should know before
investing in the Trust and the Funds. Please read this Prospectus
carefully and keep it for future reference. You can find more detailed
information about the Funds in the May 1, 1996 Statement of Additional
Information. For a free copy, call OppenheimerFunds Services, the Funds'
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).
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 Funds
Overview of the Funds
Financial Highlights
Investment Objectives and Policies
How the Funds are Managed
Performance of the Funds
About Your Account
How to Buy Shares
How to Sell Shares
Dividends, Capital Gains and Taxes
Appendix A: Description of Terms
Appendix B: Description of Securities Ratings
<PAGE>
ABOUT THE FUNDS
Overview of the Funds
Some of the important facts about the Funds are summarized below,
with references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest.
- What Are the Funds' Investment Objectives? Money Fund's
investment objective is to seek maximum current income from investments
in "money market" securities consistent with low capital risk and the
maintenance of liquidity. High Income Fund's investment objective is to
seek a high level of current income from investment in high yield fixed-
income securities. Bond Fund's investment objective is to seek a high
level of current income from investment in high yield fixed-income
securities rated "baa" or better by Moody's or "BBB" or better by Standard
& Poor's. As a secondary investment objective, Bond Fund seeks capital
growth when consistent with its primary objective. Capital Appreciation
Fund's investment objective is to achieve capital appreciation by
investing in "growth-type" companies. Growth Fund's investment objective
is to seek to achieve capital appreciation by investing in securities of
well-known established companies. Multiple Strategies Fund's investment
objective is to seek a total investment return (which includes current
income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities. Growth & Income Fund's
investment objective is to seek a total return (which includes growth in
the value of its shares as well as current income) from equity and debt
securities. Global Securities Fund's investment objective is to seek
long-term capital appreciation by investing a substantial portion of
assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have
appreciation possibilities. Strategic Bond Fund's investment objective
is to seek a high level of current income principally derived from
interest on debt securities and seeks to enhance such income by writing
covered call options on debt securities.
- What Do the Funds Invest In? To seek their respective investment
objectives, the Funds invest as follows. Money Fund primarily invests in
money market securities. High Income Fund primarily invests in high yield
fixed-income securities, including unrated securities or high risk
securities in the lower rating categories, commonly known as "junk bonds."
Bond Fund primarily invests in high yield fixed-income securities rated
"Baa" or better by Moody's or "BBB" or better by Standard & Poor's.
Capital Appreciation Fund primarily invests in "growth-type" companies.
Growth Fund primarily invests in securities of well-known established
companies. Multiple Strategies Fund primarily invests in common stocks
and other equity securities, bonds and other debt securities, and money
market securities. Growth & Income Fund invests primarily in equity and
debt securities and focuses from time to time on small to medium
capitalization companies. Global Securities Fund primarily invests in
securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations. Strategic Bond Fund primarily invests
in foreign government and corporate debt securities, U.S. Government
securities, and lower-rated high yield domestic and foreign debt
securities, commonly know as "junk bonds." These investments are more
fully explained for each Fund in "Investment Objectives and Policies,"
starting on page ___.
- Who Manages the Funds? The Funds' investment adviser is
OppenheimerFunds, Inc. (the "Manager"), which (including a subsidiary)
advises investment company portfolios having over $50 billion in assets.
Each Fund's portfolio manager is primarily responsible for the selection
of securities of that Fund. The portfolio managers are as follows: for
Money Fund, Dorothy Warmack; for High Income Fund, Bond Fund, Multiple
Strategies Fund and Strategic Bond Fund, David Negri (joined by Richard
Rubinstein for Multiple Strategies Fund and by Arthur Steinmetz for
Strategic Bond Fund); for Capital Appreciation Fund, Paul LaRocco; for
Growth Fund, Jane Putnam; for Global Securities Fund, William Wilby; and
for Growth & Income Fund, Robert J. Milnamow and Michael S. Levine. The
Manager is paid an advisory fee by each Fund, based on its assets. The
Trust's Board of Trustees, elected by shareholders, oversees the
investment adviser and the portfolio manager. Please refer to "How The
Funds Are Managed," starting on page ____ for more information about the
Manager and its fees.
- How Risky Are The Funds? While different types of investments
have risks that differ in type and magnitude, all investments carry risk
to some degree. Changes in overall market movements or interest rates,
or factors affecting a particular industry or issuer, can affect the value
of the Funds' investments and their price per share. Equity investments
are generally subject to a number of risks including the risk that values
will fluctuate as a result of changing expectations for the economy and
individual issuers, and stocks which are small to medium size in
capitalization may fluctuate more than large capitalization stocks. For
both equity and income investments, foreign investments are subject to the
risk of adverse currency fluctuation and additional risks and expenses in
comparison to domestic investments. In comparing levels of risk among the
equity and equity- income funds, Growth Fund is most conservative,
followed by Multiple Strategies Fund, Growth & Income Fund, Capital
Appreciation Fund and Global Securities Fund. Fixed-income investments
are generally subject to the risk that values will fluctuate with
inflation, with lower-rated fixed-income investments being subject to a
greater risk that the issuer will default in its interest or principal
payment obligations. In comparing levels of risk among the fixed-income
funds, Bond Fund is most conservative, followed by Strategic Bond Fund and
High Income Fund. Money Fund is the most conservative of all nine Funds
in that Money Fund intends to maintain a stable net asset value, although
there is no assurance that it will be able to do so.
- How Can I Buy or Sell Shares? Shares of each Fund are offered
only for purchase by Accounts as an investment medium for variable life
insurance policies and variable annuity contracts. Account owners should
refer to the accompanying Account Prospectus on how to buy or sell shares
of the Funds.
- How Have the Funds Performed? Money Fund, High Income Fund, Bond
Fund and Strategic Bond Fund measure their performance by quoting their
yields. All of the Funds with the exception of Money Fund may measure
their performance by quoting average annual total return and cumulative
total return, which measure historical performance. Those returns can be
compared to the returns (over similar periods) of other funds. Of course,
other funds may have different objectives, investments, and levels of
risk. The performance of all the Funds except Money Fund can also be
compared to broad market indices, which we have done starting on page ___.
Please remember that past performance does not guarantee future results.
<PAGE>
Financial Highlights
The tables on the following pages present selected financial
information, including per share data and expense ratios and other data
about the Funds, and are based on each Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Funds'
independent auditors, whose report on the Funds' financial statements for
the fiscal year ended December 31, 1995, is included in the Statement of
Additional Information.
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Oppenheimer
Money
Fund
-------------------------------------------------------------------------------
Year Ended
December 31, 1994 1993 1992 1991
1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations - net
investment income and net realized gain
on investments .06 .04 .03 .04 .06
Dividends and distributions to shareholders (.06) (.04) (.03) (.04) (.06)
-------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================
=====================
TOTAL RETURN, AT NET ASSET VALUE (1) 5.62% 4.25% 3.09% 3.93%
6.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $65,386 $89,671 $61,221 $58,266 $58,709
Average net assets (in thousands) $75,136 $90,264 $57,654 $61,317 $75,747
Ratios to average net assets:
Net investment income 5.52% 4.18% 3.12% 3.76% 5.97%
Expenses .51% .43% .43% .50% .49%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1990 1989 1988 1987 1986
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations - net
investment income and net realized gain
on investments .08 .09 .07 .06 .06
Dividends and distributions to shareholders (.08) (.09) (.07) (.06) (.06)
-----------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================
=============
TOTAL RETURN, AT NET ASSET VALUE (1) 7.84% 9.56% 6.96% 6.74% 6.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $89,143 $68,440 $69,468 $42,538 $28,218
Average net assets (in thousands) $82,966 $67,586 $60,241 $35,138 $12,914
Ratios to average net assets:
Net investment income 7.80% 8.82% 7.31% 6.33% 5.68%
Expenses .51% .53% .55% .59% .75%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends reinvested in
additional shares on the reinvestment date, and redemption at the net
asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods of less than one full year.
Total returns reflect changes in net investment income only. Total return
information does not reflect expenses that apply at the separate account
level or to related insurance products. Inclusion of these charges would
reduce the total return figures for all periods shown.
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
High Income
Fund
-------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $9.79 $11.02 $9.74 $9.40 $7.90
Income (loss) from investment operations:
Net investment income .98 .94 .82 1.19 1.28
Net realized and unrealized gain (loss) on
investments and foreign currency .94 (1.27) 1.65 .43 1.30
transactions
------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.92 (.33) 2.47 1.62 2.58
-------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.08) (.66) (1.19) (1.28) (1.08)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.24) -- -- --
-------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.08) (.90) (1.19) (1.28) (1.08)
-------------------------------------------------------------------------------
Net asset value, end of period $10.63 $ 9.79 $11.02 $9.74 $9.40
==========================================================
=====================
TOTAL RETURN, AT NET ASSET VALUE(2) 20.37% (3.18)% 26.34% 17.92%
33.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $133,451 $ 95,698 $93,011 $40,817 $27,308
Average net assets (in thousands) $115,600 $101,096 $67,000 $36,861 $23,663
Ratios to average net assets:
Net investment income 9.81% 9.15% 10.50% 12.08% 14.26%
Expenses .81% .67% .68% .73% .75%
Portfolio turnover rate(4) 107.1% 110.1% 135.7% 144.2% 108.0%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
1990 1989 1988 1987 1986(1)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $8.59 $9.30 $9.14 $10.04 $10.00
Income (loss) from investment operations:
Net investment income 1.21 1.09 1.12 1.30 .72
Net realized and unrealized gain (loss) on
investments and foreign currency (.82) (.65) .23 (.51) (.24)
transactions
-------------------------------------------------------------------------
Total income (loss) from investment
operations .39 .44 1.35 .79 .48
-------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.08) (1.08) (1.07) (1.55) (.44)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.07) (.12) (.14) --
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.08) (1.15) (1.19) (1.69) (.44)
-------------------------------------------------------------------------
Net asset value, end of period $7.90 $8.59 $9.30 $9.14 $10.04
==========================================================
===============
TOTAL RETURN, AT NET ASSET VALUE(2) 4.65% 4.84% 15.58% 8.07%
4.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $19,172 $23,698 $25,551 $21,768 $14,833
Average net assets (in thousands) $21,493 $26,040 $24,530 $20,637 $ 8,036
Ratios to average net assets:
Net investment income 14.32% 11.52% 11.94% 13.13% 11.18%(3)
Expenses .75% .75% .75% .75% .75%(3)
Portfolio turnover rate(4) 95.1% 78.7% 57.9% 42.1% 18.3%
</TABLE>
1. For the period from April 30, 1986 (commencement of operations) to
December 31, 1986.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Bond
Fund
-----------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.78 $11.65 $10.99 $11.15 $10.33
Income (loss) from investment operations:
Net investment income .72 .76 .65 .87 .95
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 1.07 (.98) .76 (.17) .80
-----------------------------------------------------------------------------
Total income (loss) from investment
operations 1.79 (.22) 1.41 .70 1.75
-----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.73) (.62) (.75) (.86) (.93)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.03) -- -- --
-----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.73) (.65) (.75) (.86) (.93)
-----------------------------------------------------------------------------
Net asset value, end of period $11.84 $10.78 $11.65 $10.99 $11.15
==========================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(1) 17.00% (1.94)% 13.04% 6.50%
17.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $211,232 $135,067 $111,846 $63,354 $32,762
Average net assets (in thousands) $170,929 $121,884 $ 87,215 $45,687 $22,169
Ratios to average net assets:
Net investment income 6.91% 7.30% 7.20% 7.81% 8.73%
Expenses .80% .57% .46% .56% .64%
Portfolio turnover rate(2) 79.4% 35.1% 36.3% 41.3% 7.6%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1990 1989 1988 1987 1986
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.49 $10.15 $10.19 $11.15 $11.27
Income (loss) from investment operations:
Net investment income .97 .98 .94 .97 .97
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.18) .32 (.05) (.71) .09
----------------------------------------------------------------------------
Total income (loss) from investment
operations .79 1.30 .89 .26 1.06
----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.95) (.96) (.93) (1.17) (1.03)
Distributions from net realized gain on
investments and foreign currency
transactions -- -- -- (.05) (.15)
----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.95) (.96) (.93) (1.22) (1.18)
----------------------------------------------------------------------------
Net asset value, end of period $10.33 $10.49 $10.15 $10.19 $11.15
==========================================================
==================
TOTAL RETURN, AT NET ASSET VALUE(1) 7.92% 13.32% 8.97% 2.53%
10.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $16,576 $13,422 $ 9,989 $10,415 $7,377
Average net assets (in thousands) $15,088 $11,167 $11,028 $ 8,748 $4,647
Ratios to average net assets:
Net investment income 9.30% 9.34% 9.08% 9.17% 8.71%
Expenses .61% .64% .70% .75% .75%
Portfolio turnover rate(2) 7.4% 5.4% 36.3% 5.9% 27.7%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Capital Appreciation
Fund
------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $25.95 $31.64 $26.04 $23.24 $15.24
Income (loss) from investment operations:
Net investment income .11 .10 .05 .06 .08
Net realized and unrealized gain (loss) on
investments 8.29 (2.22) 6.71 3.43 8.18
------------------------------------------------------------------------------
Total income (loss) from investment operations 8.40 (2.12) 6.76 3.49 8.26
------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.09) (.04) (.06) (.14) (.26)
Distributions from net realized gain on
investments (.05) (3.53) (1.10) (.55) --
------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.14) (3.57) (1.16) (.69) (.26)
------------------------------------------------------------------------------
Net asset value, end of period $34.21 $25.95 $31.64 $26.04 $23.24
==========================================================
====================
TOTAL RETURN, AT NET ASSET VALUE(2) 32.52% (7.59)% 27.32% 15.42%
54.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $325,404 $185,774 $136,885 $83,335 $49,371
Average net assets (in thousands) $240,730 $153,832 $98,228 $56,371 $34,887
Ratios to average net assets:
Net investment income .47% .50% .23% .30% .81%
Expenses .78% .57% .47% .54% .63%
Portfolio turnover rate(4) 125.5% 96.5% 122.8% 78.9% 122.3%
Average brokerage commission rate(5) $0.18 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
1990 1989 1988 1987 1986(1)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $20.40 $16.31 $14.39 $13.12 $16.21
Income (loss) from investment operations:
Net investment income .32 .50 .33 .21 .12
Net realized and unrealized gain (loss) on
investments (3.54) 3.93 1.60 1.67 (1.24)
-------------------------------------------------------------------------
Total income (loss) from investment operations (3.22) 4.43 1.93 1.88 (1.12)
-------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.34) -- (.34) (.21)
Distributions from net realized gain on
investments (1.41) -- (.01) (.27) (1.76)
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.94) (.34) (.01) (.61) (1.97)
-------------------------------------------------------------------------
Net asset value, end of period $15.24 $20.40 $16.31 $14.39 $13.12
==========================================================
===============
TOTAL RETURN, AT NET ASSET VALUE(2) (16.82)% 27.57% 13.41% 14.34%
(1.65)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,295 $27,523 $13,667 $9,692 $4,549
Average net assets (in thousands) $24,774 $21,307 $13,239 $8,598 $3,099
Ratios to average net assets:
Net investment income 1.93% 3.27% 2.13% 1.68% 2.36%(3)
Expenses .71% .68% .73% .75% 1.01%(3)
Portfolio turnover rate(4) 222.0% 130.5% 128.7% 138.7% 100.1%
Average brokerage commission rate(5) -- -- -- -- --
</TABLE>
1. For the six months ended December 31, 1986. Operating results prior
to August 15, 1986 were achieved by Centennial Capital Appreciation Fund,
a separate investment company acquired by OCAP on August 14, 1986.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Growth
Fund
-----------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.68 $17.70 $16.96 $15.17 $12.54
Income (loss) from investment operations:
Net investment income .25 .22 .46 .16 .30
Net realized and unrealized gain (loss) on
investments 6.10 (.05) .74 1.99 2.82
-----------------------------------------------------------------------------
Total income (loss) from investment
operations 6.35 .17 1.20 2.15 3.12
-----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.22) (.15) (.14) (.36) (.49)
Distributions from net realized gain on
investments and foreign currency
transactions (.26) (.04) (.32) -- --
-----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.48) (.19) (.46) (.36) (.49)
-----------------------------------------------------------------------------
Net asset value, end of period $23.55 $17.68 $17.70 $16.96 $15.17
==========================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(1) 36.65% .97% 7.25% 14.53%
25.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $117,710 $63,283 $56,701 $36,494 $22,032
Average net assets (in thousands) $88,803 $59,953 $46,389 $25,750 $18,810
Ratios to average net assets:
Net investment income 1.46% 1.38% 1.13% 1.36% 2.82%
Expenses .79% .58% .50% .61% .70%
Portfolio turnover rate(2) 58.2% 53.8% 12.6% 48.7% 133.9%
Average brokerage commission rate(3) $0.07 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1990 1989 1988 1987 1986
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $16.38 $13.64 $11.21 $12.53 $10.95
Income (loss) from investment operations:
Net investment income .56 .66 .29 .20 .13
Net realized and unrealized gain (loss) on
investments (1.79) 2.50 2.19 .24 1.76
---------------------------------------------------------------------------
Total income (loss) from investment
operations (1.23) 3.16 2.48 .44 1.89
---------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.62) (.35) -- (.34) (.15)
Distributions from net realized gain on
investments and foreign currency
transactions (1.99) (.07) (.05) (1.42) (.16)
---------------------------------------------------------------------------
Total dividends and distributions to
shareholders (2.61) (.42) (.05) (1.76) (.31)
---------------------------------------------------------------------------
Net asset value, end of period $12.54 $16.38 $13.64 $11.21 $12.53
==========================================================
=================
TOTAL RETURN, AT NET ASSET VALUE(1) (8.21)% 23.59% 22.09% 3.32%
17.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $15,895 $19,301 $17,746 $14,692 $8,287
Average net assets (in thousands) $17,235 $18,596 $15,585 $15,121 $3,744
Ratios to average net assets:
Net investment income 4.09% 3.72% 2.39% 1.56% 2.62%
Expenses .71% .70% .70% .75% .75%
Portfolio turnover rate(2) 267.9% 148.0% 132.5% 191.0% 100.9%
Average brokerage commission rate(3) -- -- -- -- --
</TABLE>
1. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
3. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Multiple Strategies
Fund
------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.91 $13.88 $12.47 $11.96 $10.90
Income (loss) from investment operations:
Net investment income .66 .63 .55 .55 .69
Net realized and unrealized gain (loss) on
investments, options written and foreign
currency transactions 2.00 (.90) 1.41 .50 1.15
------------------------------------------------------------------------------
Total income (loss) from investment operations 2.66 (.27) 1.96 1.05 1.84
------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.65) (.60) (.55) (.54) (.78)
Distributions from net realized gain on
investments, options written and foreign
currency transactions (.37) (.10) -- -- --
------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.02) (.70) (.55) (.54) (.78)
------------------------------------------------------------------------------
Net asset value, end of period $14.55 $12.91 $13.88 $12.47 $11.96
==========================================================
====================
TOTAL RETURN, AT NET ASSET VALUE(2) 21.36% (1.95)% 15.95% 8.99%
17.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $381,263 $292,067 $250,290 $159,464 $124,634
Average net assets (in thousands) $344,745 $279,949 $199,954 $139,011 $117,000
Ratios to average net assets:
Net investment income 4.81% 4.90% 4.44% 4.63% 5.95%
Expenses .77% .56% .48% .55% .54%
Portfolio turnover rate(4) 39.0% 31.4% 32.4% 57.8% 80.3%
Average brokerage commission rate(5) $0.04 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1990 1989 1988 1987(1)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.30 $11.58 $10.04 $10.00
Income (loss) from investment operations:
Net investment income .73 .73 .66 .44
Net realized and unrealized gain (loss) on
investments, options written and foreign
currency transactions (.97) 1.04 1.53 .07
-----------------------------------------------------------------
Total income (loss) from investment operations (.24) 1.77 2.19 .51
-----------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.70) (.68) (.65) (.43)
Distributions from net realized gain on
investments, options written and foreign
currency transactions (.46) (.37) -- (.04)
-----------------------------------------------------------------
Total dividends and distributions to
shareholders (1.16) (1.05) (.65) (.47)
-----------------------------------------------------------------
Net asset value, end of period $10.90 $12.30 $11.58 $10.04
==========================================================
=======
TOTAL RETURN, AT NET ASSET VALUE(2) (1.91)% 15.76% 22.15% 3.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $118,888 $121,286 $78,386 $53,291
Average net assets (in thousands) $123,231 $101,057 $64,298 $34,256
Ratios to average net assets:
Net investment income 6.53% 6.36% 6.18% 6.12%(3)
Expenses .55% .57% .58 .65%(3)
Portfolio turnover rate(4) 99.2% 66.9% 110.0% 46.9%
Average brokerage commission rate(5) -- -- -- --
</TABLE>
1. For the period from February 9, 1987 (commencement of Operations) to
December 31, 1987.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, And redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Global Securities
Fund
----------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993
-----------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.09 $16.30 $9.57
Income (loss) from investment operations:
Net investment income .12 .04 (.02)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions .19 (.96) 6.75
-----------------------------------------------------------------
Total income (loss) from investment operations .31 (.92) 6.73
-----------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.04) --
Distributions from net realized gain on investments and
foreign currency transactions (.40) (.25) --
-----------------------------------------------------------------
Total dividends and distributions to shareholders (.40) (.29) --
-----------------------------------------------------------------
Net asset value, end of period $15.00 $15.09 $16.30
==========================================================
=======
TOTAL RETURN, AT NET ASSET VALUE(2) 2.24% (5.72)%
70.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $360,979 $297,842 $96,425
Average net assets (in thousands) $332,336 $214,545 $31,696
Ratios to average net assets:
Net investment income .86% .54% .72%
Expenses .89% .91% .92%
Portfolio turnover rate(4) 131.3% 70.4% 65.1%
Average brokerage commission rate(5) $0.01 -- --
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1992 1991 1990(1)
-----------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.38 $10.04 $10.00
Income (loss) from investment operations:
Net investment income .07 .04 --
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.80) .30 .04
---------------------------------------------------------------
Total income (loss) from investment operations (.73) .34 .04
---------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.04) -- --
Distributions from net realized gain on investments and
foreign currency transactions (.04) -- --
---------------------------------------------------------------
Total dividends and distributions to shareholders (.08) -- --
---------------------------------------------------------------
Net asset value, end of period $9.57 $10.38 $10.04
==========================================================
=====
TOTAL RETURN, AT NET ASSET VALUE(2) (7.11)% 3.39% .40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $13,537 $7,339 $ 432
Average net assets (in thousands) $11,181 $3,990 $ 263
Ratios to average net assets:
Net investment income 1.04% .75% .08%(3)
Expenses 1.06% 1.32% 6.84%(3)
Portfolio turnover rate(4) 34.1% 29.5% 0.0%
Average brokerage commission rate(5) -- -- --
</TABLE>
1. For the period from November 12, 1990 (commencement of operations) to
December 31, 1990.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Strategic Bond
Fund
--------------------------------------------------------
Year Ended
December 31,
1995 1994 1993(1)
--------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.60 $5.12 $5.00
Income (loss) from investment operations:
Net investment income .38 .35 .10
Net realized and unrealized gain (loss) on investments,
options written and foreign currency transactions .30 (.54) .11
--------------------------------------------------------
Total income (loss) from investment operations .68 (.19) .21
--------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.37) (.32) (.09)
Distributions from net realized gain on investments -- -- --
Distributions in excess of net realized gain on investments,
options written and foreign currency transactions -- (.01) --
--------------------------------------------------------
Total dividends and distributions to shareholders (.37) (.33) (.09)
--------------------------------------------------------
Net asset value, end of period $4.91 $4.60 $5.12
========================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 15.33% (3.78)% 4.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $60,098 $20,320 $9,887
Average net assets (in thousands) $37,698 $15,389 $4,259
Ratios to average net assets:
Net investment income 9.32% 8.36% 5.67%(3)
Expenses .85% .87% .96%(3)
Portfolio turnover rate(4) 87.0% 136.6% 10.9%
</TABLE>
1. For the period from May 3, 1993 (commencement of operations) to
December 31, 1993.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Growth & Income
Fund
---------------
Year Ended
December 31,
1995(1)
---------
<S> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.00
Income (loss) from investment operations:
Net investment income .01
Net realized and unrealized gain (loss) on investments,
options written and foreign currency transactions 2.52
---------
Total income (loss) from investment operations 2.53
---------
Dividends and distributions to shareholders:
Dividends from net investment income (.02)
Distributions from net realized gain on investments --
Distributions in excess of net realized gain on investments,
options written and foreign currency transactions --
---------
Total dividends and distributions to shareholders (.02)
---------
Net asset value, end of period $12.51
=========
TOTAL RETURN, AT NET ASSET VALUE(2) 25.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $4,288
Average net assets (in thousands) $1,809
Ratios to average net assets:
Net investment income 0.50%(3)
Expenses 2.07%(3)
Portfolio turnover rate(4) 23.7%
Average brokerage commission rate(5) $0.34
</TABLE>
1. For the period from July 5, 1995 (commencement of operations) to
December 31, 1995
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of
these charges would reduce the total return figures for all periods shown.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Investment Objectives and Policies
Investment Objective and Policies - Money Fund. The objective of Money
Fund is to seek the maximum current income from investments in "money
market" securities consistent with low capital risk and the maintenance
of liquidity. The Securities and Exchange Commission Rule 2a-7 ("Rule 2a-
7") under the Investment Company Act of 1940 (the "Investment Company
Act") places restrictions on a money market fund's investments. Under
Rule 2a-7, Money Fund may purchase only "Eligible Securities," as defined
below, that the Trust's Board of Trustees has determined have minimal
credit risk. An "Eligible Security" is (a) a security that has received
a rating in one of the two highest short-term rating categories by any two
"nationally-recognized statistical rating organizations" as defined in
Rule 2a-7 ("Rating Organizations"), or, if only one Rating Organization
has rated that security, by that Rating Organization, or (b) an unrated
security that is judged by the Manager to be of comparable quality to
investments that are "Eligible Securities" rated by Rating Organizations.
Rule 2a-7 permits Money Fund to purchase "First Tier Securities," which
are Eligible Securities rated in the highest category for short-term debt
obligations by at least two Rating Organizations, or, if only one Rating
Organization has rated a particular security, by that Rating Organization,
or comparable unrated securities. Under Rule 2a-7, Money Fund may invest
only up to 5% of its assets in "Second Tier Securities," which are
Eligible Securities that are not "First Tier Securities."
In addition to the overall 5% limit on Second Tier Securities, Money
Fund may not invest (i) more than 5% of its total assets in the securities
of any one issuer (other than the U.S. Government, its agencies or
instrumentalities) or (ii) more than 1% of its total assets or $1 million
(whichever is greater) in Second Tier Securities of any one issuer. The
Trust's Board must approve or ratify the purchase of Eligible Securities
that are unrated or are rated by only one Rating Organization.
Additionally, under Rule 2a-7, Money Fund must maintain a dollar-weighted
average portfolio maturity of no more than 90 days, and the maturity of
any single portfolio investment may not exceed 397 days. The Trust's
Board has adopted procedures under Rule 2a-7 pursuant to which the Board
has delegated to the Manager the responsibility of conforming Money Fund's
investments with the requirements of Rule 2a-7 and those Procedures.
Ratings at the time of purchase will determine whether securities may
be acquired under the above restrictions. The rating restrictions
described in this Prospectus do not apply to banks in which the Trust's
cash is kept. Subsequent downgrades in ratings may require reassessment
of the credit risk presented by a security and may require its sale. See
"Investment Objectives and Policies -- Money Fund" in the Statement of
Additional Information for further details.
The Trust intends to exercise due care in the selection of portfolio
securities. However, a risk may exist that the issuers of Money Fund's
portfolio securities may not be able to meet their duties and obligations
on interest or principal payments at the time called for by the
instrument. There is also the risk that because of a redemption demand
greater than anticipated by the Manager, some of Money Fund's portfolio
may have to be liquidated prior to maturity at prices less than the
original cost or maturity value. Any of these risks, if encountered,
could cause a reduction in the net asset value of Money Fund's shares.
The types of instruments that will form the major part of Money
Fund's investments are certificates of deposit, bankers' acceptances,
commercial paper, U.S. Treasury bills, securities of U.S. Government
agencies or instrumentalities and other debt instruments (including bonds)
issued by corporations, including variable and floating rate instruments,
and variable rate master demand notes. Some of such instruments may be
supported by letters of credit or may be subject to repurchase
transactions (described below). Except as described below, Money Fund
will purchase certificates of deposit or bankers' acceptances only if
issued or guaranteed by a domestic bank subject to regulation by the U.S.
Government or by a foreign bank having total assets at least equal to U.S.
$1 billion. Money Fund may invest in certificates of deposit of up to
$100,000 of a domestic bank if such certificates of deposit are fully
insured as to principal by the Federal Deposit Insurance Corporation. For
purposes of this section, the term "bank" includes commercial banks,
savings banks, and savings and loan associations and the term "foreign
bank" includes foreign branches of U.S. banks (issuers of "Eurodollar"
instruments), U.S. branches and agencies of foreign banks (issuers of
"Yankee dollar" instruments) and foreign branches of foreign banks. Money
Fund also may purchase obligations issued by other entities if they are:
(i) guaranteed as to principal and interest by a bank or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by
Money Fund, or (ii) subject to repurchase agreements (explained below),
if the collateral for the agreement complies with Rule 2a-7. In addition,
the Fund may also invest in other types of securities described above in
accordance with the requirements of Rule 2a-7. For further information,
see "Foreign Securities" and "Other Investment Restrictions" below. See
Appendix A below and "Investment Objectives and Policies" in the Statement
of Additional Information for further information on the investments which
Money Fund may make. See Appendix B below for a description of the rating
categories of the Rating Organizations.
Investment Objectives and Policies - High Income Fund, Bond Fund and
Strategic Bond Fund.
High Income Fund. The objective of High Income Fund is to earn a high
level of current income by investing primarily in a diversified portfolio
of high yield, fixed-income securities (including long-term debt and
preferred stock issues, including convertible securities) believed by the
Manager not to involve undue risk. The Fund may also acquire
participation interests in loans that are made to corporations (see
"Participation Interests," below). High Income Fund's investment policy
is to assume certain risks (discussed below) in seeking high yield, which
is ordinarily associated with high risk securities, commonly known as
"junk bonds," in the lower rating categories of the established securities
ratings services (i.e., securities rated "Baa" or lower by Moody's
Investors Service, Inc. ("Moody's") or "BBB" or lower by Standard & Poor's
Corporation ("Standard & Poor's")), and unrated securities. The
investments in which High Income Fund will invest principally will be in
the lower rating categories; it may invest in securities rated as low as
"C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that
the obligations are speculative in a high degree and may be in default.
Appendix B of this Prospectus describes these rating categories.
High Income Fund is not obligated to dispose of securities whose
issuers subsequently are in default or if the rating is subsequently
downgraded. High Income Fund may invest, without limit, in unrated
securities if such securities offer, in the opinion of the Manager, yields
and risks comparable to rated securities. Risks of high yield securities
are discussed under "Risk Factors" below. High Income Fund's portfolio
at December 31, 1995 contained domestic and foreign corporate bonds in the
following rating categories as rated by Standard & Poor's (the percentages
relate to the weighted average value of the bonds in each rating category
as a percentage of that Fund's total assets): AAA, 0.34%; AA, 0.22%; BBB,
1.85%; BB, 9.14%; B, 39.45%; CCC, 13.37%; C, 0.93%; and D, 0.53%. If a
bond was not rated by Standard & Poor's but was rated by Moody's, it is
included in the comparable category. The Manager will not rely
principally on the ratings assigned by rating services. The Manager's
analysis may include consideration of the financial strength of the
issuer, including its historic and current financial condition, the
trading activity in its securities, present and anticipated cash flow,
estimated current value of assets in relation to historical cost, the
issuer's experience and managerial expertise, responsiveness to changes
in interest rates and business conditions, debt maturity schedules,
current and future borrowing requirements, and any change in the financial
condition of the issuer and the issuer's continuing ability to meet its
future obligations. The Manager also may consider anticipated changes in
business conditions, levels of interest rates of bonds as contrasted with
levels of cash dividends, industry and regional prospects, the
availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and
the world.
Bond Fund. Bond Fund's primary objective is to earn a high level of
current income by investing primarily in a diversified portfolio of high
yield fixed-income securities. As a secondary objective, Bond Fund seeks
capital growth when consistent with its primary objective. As a matter
of non-fundamental policy, Bond Fund will, under normal market conditions,
invest at least 65% of its total assets in bonds. Bond Fund will invest
only in securities rated "Baa" or better by Moody's or "BBB" or better by
Standard & Poor's. However, Bond Fund is not obligated to dispose of
securities if the rating is reduced, and therefore will from time to time
hold securities rated lower than "Baa" by Moody's or "BBB" by Standard &
Poor's.
Strategic Bond Fund. The investment objective of Strategic Bond Fund is
to seek a high level of current income principally derived from interest
on debt securities and to enhance such income by writing covered call
options on debt securities. Although the premiums received by Strategic
Bond Fund from writing covered calls are a form of capital gain, the Fund
generally will not make investments in securities with the objective of
seeking capital appreciation.
The Fund intends to invest principally in: (i) lower-rated high yield
domestic debt securities; (ii) U.S. Government securities, and (iii)
foreign government and corporate debt securities. Under normal
circumstances, the Fund's assets will be invested in each of these three
sectors. However, Strategic Bond Fund may from time to time invest up to
100% of its total assets in any one sector if, in the judgment of the
Manager, the Fund has the opportunity of seeking a high level of current
income without undue risk to principal. Accordingly, the Fund's
investments should be considered speculative. Distributable income will
fluctuate as the Fund assets are shifted among the three sectors.
- High Yield Securities. The higher yields and high income sought
by Strategic Bond Fund are generally obtainable from securities in the
lower rating categories of the established rating services, commonly known
as "junk bonds." Such securities are rated "Baa" or lower by Moody's or
"BBB" or lower by Standard & Poor's. Strategic Bond Fund may invest in
securities rated as low as "C" by Moody's or "D" by Standard & Poor's.
Such ratings indicate that the obligations are speculative in a high
degree and may be in default. Risks of high yield, high risk securities
are discussed under "Risk Factors" below. Strategic Bond Fund's portfolio
at December 31, 1995, contained domestic and foreign corporate bonds in
the following rating categories as rated by Standard & Poor's (the
percentages relate to the weighted average of the bonds in each rating
category as a percentage of that Fund's total assets): AAA, 0.30%; AA,
0.07%; BBB, 0.69%; BB, 5.45%; B, 14.18%; CCC, 4.63%; C, 0.42%; and D,
0.11%. If a bond was not rated by Standard & Poor's but was rated by
Moody's, it is included in the comparable category. The Manager will not
rely principally on the ratings assigned by rating services. Strategic
Bond Fund is not obligated to dispose of securities whose issuers
subsequently are in default or if the rating of such securities is
reduced. Appendix B of this Prospectus describes these rating categories.
Strategic Bond Fund may also invest in unrated securities which, in the
opinion of the Manager, offer yields and risks comparable to those of
securities which are rated.
Other Fixed-Income Strategies and Techniques. High Income Fund, Bond
Fund and Strategic Bond Fund (collectively, the "Income Funds") can also
use the investment techniques and strategies described below. The
Statement of Additional Information contains more information about these
practices.
- International Securities. The Income Funds may invest in foreign
government and foreign corporate debt securities (which may be denominated
in U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (such as the World Bank) and
foreign governments (including political subdivisions having taxing
authority) or their agencies or instrumentalities. These investments may
include (i) U.S. dollar-denominated debt obligations known as "Brady
Bonds," which are issued for the exchange of existing commercial bank
loans to foreign entities for new obligations that are generally
collateralized by zero coupon Treasury securities having the same
maturity, (ii) debt obligations such as bonds (including sinking fund and
callable bonds), (iii) debentures and notes (including variable rate and
floating rate instruments), and (iv) preferred stocks and zero coupon
securities. Further information about investments in foreign securities
and special risks of "emerging markets" is set forth below under "Other
Investment Techniques and Strategies - Foreign Securities."
- U.S. Government Securities. U.S. Government Securities are debt
obligations issued by or guaranteed by the United States Government or one
of its agencies or instrumentalities. Although U.S. Government Securities
are considered among the most creditworthy of fixed-income investments and
their yields are generally lower than the yields available from corporate
debt securities, the values of U.S. Government Securities (and of fixed-
income securities generally) will vary inversely to changes in prevailing
interest rates. To compensate for the lower yields available on U.S.
Government securities, the Income Funds will attempt to augment these
yields by writing covered call options against them. See "Hedging,"
below. Certain of these obligations, including U.S. Treasury notes and
bonds, and mortgage-backed securities guaranteed by the Government
National Mortgage Association ("Ginnie Maes"), are supported by the full
faith and credit of the United States. Certain other U.S. Government
Securities, issued or guaranteed by Federal agencies or government-
sponsored enterprises, are not supported by the full faith and credit of
the United States. These latter securities may include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Mortgage Corporation ("Freddie
Macs"), and obligations supported by the credit of the instrumentality,
such as Federal National Mortgage Association bonds ("Fannie Maes"). U.S.
Government Securities in which the Funds may invest include zero coupon
U.S. Treasury securities, mortgage-backed securities and money market
instruments.
Zero coupon Treasury securities are: (i) U.S. Treasury notes and
bonds which have been stripped of their unmatured interest coupons and
receipts; or (ii) certificates representing interests in such stripped
debt obligations or coupons. Because a zero coupon security pays no
interest to its holder during its life or for a substantial period of
time, it usually trades at a deep discount from its face or par value and
will be subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities
which make current distributions of interest. Because the Fund accrues
taxable income from these securities without receiving cash, the Fund may
be required to sell portfolio securities in order to pay cash dividends
or to meet redemptions. The Income Funds may invest up to 50% of their
total assets at the time of purchase in zero coupon securities issued by
either corporations or the U.S. Treasury.
- Domestic Securities. The Income Funds' investments in domestic
securities may include preferred stocks, participation interests and zero
coupon securities. Domestic investments include fixed-income securities
and dividend-paying common stocks issued by domestic corporations in any
industry which may be denominated in U.S. dollars or non-U.S. currencies.
The Income Funds' investments may include securities which represent
participation interests in loans made to corporations (see "Participation
Interests," below) and in pools of residential mortgage loans which may
be guaranteed by agencies or instrumentalities of the U.S. Government
(e.g. Ginnie Maes, Freddie Macs and Fannie Maes), including collateralized
mortgage-backed obligations ("CMOs"), or which may not be guaranteed.
Such securities differ from conventional debt securities which provide for
periodic payment of interest in fixed amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Mortgage-backed
securities provide monthly payments which are, in effect, a "pass-through"
of the monthly interest and principal payments (including any prepayments)
made by the individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. CMOs in which the Fund may invest are
securities issued by a U.S. Government instrumentality or private
corporation that are collateralized by a portfolio of mortgages or
mortgage-backed securities which may or may not be guaranteed by the U.S.
Government. The issuer's obligation to make interest and principal
payments is secured by the underlying portfolio of mortgages or mortgage-
backed securities. Mortgage-backed securities may be less effective than
debt obligations of similar maturity at maintaining yields during periods
of declining interest rates.
The Income Funds may also invest in CMOs that are "stripped." That
means that the security is divided into two parts, one of which receives
some or all of the principal payments (and is known as a "P/O") and the
other which receives some or all of the interest (and is known as an
"I/O"). P/Os and I/Os are generally referred to as "derivative
investments," discussed further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall, and
in times of rapidly falling interest rates, the Fund might receive back
less than its investment.
The value of "principal only" securities generally increases as
interest rates decline and prepayment rates rise. The price of these
securities is typically more volatile than that of coupon-bearing bonds
of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established
trading markets have not yet developed for these securities. Therefore,
some stripped securities may be deemed "illiquid." If any Fund holds
illiquid stripped securities, the amount it can hold will be subject to
its investment policy limiting investments in illiquid securities to 15%
of that Fund's assets.
The Income Funds may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the mortgage-
backed securities in which the Funds may invest. The Funds are required
to identify cash, U.S. Government securities or other high-grade debt
securities to its custodian bank in an amount equal to its obligation
under the forward roll. The main risk of this investment strategy is risk
of default by the counterparty.
The Income Funds may also invest in asset-backed securities, which
are securities that represent fractional undivided interests in pools of
consumer loans and trade receivables, similar in structure to the
mortgage-backed securities in which the Fund may invest, described above.
Payments of principal and interest are passed through to holders of asset-
backed securities and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee
by another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally
applies to only a fraction of the asset-backed security's par value until
exhausted.
Risk Factors. The securities in which High Income Fund and Strategic Bond
Fund principally invest are considered speculative and involve greater
risk than lower yielding, higher rated fixed-income securities, while
providing higher yields than such securities. Lower rated securities may
be less liquid, and significant losses could be experienced if a
substantial number of other holders of such securities decide to sell at
the same time. Other risks may involve the default of the issuer or price
changes in the issuer's securities due to changes in the issuer's
financial strength or economic conditions. Issuers of lower rated or
unrated securities are generally not as financially secure or creditworthy
as issuers of higher-rated securities. These Funds are not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced. These risks are discussed in more detail in the
Statement of Additional Information.
Investment Objectives and Policies - Capital Appreciation Fund, Growth
Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities
Fund.
Capital Appreciation Fund. In seeking its objective of capital
appreciation, Capital Appreciation Fund will emphasize investments in
securities of "growth-type" companies. Such companies are believed to
have relatively favorable long-term prospects for increasing demand for
their goods or services, or to be developing new products, services or
markets, and normally retain a relatively larger portion of their earnings
for research, development and investment in capital assets. "Growth-type"
companies may also include companies developing applications for recent
scientific advances. Capital Appreciation Fund may also invest in
cyclical industries and in "special situations" that the Manager believes
present opportunities for capital growth. "Special situations" are
anticipated acquisitions, mergers or other unusual developments which, in
the opinion of the Manager, will increase the value of an issuer's
securities, regardless of general business conditions or market movements.
An additional risk is present in this type of investment since the price
of the security may be expected to decline if the anticipated development
fails to occur.
Growth Fund. In seeking its objective of capital appreciation, Growth
Fund will emphasize investments in securities of well-known and
established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (having an
operating history of at least five years, including predecessors).
Current income is a secondary consideration in the selection of Growth
Fund's portfolio securities.
Multiple Strategies Fund. The objective of Multiple Strategies Fund is
to seek a high total investment return, which includes current income as
well as capital appreciation in the value of its shares. In seeking that
objective, Multiple Strategies Fund may invest in equity securities
(including common stocks, preferred stocks, convertible securities and
warrants), debt securities (including bonds, high yield securities,
participation interests, asset-backed securities, private-label mortgage-
backed securities and CMOs, zero coupon securities and U.S. Government
obligations, described above under "Investment Objectives and Policies -
High Income Fund, Bond Fund and Strategic Bond Fund" and under
"Participation Interests" below) and cash and cash equivalents (described
above as the types of instruments in which the Money Fund may invest).
The composition of Multiple Strategies Fund's portfolio among the
different types of permitted investments will vary from time to time based
upon the Manager's evaluation of economic and market trends and perceived
relative total anticipated return from such types of securities.
Accordingly, there is neither a minimum nor a maximum percentage of
Multiple Strategies Fund's assets that may, at any given time, be invested
in any of the types of investments identified above. In the event future
economic or financial conditions adversely affect equity securities, it
is expected that Multiple Strategies Fund would assume a defensive
position by investing in debt securities (with an emphasis on securities
maturing in one year or less from the date of purchase), or cash and cash
equivalents.
Growth & Income Fund. The objective of Growth & Income Fund is to seek
a high total return, which includes growth in the value of its shares as
well as current income from equity and debt securities. In seeking that
objective, Growth & Income Fund may invest in equity and debt securities.
Its equity investments will include common stocks, preferred stocks,
convertible securities and warrants. Its debt securities will include
bonds, participation interests, asset-backed securities, private-label
mortgage-backed securities and CMOs, zero coupon securities and U.S.
government obligations. From time to time Growth & Income Fund may focus
on small to medium capitalization issuers, the securities of which may be
subject to greater price volatility than those of larger capitalized
issuers.
The composition of Growth & Income Fund's portfolio among equity and
fixed-income investments will vary from time to time based upon the
Manager's evaluation of economic and market trends and perceived relative
total anticipated return from such types of investments. Accordingly,
there is neither a minimum nor a maximum percentage of Growth & Income
Fund's assets that may, at any given time, be invested in either type of
investment. In the event future economic or financial conditions
adversely affect equity securities, it is expected that Growth & Income
Fund would assume a defensive position by investing in debt securities
(with an emphasis on securities maturing in one year or less from the date
of purchase).
Global Securities Fund. The objective of Global Securities Fund is to
seek long-term capital appreciation. Current income is not an objective.
In seeking its objective, the Fund will invest a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies
(those which, in the opinion of the Manager, have relatively favorable
long-term prospects for increasing demand or which develop new products
and retain a significant part of earnings for research and development),
cyclical industries (e.g. base metals, paper and chemicals) and special
investment situations which are considered to have appreciation
possibilities (e.g., private placements of start-up companies). The Fund
may invest without limit in "foreign securities" (as defined below in
"Other Investment Techniques and Strategies - Foreign Securities") and
thus the relative amount of such investments will change from time to
time. It is currently anticipated that Global Securities Fund may invest
as much as 80% or more of its total assets in foreign securities. See
"Investment Policies and Strategies - Foreign Securities," below, for
further discussion as to the possible rewards and risks of investing in
foreign securities and as to additional diversification requirements for
the Fund's foreign investments.
- Can the Funds' Investment Objectives and Policies Change? The
Funds have investment objectives, described above, as well as investment
policies each follows to try to achieve its objectives. Additionally, the
Funds use certain investment techniques and strategies in carrying out
those investment policies. The Funds' investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
Each Fund's investment objectives are fundamental policies.
The Trust's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. 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).
Other Investment Techniques and Strategies. Some of the Funds can also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on
their use that are designed to reduce some of the risks.
- Special Risks - Borrowing for Leverage. From time to time, Capital
Appreciation Fund, Strategic Bond Fund, Growth Fund, Multiple Strategies
Fund, Growth & Income Fund and Global Securities Fund may borrow money
from banks to buy securities. These Funds will borrow only if they can
do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." This investing
technique may subject the Fund to greater risks and costs than funds that
do not borrow. These risks may include the possibility that a Fund's net
asset value per share will fluctuate more than funds that don't borrow,
since a Fund pays interest on borrowings and interest expense affects a
Fund's share price and yield. Growth Fund may borrow only up to 5% of the
value of its total assets and Global Securities Fund may borrow up to 10%
of the value of its total assets. Global Securities Fund will not borrow,
if as a result of such borrowing more than 25% of its total assets would
consist of investments in when-issued or delayed delivery securities or
borrowed funds. Borrowing for Leverage is subject to regulatory limits
described in more detail in "Borrowing" in the Statement of Additional
Information.
Each of the above Funds has undertaken to limit borrowing by that
Fund to 25% of the value of its net assets, which is further limited to
10% if the borrowing is for a purpose other than to facilitate
redemptions. Neither percentage limitation is a fundamental policy.
- Investments In Small, Unseasoned Companies. Money Fund, Capital
Appreciation Fund, Multiple Strategies Fund, Growth & Income Fund, Growth
Fund, Global Securities Fund and Strategic Bond Fund may each invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three years, counting the operations of
any predecessors. Securities of these companies may have limited
liquidity (which means that the Fund may have difficulty selling them at
an acceptable price when it wants to) and the prices of these securities
may be volatile. It is not currently intended that investments in
securities of companies (including predecessors) that have operated less
than three years will exceed 5% of the net assets of either Growth Fund
or Multiple Strategies Fund. Money Fund, Capital Appreciation Fund,
Growth & Income Fund, Global Securities Fund and Strategic Bond Fund are
not subject to this restriction.
- Participation Interests. Strategic Bond Fund, Global Securities
Fund, High Income Fund and Multiple Strategies Fund and Growth & Income
Fund may acquire participation interests in U.S. dollar-denominated loans
that are made to U.S. or foreign companies (the "borrower"). They may be
interests in, or assignments of, the loan, and are acquired from the banks
or brokers that have made the loan or are members of the lending
syndicate. No more than 5% of a Fund's net assets can be invested in
participation interests of the same borrower. The Manager has set certain
creditworthiness standards for issuers of loan participations, and
monitors their creditworthiness. The value of loan participation
interests primarily depends upon the creditworthiness of the borrower, and
its ability to pay interest and principal. Borrowers may have difficulty
making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net asset
value of its shares. Some borrowers may have senior securities rated as
low as "C" by Moody's or "D" by Standard & Poor's, but may be deemed
acceptable credit risks. Participation interests are subject to each
Fund's limitations on investments in illiquid securities. See "Illiquid
and Restricted Securities" below.
- Foreign Securities. Each Fund may purchase "foreign securities"
that is, securities of companies organized under the laws of countries
other than the United States that are traded on foreign securities
exchanges or in the foreign over-the-counter markets, and each Fund other
than Money Fund may purchase securities issued by U.S. corporations
denominated in non-U.S. currencies. Money Fund may invest in certain
dollar-denominated foreign securities which are "Eligible Securities" as
described above. Securities of foreign issuers that are represented by
American Depository Receipts ("ADRs"), or that are listed on a U.S.
securities exchange or are traded in the United States over-the-counter
markets are not considered "foreign securities" for this purpose because
they are not subject to many of the special considerations and risks
(discussed below and in the Statement of Additional Information) that
apply to foreign securities traded and held abroad. Each Fund may also
invest in debt obligations issued or guaranteed by foreign corporations,
certain supranational entities (such as the World Bank) and foreign
governments (including political subdivisions having taxing authority) or
their agencies or instrumentalities, subject to the investment policies
described above. Foreign securities which the Funds may purchase may be
denominated in U.S. dollars or in non-U.S. currencies. The Funds may
convert U.S. dollars into foreign currency, but only to effect securities
transactions and not to hold such currency as an investment, other than
in hedging transactions (see "Hedging" below).
It is currently intended that each Fund (other than Global Securities
Fund, Multiple Strategies Fund, Growth & Income Fund or Strategic Bond
Fund) will invest no more than 25% of its total assets in foreign
securities or in government securities of any foreign country or in
obligations of foreign banks. Multiple Strategies Fund will invest no
more than 35% of its total assets in foreign securities or in government
securities of any foreign country or in obligations of foreign banks.
Global Securities Fund, Growth & Income Fund and Strategic Bond Fund have
no restrictions on the amount of their assets that may be invested in
foreign securities. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
highly speculative.
The Funds have undertaken to comply with the foreign country
diversification guidelines of Section 10506 of the California Insurance
Code, as follows: Whenever a Fund's investment in foreign securities
exceeds 25% of its net assets, it will invest its assets in securities of
issuers located in a minimum of two different foreign countries; this
minimum is increased to three foreign countries if foreign investments
comprise 40% or more of a Fund's net assets, to four if 60% or more and
to five if 80% or more. In addition, no such Fund will have more than 20%
of its net assets invested in securities of issuers located in any one
foreign country; that limit is increased to 35% for Australia, Canada,
France, Japan, the United Kingdom or Germany.
The percentage of each Fund's assets that will be allocated to
foreign securities will vary depending on the relative yields of foreign
and U.S. securities, the economies of foreign countries, the condition of
their financial markets, the interest rate climate of such countries, and
the relationship of such countries' currencies to the U.S. dollar. These
factors are judged on the basis of fundamental economic criteria (e.g.,
relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and political
data. Subsequent foreign currency losses may result in a Fund having
previously distributed more income in a particular period than was
available from investment income, which could result in a return of
capital to shareholders. Each such Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon
market conditions and subject to the above diversification requirements
those of a single country. In summary, foreign securities markets may be
less liquid and more volatile than the markets in the U.S. Risks of
foreign securities investing may include foreign withholding taxation,
changes in currency rates or currency blockage, currency exchange costs,
difficulty in obtaining and enforcing judgments against foreign issuers,
relatively greater brokerage and custodial costs, risk of expropriation
or nationalization of assets, less publicly available information, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards. See "Investment Objectives and Policies - Foreign
Securities" in the Statement of Additional Information for further
details.
- Special Risks of "Emerging Markets". Investments in securities
traded in "emerging markets" (which are trading markets that are
relatively new in countries with developing economies) involve more risks
than other foreign securities. Emerging markets may have extended
settlement periods for securities transactions so that a Fund might not
receive the repayment of principal or income on its investments on a
timely basis, which could affect its net asset value. There may be a lack
of liquidity for emerging market securities. Interest rates and foreign
currency exchange rates may be more volatile. Government limitations on
foreign investments may be more likely to be imposed than in more
developed countries. Emerging markets may respond in a more volatile
manner to economic changes than those of more developed countries.
- Warrants and Rights. Warrants basically are options to purchase
stock at set prices that are valid for a limited period of time. Rights
are options to purchase securities, normally granted to current holders
by the issuer. Each of the Funds (except Money Fund) may invest up to 5%
of its total assets in warrants and rights. That 5% does not apply to
warrants and rights that have been acquired as part of units with other
securities or that were attached to other securities. No more than 2% of
each such Fund's total assets may be invested in warrants that are not
listed on either the New York or American Stock Exchanges. For further
details about these investments, see "Warrants and Rights" in the
Statement of Additional Information.
- Repurchase Agreements. Each Fund may acquire securities that are
subject to repurchase agreements to generate income while providing
liquidity. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there
is any delay in its ability to do so. No Fund will enter into a
repurchase agreement that causes more than 15% of its net assets (10% of
net assets for Money Fund) to be subject to repurchase agreements having
a maturity beyond seven days. There is no limit on the amount of a Fund's
net assets that may be subject to repurchase agreements of seven days or
less.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Board of Trustees, the Manager determines
the liquidity of certain of a 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 resale
or cannot be sold publicly until it is registered under the Securities Act
of 1933. No Fund will invest more than 15% of its net assets in illiquid
or restricted securities; no Fund presently intends to invest more than
10% of its net assets in illiquid or restricted securities. This policy
applies to participation interests, bank time deposits, master demand
notes and repurchase transactions maturing in more than seven days, over-
the-counter ("OTC") options held by any Fund and that portion of assets
used to cover such OTC options; it does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers.
- Loans of Portfolio Securities. To attempt to increase its income,
each Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. Each Fund must receive collateral for such loans.
These loans are limited to 25% of the Fund's net assets and are subject
to other conditions described in the Statement of Additional Information.
The Funds presently do not intend to lend portfolio securities, but if any
Fund does, the value of securities loaned is not expected to exceed 5% of
the value of that Fund's total assets.
- "When-Issued" or Delayed Delivery Transactions. Each Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to a Fund
if the value of the security changes prior to the settlement date.
- Hedging. As described below, the Funds (other than Money Fund)
may purchase and sell certain kinds of futures contracts, put and call
options, forward contracts, and options on futures and broadly-based stock
or bond indices, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Funds do not use hedging
instruments for speculative purposes, and have limits on the use of them,
described below. The hedging instruments the Funds may use are described
below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Funds may buy and sell options, futures and forward contracts for
a number of purposes. They may do so to try to manage their exposure to
the possibility that the prices of their portfolio securities may decline,
or to establish a position in the securities market as a temporary
substitute for purchasing individual securities. High Income Fund, Bond
Fund, Multiple Strategies Fund, Growth & Income Fund and Strategic Bond
Fund may do so to try to manage their exposure to changing interest rates.
Some of these strategies, such as selling futures, buying puts and writing
covered calls, hedge the Funds' portfolios against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Funds' exposure to the securities market. Forward
contracts are used to try to manage foreign currency risks on Funds'
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Funds own,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Funds for liquidity purposes or to raise cash to distribute to
shareholders.
- Futures. Global Securities Fund, Capital Appreciation Fund,
Growth Fund, Multiple Strategies Fund, Growth & Income Fund and Strategic
Bond Fund may buy and sell futures contracts that relate to broadly-based
stock indices (these are referred to as Stock Index Futures). The latter
three Funds and Global Securities Fund, Bond Fund and High Income Fund may
buy and sell futures contracts that relate to broadly-based securities
indices (these are referred to as Stock Index Futures and Bond Index
Futures) or to interest rates (these are referred to as Interest Rate
Futures). These types of Futures are described in "Hedging" in the
Statement of Additional Information.
- Put and Call Options. The Funds may buy and sell certain kinds
of put options (puts) and call options (calls).
The Funds may buy calls only on securities, broadly-based stock and
bond indices, foreign currencies and Futures that the Fund is permitted
to buy and sell (as explained above) or to terminate their obligation on
a call that the Fund previously wrote. Each Fund may write (that is,
sell) covered call options on up to 100% of its assets. When a Fund
writes a call, it receives cash (called a premium). The call gives the
buyer the ability to buy the investment on which the call was written from
that Fund at the call price during the period in which the call may be
exercised. If the value of the investment does not rise above the call
price, it is likely that the call will lapse without being exercised,
while the Fund keeps the cash premium (and the investment).
The Funds may purchase put options. Buying a put on an investment
gives that Fund the right to sell the investment at a set price to a
seller of a put on that investment. The Funds can buy only those puts
that relate to (1) securities (whether or not that Fund owns such
securities), (2) Futures that the Fund is permitted to buy and sell (as
explained above), (3) broadly-based stock or bond indices or (4) foreign
currencies. A Fund can buy a put on a Future whether or not that Fund
owns the particular Future in its portfolio. A Fund may not sell a put
other than a put that it previously purchased.
The Funds may buy and sell puts and calls only if certain conditions
are met: (1) calls the Funds buy or sell must be listed on a securities
or commodities exchange, or quoted on the Automated Quotation System
("NASDAQ") of The Nasdaq Stock Market, Inc.; (2) in the case of puts and
calls on foreign currency, they must be traded on a securities or
commodities exchange, or in the over-the-counter market, or quoted by
recognized dealers in those options; (3) none of the Funds will write puts
if, as a result, more than 50% of its net assets would be required to be
segregated liquid assets; (4) each call the Funds write must be "covered"
while it is outstanding: that means a Fund must own the security on which
the call was written; calls (including calls on Futures) must be covered
by securities or other liquid assets a Fund owns and segregates to enable
it to satisfy its obligations if the call is exercised; (5) a Fund may
write calls on Futures contracts it owns, but these calls must be covered
by securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised; (6) a call
or put option may not be purchased if the value of all of a Fund's put and
call options would exceed 5% of that Fund's total assets. No trading or
listing requirement applies to calls written by a Fund.
If a call written by a Fund is exercised, the Fund forgoes any
possible profit from an increase in the market price of the underlying
security over the exercise price less the commissions paid on the sale.
In addition, the Fund could experience capital losses which might cause
previously distributed short-term capital gains to be recharacterized as
non-taxable return of capital to shareholders.
- Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for
future delivery at a fixed price. The Funds (other than Money Fund) use
them to "lock-in" the U.S. dollar price of a security denominated in a
foreign currency that a Fund has bought or sold, or to protect against
losses from changes in the relative values of the U.S. dollar and a
foreign currency. Such Funds may also use "cross hedging," where a Fund
hedges against changes in currencies other than the currency in which a
security it holds is denominated.
- Interest Rate Swaps. Strategic Bond Fund, High Income Fund, Bond
Fund and Growth & Income Fund can also enter into interest rate swap
transactions. In an interest rate swap, a Fund and another party exchange
their right to receive or their obligation to pay interest on a security.
For example, they may swap a right to receive floating rate payments for
fixed rate payments. A Fund enters into swaps only on securities it owns.
Each of these Funds may not enter into swaps with respect to more than 50%
of its total assets. Also, each Fund will segregate liquid assets (such
as cash or U.S. Government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily, as needed.
Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce that Fund's return. A 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 Funds. There are also special risks in particular hedging
strategies. If a covered call written by a Fund is exercised on a
security that has increased in value, that 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. The use of
forward contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
To limit its exposure in foreign currency exchange contracts, each Fund
limits its exposure to the amount of its assets denominated in the foreign
currency. Interest rate swaps are subject to credit risks (if the other
party fails to meet its obligations) and also to interest rate risks. The
Funds could be obligated to pay more under their swap agreements than
they receive under them, as a result of interest rate changes. These
risks are described in greater detail in the Statement of Additional
Information.
- Derivative Investments. Each Fund (other than Money Fund) can
invest in a number of different kinds of "derivative investments." Such
Funds may use some types of derivatives for hedging purposes, and may
invest in others because they offer the potential for increased income and
principal value. 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 investments include exchange-
traded options and futures contracts (please refer to "Hedging").
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is 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 these risks can mean
that a Fund will realize less income than expected from its investments,
or that it can lose part of the value of its investments, which will
affect that Fund's share price. Certain derivative investments held by
the Funds may trade in the over-the-counter markets and may be illiquid.
If that is the case, the Funds' investment in them will be limited, as
discussed in "Illiquid and Restricted Securities."
One type of derivative the Funds (other than Money Fund) may invest
in is an "index-linked" note. On the maturity of this type of debt
security, payment is made based on the performance of an underlying index,
rather than based on a set principal amount for a typical note. Another
derivative investment such Funds may invest in are currency-indexed
securities. These are typically short-term or intermediate-term debt
securities. Their value at maturity or the interest rates at which they
pay income are determined by the change in value of the U.S. dollar
against one or more foreign currencies or an index. In some cases, these
securities may pay an amount at maturity based on a multiple of the amount
of the relative currency movements. This variety of index security offers
the potential for greater income but at a greater risk of loss.
Other derivative investments the Funds (other than Money Fund) may
invest in include "debt exchangeable for common stock" of an issuer or
"equity-linked debt securities" of an issuer. At maturity, the debt
security is exchanged for common stock of the issuer or is payable in an
amount based on the price of the issuer's common stock 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 (because the
price of the issuer's common stock is not as high as was expected).
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Funds may engage frequently in
short-term trading to try to achieve their objectives. High turnover and
short-term trading involve correspondingly greater commission expenses and
transaction costs for Capital Appreciation Fund, Growth Fund, Multiple
Strategies Fund, Growth & Income Fund and Global Securities Fund and to
a lesser extent, higher transaction costs for Money Fund, Bond Fund,
Strategic Bond Fund and High Income Fund. The "Financial Highlights,"
above show the portfolio turnover for the past fiscal years for each Fund.
If any Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify under the
tax laws as a regulated investment company (see "Dividends, Capital Gains
and Taxes," below).
- 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 its 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 Funds may not
sell securities short except that each Fund (except Money Fund) may sell
securities short in collateralized transactions referred to as "short
sales against-the-box", where the Funds own an equivalent amount of the
securities sold short. No more than 15% of any Fund's net assets will be
held as collateral for such short sales at any one time.
Other Investment Restrictions
Each of the Funds has certain investment restrictions which, together
with its investment objective, are fundamental policies. Under some of
those restrictions, each Fund cannot: (1) with respect to 75% of its total
assets, invest in securities (except those of the U.S. Government or its
agencies or instrumentalities) of any issuer if immediately thereafter,
either (a) more than 5% of that Fund's total assets would be invested in
securities of that issuer, or (b) that Fund would then own more than 10%
of that issuer's voting securities or 10% in principal amount of the
outstanding debt securities of that issuer (the latter limitation on debt
securities does not apply to Strategic Bond Fund); (2) lend money except
in connection with the acquisition of debt securities which a Fund's
investment policies and restrictions permit it to purchase; the Funds may
also make loans of portfolio securities (see "Loans of Portfolio
Securities"); (3) pledge, mortgage or hypothecate any assets to secure a
debt; the escrow arrangements which are involved in options trading are
not considered to involve such a mortgage, hypothecation or pledge; (4)
concentrate investments in any particular industry, other than securities
of the U.S. Government or its agencies or instrumentalities (Money Fund,
Bond Fund and High Income Fund, only); therefore these Funds will not
purchase the securities of issuers primarily engaged in the same industry
if more than 25% of the total value of that Fund's assets would (in the
absence of special circumstances) consist of securities of companies in
a single industry; however, there is no limitation as to concentration of
investments by Money Fund in obligations issued by domestic banks, foreign
branches of domestic banks (if guaranteed by the domestic parent), savings
and loan associations or in obligations issued by the federal government
and its agencies and instrumentalities; and (5) deviate from the
percentage requirements and other restrictions listed under "Warrants and
Rights," and the first paragraph under "Special Risks-Borrowing for
Leverage." None of the percentage limitations and restrictions described
above and in the Statement of Additional Information for the Funds with
respect to writing covered calls, hedging, short sales and derivatives is
a fundamental policy.
All of the percentage restrictions described above and elsewhere in
this Prospectus, other than those described under "Other Investment
Techniques and Strategies--Special Risks-Borrowing for Leverage," apply
only at the time a Fund purchases a security. A Fund need not dispose of
a security merely because the size of the Fund's assets has changed or the
security has increased in value relative to the size of the Fund. Money
Fund has separately undertaken to exclude savings and loan associations
from the exception to the concentration limitation set forth under
investment restriction (4), above. There are other fundamental policies
discussed in the Statement of Additional Information.
The Trustees of the Trust are required to monitor events to identify
any irreconcilable conflicts which may arise between the variable life
insurance policies and variable annuity contracts that invest in the
Funds. Should any conflict arise which ultimately requires that any
substantial amount of assets be withdrawn from any Fund, its operating
expenses could increase.
How the Funds are Managed
Organization and History. The Trust was organized in 1984 as a
Massachusetts business trust. The Trust is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest. It consists of nine separate Funds - Money
Fund, Bond Fund and Growth Fund, all organized in 1984, High Income Fund,
Capital Appreciation Fund and Multiple Strategies Fund, all organized in
1986, Global Securities Fund, organized in 1990, Strategic Bond Fund,
organized in 1993 and Growth & Income Fund, organized in 1995.
The Trust 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 Funds'
activities, review performance, and review the actions of the Manager.
"Trustees and Officers of the Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Trust will normally not hold
annual meetings of its shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call
a meeting to remove a Trustee or to take other action described in the
Trust's Declaration of Trust.
The Manager and Its Affiliates. The Funds are managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Funds'
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 Investment Advisory Agreements for each Fund which state the
Manager's responsibilities. The Agreements set forth the fees paid by
each Fund to the Manager and describe the expenses that each Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $50 billion
as of March 31, 1996, held in more than 2.8 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.
- Portfolio Managers. The Portfolio Manager of High Income Fund,
Bond Fund, Multiple Strategies Fund and Strategic Bond Fund is David P.
Negri, joined by Richard H. Rubinstein for Multiple Strategies Fund and
by Arthur P. Steinmetz for Strategic Bond Fund. They are the persons
principally responsible for the day-to-day management of those Funds since
July 1989, January 1990, July 1989 (April 1991 for Mr. Rubinstein) and May
1993, respectively. During the past five years, Messrs. Steinmetz and
Negri have also served as officers of other Oppenheimer funds. During the
past five years, Mr. Rubinstein has served as an officer of other
Oppenheimer funds and was formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer Capital Corp., an investment
adviser. The Portfolio Manager of Global Securities Fund is William
Wilby. He has been the person principally responsible for the day-to-day
management of that Fund's portfolio since December, 1995. During the past
five years, Mr. Wilby has also served as an officer and portfolio manager
for other Oppenheimer funds, prior to which he was an international
investment strategist at Brown Brothers Harriman & Co., and a Managing
Director and Portfolio Manager at AIG Global Investors. The Portfolio
Manager of the Money Fund is Dorothy G. Warmack. On May 1, 1996, she
became the person principally responsible for the day-to-day management
of that Fund's portfolio. During the past five years, she has served as
an officer of other Oppenheimer funds. The Portfolio Manager of Growth
Fund is Jane Putnam. She has been the person principally responsible for
the day-to-day management of that Fund's portfolio since May 1994. During
the past five years, Ms. Putnam has also served as an Associate Portfolio
Manager for other Oppenheimer funds and formerly served as a portfolio
manager and equity research analyst for Chemical Bank. The Portfolio
Manager of Capital Appreciation Fund is Paul LaRocco. He has been the
person principally responsible for the day-to-day management of that
Fund's portfolio since January 1994. During the past five years, he has
also served as an Associate Portfolio Manager for other Oppenheimer funds
and formerly served as a securities analyst with Columbus Circle
Investors, prior to which he was an investment analyst for Chicago Title
& Trust Co. The Portfolio Manager of Growth & Income Fund is Robert J.
Milnamow and the Associate Portfolio Manager of that Fund is Michael S.
Levine. Mr. Milnamow has been the person principally responsible for the
day-to-day management of that Fund since November 1995. He is an officer
of other Oppenheimer funds. During the past five years, Mr. Milnamow was
a portfolio manager with Phoenix Securities Group, and Mr. Levine was a
portfolio manager and research associate for Amos Securities, Inc., before
which he was an analyst for Shearson Lehman Hutton, Inc. Messrs. Negri,
Evans, Milnamow and Rubinstein and Ms. Warmack are Vice Presidents of the
Manager, Mr. Levine is an Assistant Vice President of the Manager, Messrs.
Steinmetz and Wilby are Senior Vice Presidents of the Manager, and Ms.
Putnam and Mr. LaRocco are Assistant Vice Presidents of the Manager. Each
of the Portfolio Managers named above is also a Vice President of the
Trust.
- Fees and Expenses. The monthly management fee payable to the
Manager is computed separately on the net assets of each Fund as of the
close of business each day. The management fee rates are as follows: (i)
for Money Fund: 0.450% of the first $500 million of net assets, 0.425%
of the next $500 million, 0.400% of the next $500 million, and 0.375% of
net assets over $1.5 billion; (ii) for Capital Appreciation Fund, Growth
Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities
Fund: 0.75% of the first $200 million of net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million, 0.66% of the next $200
million, and 0.60% of net assets over $800 million; and (iii) for High
Income Fund, Bond Fund and Strategic Bond Fund: 0.75% of the first $200
million of net assets, 0.72% of the next $200 million, 0.69% of the next
$200 million, 0.66% of the next $200 million, 0.60% of the next $200
million, and 0.50% of net assets over $1 billion.
During the fiscal year ended December 31, 1995, the management fee
(computed on an annualized basis as a percentage of the net assets of all
the Funds as of the close of business each day) and the total operating
expenses as a percentage of average net assets of each Fund were as
follows:
Total
Management Operating
Fees Expenses(1)
Money Fund .45% .51%
High Income Fund .75% .81%
Bond Fund .75% .80%
Capital Appreciation Fund .74% .78%
Growth Fund .75% .79%
Multiple Strategies Fund .74% .77%
Global Securities Fund .74% .89%
Strategic Bond Fund .75% .85%
Growth & Income Fund(2) .75% .93%
____________________
(1) This table does not reflect expenses that apply at the separate
account level or to related insurance products.
(2) Because Growth & Income Fund is a new fund and has not completed a
full fiscal year, the expenses shown above are based on amounts estimated
to be payable in the current fiscal year. Growth & Income Fund's total
operating expenses for the period from commencement of operations (July
5, 1995) to December 31, 1995 were 2.07% (on an annualized basis) as a
percentage of net assets.
The Funds pay expenses related to their daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Funds' 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 is contained in the Statement of Additional Information.
There is also information about the Funds' brokerage policies and
practices in "Brokerage Policies of the Funds" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Funds' portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreements to consider whether brokers have sold shares of the Funds or
any other funds for which the Manager serves as investment adviser.
- Shareholder Inquiries. Inquiries by policyowners for Account
information are to be directed to the insurance company issuing the
Account at the address or telephone number shown in the accompanying
Account Prospectus.
Performance of the Funds
Explanation of Performance Terminology. Money Fund uses the term "yield"
to illustrate its performance. High Income Fund, Bond Fund and Strategic
Bond Fund use the terms "yield," "total return," and "average annual total
return" to illustrate performance. All the Funds, except Money Fund, use
the terms "average annual total return" and "total return" to illustrate
their performance. 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 Funds' total returns and yields
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 and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Funds' performance. Each Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio and
expenses.
- Yields. Money Fund's "yield" is the income generated by an
investment in that Fund over a seven-day period, which is then
"annualized." In annualizing, the amount of income generated by the
investment during that seven days is assumed to be generated each week
over a 52-week period, and is shown as a percentage of the investment.
The compounded "effective yield" is calculated similarly, but the
annualized income earned by an investment in Money Fund is assumed to be
reinvested. The compounded effective yield will therefore be slightly
higher than the yield because of the effect of the assumed reinvestment.
Yield for High Income Fund, Strategic Bond Fund or Bond Fund will be
computed in a standardized manner for mutual funds, by dividing that
Fund's net investment income per share earned during a 30-day base period
by the maximum offering price (equal to the net asset value) per share on
the last day of the period. This yield calculation is compounded on a
semi-annual basis, and multiplied by 2 to provide an annualized yield. The
Statement of Additional Information describes a dividend yield and a
distribution return that may also be quoted for these Funds.
- Total Returns. There are different types of total returns used to
measure each 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 Funds' actual year-by-year
performance.
How Have the Funds Performed? Below is a discussion by the Manager of the
Funds' performance during their last fiscal year ended December 31, 1995,
followed by a graphical comparison of each Fund's performance, except
Money Fund, to an appropriate broad-based market index.
Management's Discussion of Performance. During the Funds' fiscal year
ended December 31, 1995, the bond markets and the equity markets
experienced overall price increases in response to declines in interest
rates and favorable corporate profits in the face of slower economic
growth. During that period, the Manager emphasized the following
investment strategies and techniques. High Income Fund focused on the
higher quality tiers of below-investment grade bonds and sought value in
the housing, gaming and energy sectors, and invested in bonds of growth
companies such as foreign cable companies. Bond Fund reacted to a strong
rally in treasury securities by reducing its treasury allocation in favor
of increased allocations in different categories of U.S. Government and
corporate bonds. It reduced its holdings in utilities and cyclical
companies such as mining and metals companies in favor of companies
expected to experience earnings growth, such as cable, communications,
broadcasting and media firms. Capital Appreciation Fund experienced
increased investor interest in small-cap stocks beginning in the third
quarter of 1995, prior to which small-cap stocks were not participating
fully in the stock market rally. Its focus throughout the fiscal year was
on individual companies that appear to have carved out a unique market
niche rather than on broad industry sectors. Growth Fund's strategy of
looking for growth at reasonable price lead it to invest substantially in
the technology and financial services sectors. Multiple Strategies Fund's
equity investments reflected large positions in technology and health care
stocks while its fixed-income positions were strategically positioned at
year-end fairly equally across U.S. treasuries, foreign bonds and
corporate high yield bonds, in part in reaction to higher yields available
outside of the U.S. Growth & Income Fund had significant holdings in
technology stocks (including semiconductor makers) healthcare and
financial services. Global Securities Fund's investments reflected
perceived worldwide trends such as telecommunications expansion, emerging
consumer markets, infrastructure development and global integration, with
increased exposure to Japanese and European export-oriented companies and
high-quality technology stocks. Strategic Bond Fund added to its position
in bonds of selected East Asian markets and private label mortgage-backed
securities, in an effort to diversify among typically uncorrelated sectors
of the fixed-income market.
- Comparing each Fund's Performance to the Market. The charts below
show the performance of hypothetical $10,000 investments in each Fund
(except for Money Fund) held until December 31, 1995. Performance
information does not reflect charges that apply to separate accounts
investing in the Funds and is not restated to reflect the increased
management fee rates that took effect September 1, 1994. If these charges
and expenses were taken into account, performance would be lower.
High Income Fund's performance is compared to the performance of the
Salomon Brothers High Yield Market Index which is an unmanaged index of
below-investment grade (but rated at least BB+/Ba1 by Standard & Poor's
or Moody's) U.S. corporate debt obligations, widely-recognized as a
measure of the performance of the high-yield corporate bond market. Bond
Fund's performance is compared to the performance of the Lehman Brothers
Corporate Bond Index, which is an unmanaged index of publicly-issued non-
convertible investment grade corporate debt of U.S. issuers, widely
recognized as a measure of the U.S. fixed-rate corporate bond market. The
performance of Capital Appreciation Fund, Growth Fund and Growth & Income
Fund is compared to the performance of the S&P 500 Index, a broad-based
index of equity securities widely regarded as a general measurement of the
performance of the U.S. equity securities market. Multiple Strategies
Fund's performance is compared to the S&P 500 Index and the Lehman
Brothers Aggregate Bond Index, a broad-based, unmanaged index of U.S.
corporate bond issues, U.S. government securities and mortgage-backed
securities, widely recognized as a measure of the performance of the
domestic debt securities market. Global Securities Fund's performance is
compared to the Morgan Stanley World Index, an unmanaged index of issuers
listed on the stock exchanges of 20 foreign countries and the U.S., and
is widely recognized as a measure of global stock market performance.
Strategic Bond Fund's performance is compared to the Lehman Brothers
Aggregate Bond Index and the Salomon Brothers World Government Bond Index.
The Salomon Brothers World Government Bond Index is an unmanaged index of
fixed-rate bonds having a maturity of one year or more, and is widely
recognized as a benchmark of fixed income performance on a world-wide
basis. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none
of the data below shows the effect of taxes. Also, a Fund's performance
reflects the effect of that Fund's business and operating expenses. While
index comparisons may be useful to provide a benchmark for a Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the one index. Moreover, the index performance data
does not reflect any assessment of the risk of the investments included
in the index.
Comparison of Change in Value of $10,000 Hypothetical Investments in High
Income Fund Versus Salomon Brothers High Yield Market Index
(Graph comparing total return of High Income Fund shares to performance
of Salomon Brothers High Yield Market Index)
Average Annual Total Return at 12/31/95 (1)
1 year 5 years Life of Fund
20.37% 18.38% 13.27%
(1) The inception date of the Fund was 4/30/86. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Bond
Fund Versus Lehman Brothers Corporate Bond Index
(Graph comparing total return of Bond Fund shares to performance of Lehman
Brothers Corporate Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
17% 10.19% 9.35%
(1) The inception date of the Fund was 4/3/85. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Capital Appreciation Fund Versus S&P 500 Index
(Graph comparing total return of Capital Appreciation Fund shares to
performance of S&P 500 Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
32.52% 22.73% 15.20%
(1) The inception date of the Fund was 8/15/86. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Growth Fund Versus S&P 500 Index
(Graph comparing total return of Growth Fund shares to performance of S&P
500 Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
36.65% 16.30% 13.57%
(1) The inception date of the Fund was 4/3/85. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Multiple Strategies Fund Versus S&P 500 Index and Lehman Brothers
Aggregate Bond Index
(Graph comparing total return of Multiple Strategies Fund shares to
performance of S&P 500 Index and Lehman Brothers Aggregate Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
21.36% 12.05% 11.09%
(1) The inception date of the Fund was 2/9/87. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Global Securities Fund Versus Morgan Stanley World Index
(Graph comparing total return of Global Securities Fund shares to
performance of Morgan Stanley World Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
2.24% 9.53% 9.36%
(1) The inception date of the Fund was 11/12/90. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Strategic Bond Fund Versus Lehman Brothers Aggregate Bond Index and
Salomon Brothers World Government Bond Index
(Graph comparing total return of Strategic Bond Fund to performance of
Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government
Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year Life of Fund
15.33% 5.63%
______________
(1) The inception date of the Fund was 5/3/93. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Growth & Income Fund Versus S&P 500 Index
(Graph comparing total return of Growth & Income Fund to performance of
S&P 500)
Cumulative Total Return at 12/31/95 (1)
Life of Fund
25.25%
_________________________
(1) The inception date of the Fund was 7/5/95. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Shares of each Fund are offered only for purchase by Accounts as an
investment medium for variable life insurance policies and variable
annuity contracts, as described in the accompanying Account Prospectus.
The sale of shares will be suspended during any period when the
determination of net asset value is suspended and may be suspended by the
Board of Trustees whenever the Board judges it in that Fund's best
interest to do so. Shares of each Fund are offered at their respective
offering price, which (as used in this Prospectus and the Statement of
Additional Information) is net asset value (without sales charge).
All purchase orders are processed at the offering price next
determined after receipt by the Trust of a purchase order in proper form.
The offering price (and net asset value) is determined as of the close of
The New York Stock Exchange, which is normally 4:00 P.M., New York time,
but may be earlier on some days. Net asset value per share of each Fund
is determined by dividing the value of that Fund's net assets by the
number of its shares outstanding. The Board of Trustees has established
procedures for valuing each Fund's securities. In general, those
valuations are based on market value. Under Rule 2a-7, the amortized cost
method is used to value Money Fund's net asset value per share, which is
expected to remain fixed at $1.00 per share except under extraordinary
circumstances; there can be no assurance that Money Fund's net asset value
will not vary. Further details are in "About Your Account- How to Buy
Shares - Money Fund Net Asset Valuation" in the Statement of Additional
Information.
How to Sell Shares
Payment for shares tendered by an Account for redemption is made
ordinarily in cash and forwarded within seven days after receipt by the
Trust's transfer agent, OppenheimerFunds Services (the "Transfer Agent"),
of redemption instructions in proper form, except under unusual
circumstances as determined by the Securities and Exchange Commission.
The Trust understands that payment to the Account owner will be made in
accordance with the terms of the accompanying Account Prospectus. The
redemption price will be the net asset value next determined after the
receipt by the Transfer Agent of a request in proper form. The market
value of the securities in the portfolios of the Funds is subject to daily
fluctuations and the net asset value of the Funds' shares (other than
shares of the Money Fund) will fluctuate accordingly. Therefore, the
redemption value may be more or less than the investor's cost.
Dividends, Capital Gains And Taxes
Dividends of Money Fund. The Trust intends to declare Money Fund's
dividends from its net investment income on each day the New York Stock
Exchange is open for business. Such dividends will be payable on shares
held of record at the time of the previous determination of net asset
value. Daily dividends accrued since the prior dividend payment will be
paid to shareholders monthly as of a date selected by the Board of
Trustees. Money Fund's net income for dividend purposes consists of all
interest income accrued on portfolio assets, less all expenses of that
Fund for such period. Accrued market discount is included in interest
income; amortized market premium is treated as an expense. Although
distributions from net realized gains on securities, if any, will be paid
at least once each year, and may be made more frequently, Money Fund does
not expect to realize long-term capital gains, and therefore does not
contemplate payment of any capital gains distribution. Distributions from
net realized gains will not be distributed unless Money Fund's capital
loss carry forwards, if any, have been used or have expired. Money Fund
seeks to maintain a net asset value of $1.00 per share for purchases and
redemptions. To effect this policy, under certain circumstances the Money
Fund may withhold dividends or make distributions from capital or capital
gains (see "Money Fund Net Asset Valuation" in the Statement of Additional
Information).
Dividends and Distributions of High Income Fund, Bond Fund, Strategic Bond
Fund, Growth & Income Fund and Multiple Strategies Fund. The Trust
intends to declare High Income Fund, Bond Fund, Strategic Bond Fund,
Growth & Income Fund and Multiple Strategies Fund dividends quarterly,
payable in March, June, September and December.
Dividends and Distributions of Capital Appreciation Fund, Growth Fund and
Global Securities Fund. The Trust intends to declare Capital Appreciation
Fund, Growth Fund and Global Securities Fund dividends on an annual basis.
Capital Gains. Any Fund (other than Money Fund) may make a supplemental
distribution annually in December out of any net short-term or long-term
capital gains derived from the sale of securities, premiums from expired
calls written by the Fund, and net profits from hedging transactions.
Each such Fund may also make a supplemental distribution of capital gains
and ordinary income following the end of its fiscal year. All dividends
and capital gains distributions paid on shares of any of the Funds are
automatically reinvested in additional shares of that Fund at net asset
value determined on the distribution date. There are no fixed dividend
rates and there can be no assurance as to payment of any dividends or the
realization of any capital gains.
Tax Treatment to the Account As Shareholder. Dividends paid by each Fund
from its ordinary income and distributions of each Fund's net realized
short-term or long-term capital gains are includable in gross income of
the Accounts holding such shares. The tax treatment of such dividends and
distributions depends on the tax status of that Account.
Tax Status of the Funds. If the Funds qualify as "regulated investment
companies" under the Internal Revenue Code, the Trust will not be liable
for Federal income taxes on amounts paid as dividends and distributions
from any of the Funds. The Funds did qualify during their last fiscal
year and the Trust intends that they will qualify in current and future
years. However, the Code contains a number of complex tests relating to
qualification which any Fund might not meet in any particular year (see,
e.g., "Other Investment Techniques and Strategies - Portfolio Turnover").
If any Fund does not so qualify, it would be treated for tax purposes as
an ordinary corporation and would receive no tax deduction for payments
made to shareholders of that Fund. The above discussion relates solely to
Federal tax laws. This discussion is not exhaustive and a qualified tax
adviser should be consulted.
<PAGE>
APPENDIX A - DESCRIPTION OF TERMS
Some of the terms used in the Prospectus and the Statement of Additional
Information are described below:
Bank obligations include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay
funds deposited with it for a definite period of time (usually 14 days to
one year) at a stated interest rate. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft which has
been drawn on it by a customer; these instruments reflect the obligation
both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a
stated interest rate. Bank notes are short-term direct credit obligations
of the issuing bank or bank holding company.
Commercial paper consists of short-term (usually 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations. Variable rate master demand notes are obligations that permit
the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangement between the holder and the borrower. The
holder has the right to increase the amount under the note at any time up
to the face amount, or to decrease the amount borrowed, and the borrower
may repay up to the face amount of the note without penalty.
Corporate obligations are bonds and notes issued by corporations and other
business organizations, including business trusts, in order to finance
their long-term credit needs.
Letters of credit are obligations by the issuer (a bank or other person)
to honor drafts or other demands for payment upon compliance with
specified conditions.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include issues of the United States
Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the
authority of an act of Congress. Such agencies and instrumentalities
include, but are not limited to, Bank for Cooperatives, Federal Financing
Bank, Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association and Tennessee Valley
Authority. Issues of the United States Treasury are direct obligations
of the United States Government. Issues of agencies or instrumentalities
are (i) guaranteed by the United States Treasury, or (ii) supported by the
issuing agency's or instrumentality's right to borrow from the United
States Treasury, or (iii) supported by the issuing agency's or
instrumentality's own credit.
<PAGE>
APPENDIX B - DESCRIPTION OF SECURITIES RATINGS
This is a description of (i) the two highest rating categories for Short
Term Debt and Long Term Debt by the Rating Organizations referred to under
"Investment Objectives and Policies -- Money Fund", and (ii) additional
rating categories that apply principally to investments by High Income
Fund, Strategic Bond Fund and Bond Fund. The rating descriptions are
based on information supplied by the Rating Organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months), are
judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions
in well-established industries; (b) high rates of return on funds
employed; (c) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (d) broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
(e) well established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of
no more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned
"F-1+" or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including
bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as
follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
Long Term Debt Ratings.
These rating categories apply principally to investments by High Income
Fund, Strategic Bond Fund and Bond Fund. For Money Fund only, the two
highest rating categories of each Rating Organization are relevant for
securities purchased with a remaining maturity of 397 days or less, or for
rating issuers of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the
"Aaa" group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
"Aaa" securities.
A: Possess many favorable investment attributes and are to be considered
as upper-medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Considered medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Judged to have speculative elements; their future cannot be
considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Of poor standing and may be in default or there may be present
elements of danger with respect to principal or interest.
Ca: Represent obligations which are speculative in a high degree and are
often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" in each generic
rating classification from "Aa" through "B" in its corporate bond rating
system. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower
end of its generic rating category.
Standard & Poor's: Bonds are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
A: Have a strong capacity to pay principal and interest, although they
are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Regarded as having an adequate capacity to pay principal and
interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this
capacity than for bonds in the "A" category.
BB, B, CCC, CC: Regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates the lowest
degree of speculation and"CC" the highest degree. While such bonds will
likely have some equality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
Fitch:
AAA: Considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Plus (+) and minus (-)
signs are used in the "AA" category to indicate the relative position of
a credit within that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than the risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
Plus (+) and minus (-) signs are used in the "AA" category to indicate the
relative position of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are
rated as follows:
AAA: The lowest expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial such that adverse
changes in business, economic, or financial conditions are unlikely to
increase investment risks significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in
business, economic, or financial conditions may increase investment risk
albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to
denote relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings
assess the likelihood of receiving payment of principal and interest on
a timely basis and incorporate TBW's opinion as to the vulnerability of
the company to adverse developments, which may impact the market's
perception of the company, thereby affecting the marketability of its
securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its
natural money markets. If weakness or vulnerability exists in any aspect
of the company's business, it is entirely mitigated by the strengths of
the organization.
A/B: The company is financially very solid with a favorable track record
and no readily apparent weakness. Its overall risk profile, while low,
it not quite as favorable as for companies in the highest rating category.
<PAGE>
APPENDIX TO PROSPECTUS
Graphic material included in Prospectus of Oppenheimer Variable
Account Funds: "Comparison of Total Return of Oppenheimer Variable Account
Funds with Broad-Based Indices - Changes in Value of a $10,000
Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer
Variable Account Funds (the "Funds") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in
shares of the Funds for the life of each Fund (except Oppenheimer Money
Fund) and comparing such values with the same investments over the same
time periods in Broad-Based Indices. Set forth below are the relevant
data points that will appear on the linear graphs. Additional information
with respect to the foregoing, including a description of the Broad-Based
Indices, is set forth in the Prospectus under "How Have the Funds
Performed? - Management's Discussion of Performance."
Salomon
Brothers
Fiscal High Yield
Year Ended High Income Fund Market Index
04/30/86(1) $10,000 $10,000
12/31/86 $10,473 $10,510
12/31/87 $11,318 $10,990
12/31/88 $13,081 $12,664
12/31/89 $13,715 $13,012
12/31/90 $14,352 $12,096
12/31/91 $19,220 $16,851
12/31/92 $22,664 $19,859
12/31/93 $28,632 $24,878
12/31/94 $27,722 $24,569
12/31/95 $33,369 $29,412
Lehman
Brothers
Fiscal Corporate
Year Ended Bond Fund Bond Index
04/03/85 $10,000 $10,000
12/31/85 $11,882 $11,819
12/31/86 $13,084 $13,770
12/31/87 $13,415 $14,112
12/31/88 $14,618 $15,352
12/31/89 $16,565 $17,526
12/31/90 $17,877 $18,811
12/31/91 $21,028 $22,325
12/31/92 $22,395 $24,294
12/31/93 $25,315 $27,209
12/31/94 $24,825 $26,139
12/31/95 $24,444 $27,063
Fiscal Capital
Year Ended Appreciation Fund S&P 500 Index
08/15/86(1) $10,000 $10,000
12/31/86 $ 9,835 $ 9,684
12/31/87 $11,245 $10,192
12/31/88 $12,754 $11,880
12/31/89 $16,269 $15,638
12/31/90 $13,533 $15,152
12/31/91 $20,938 $19,758
12/31/92 $24,167 $21,261
12/31/93 $30,770 $23,400
12/31/94 $28,434 $23,706
12/31/95 $37,681 $32,504
Fiscal
Year Ended Growth Fund S&P 500 Index
04/30/85 $10,000 $10,000
12/31/85 $10,950 $12,076
12/31/86 $12,894 $14,331
12/31/87 $13,322 $15,083
12/31/88 $16,265 $17,581
12/31/89 $20,101 $23,141
12/31/90 $18,450 $22,422
12/31/91 $23,163 $29,238
12/31/92 $26,528 $31,463
12/31/93 $28,451 $34,668
12/31/94 $28,726 $35,081
12/31/95 $35,851 $39,495
Lehman
Brothers
Fiscal Multiple Aggregate
Year Ended Strategies Fund S&P 500 Index Bond Index
02/09/87(1) $10,000 $10,000 $10,000
12/31/87 $10,397 $ 8,923 $10,063
12/31/88 $12,700 $10,401 $10,857
12/31/89 $14,701 $13,690 $12,434
12/31/90 $14,421 $13,265 $13,549
12/31/91 $16,941 $17,297 $15,716
12/31/92 $18,463 $18,613 $16,879
12/31/93 $21,408 $20,486 $18,525
12/31/94 $20,991 $20,754 $17,984
12/31/95 $25,474 $28,457 $21,307
Morgan
Fiscal Global Stanley
Year Ended Securities Fund World Index
11/12/90(1) $10,000 $10,000
12/31/90 $10,040 $10,211
12/31/91 $10,380 $12,148
12/31/92 $ 9,642 $11,582
12/31/93 $16,423 $14,261
12/31/94 $15,483 $14,985
12/31/95 $15,830 $18,090
Lehman Salomon
Brothers Brothers World
Fiscal Strategic Aggregate Government
Year Ended Bond Fund Bond Index Bond Index
05/03/93(1) $10,000 $10,000 $10,000
12/31/93 $10,425 $10,453 $10,426
12/31/94 $10,032 $10,147 $10,671
12/31/95 $11,569 $12,022 $12,703
_______________________
(1) Commencement of operations.
Fiscal Growth & S&P
Year Ended Income Fund 500 Index
07/05/95(1) $10,000 $10,000
12/31/95 $12,525 $11,455
_______________________
(1) Commencement of operations.
<PAGE>
Oppenheimer Variable Account Funds
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Trust, OppenheimerFunds, 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.
PR0600.001.0496
<PAGE>
Oppenheimer Variable Account Funds
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
<PAGE>
Oppenheimer Variable Account Funds
3410 South Galena Street, Denver, Colorado 80231-5099
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
October 18, 1996
___________________________________
This Statement of Additional Information of Variable
Account Funds consists of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Variable Account
Funds dated May 1, 1996, previously filed with Registration Statement of
Oppenheimer Variable Account Funds on Form N-14, 10/18/96, and
incorporated herein by reference.
2. Oppenheimer Variable Account Funds' Annual Report as of December 31,
1995, previously filed with Registration Statement of Oppenheimer Variable
Account Funds on Form N-14, 10/18/96, and incorporated herein by
reference.
3. Oppenheimer Variable Account Funds' Semi-Annual Report as of June 30,
1996, previously filed with Registration Statement of Oppenheimer Variable
Account Funds on Form N-14, 10/18/96, and incorporated herein by
reference.
4. (a) Prospectus of JP Family of Funds dated May 1, 1996, previously
filed with Registration Statement of Oppenheimer Variable Account Funds
on Form N-14, 10/18/96, and incorporated herein by reference.
(b) Supplement to Prospectus of JP Family of Funds dated October 8,
1996, filed herewith and incorporated herein by reference.
5. Statement of Additional Information of JP Capital Appreciation Fund,
Inc., dated May 1, 1996, previously filed with Registration Statement of
Oppenheimer Variable Account Funds on Form N-14, 10/18/96, and
incorporated herein by reference.
6. Statement of Additional Information of JP Investment Grade Bond Fund,
Inc., dated May 1, 1996, previously filed with Registration Statement of
Oppenheimer Variable Account Funds on Form N-14, 10/18/96, and
incorporated herein by reference.
7. Annual Report of JP Family of Funds as of December 31, 1995, previously
filed with Registration Statement of Oppenheimer Variable Account Funds
on Form N-14, 10/18/96, and incorporated herein by reference.
8. Semi-Annual Report of JP Family of Funds as of June 30, 1996,
previously filed with Registration Statement of Oppenheimer Variable
Account Funds on Form N-14, 10/18/96, and incorporated herein by
reference.
9. Pro Forma Financial Statements, filed herewith and incorporated herein
by reference.
This Statement of Additional Information (the "Statement of
Additional Information") is not a Prospectus. This Statement of
Additional Information should be read in conjunction with the Proxy
Statement and Prospectus, which may be obtained by written request to
OppenheimerFunds Services ("OFS"), P.O. Box 5270, Denver, Colorado 80217,
or by calling OFS at the toll-free number shown above.
<PAGE>
JP CAPITAL APPRECIATION FUND, INC.
SUPPLEMENT DATED OCTOBER 8, 1996
TO PROSPECTUS DATED MAY 1, 1996
Please read this Supplement carefully and retain it for future reference.
On September 24, 1996, Jefferson-Pilot Corporation ("JPC") and
OppenheimerFunds, Inc. signed an acquisition agreement pursuant to which
OppenheimerFunds, Inc. will, subject to certain conditions, purchase
substantially all of the assets of JP Investment Management Company,
investment adviser to JP Capital Appreciation Fund, Inc. (the "Fund") and
a wholly-owned subsidiary of JPC. In connection with this acquisition,
the Board of Directors of the Fund recently met to consider a proposed
Reorganization Agreement pursuant to which the Fund would be acquired by
and reorganized into the Oppenheimer Growth Fund ("Growth Fund"), a series
of Oppenheimer Variable Accounts Funds, which is managed by
OppenheimerFunds, Inc. The Board determined that it is in the best
interests of the Fund and the Fund's shareholders that the Fund reorganize
with Growth Fund and unanimously approved the terms of the Reorganization
Agreement and the reorganization transactions to which it relates. The
Fund's Board of Directors also determined to recommend to the Fund's
shareholders that they approve the Reorganization Agreement.
The Reorganization Agreement will provide for the transfer of
substantially all the assets of the Fund to Growth Fund in exchange for
the issuance of shares of Growth Fund; the distribution of such shares of
Growth Fund to the shareholders of the Fund in liquidation of the Fund;
and the cancellation of the outstanding shares of the Fund. As a result
of the proposed reorganization, each shareholder of the Fund would likely
receive that number of shares of Growth Fund having an aggregate net asset
value equal to the net asset value of such shareholder's shares of the
Fund. The reorganization is contemplated to be tax-free, and the Fund
will request an opinion of tax counsel to that effect.
Unless otherwise determined by the Fund's Board of Directors, a meeting
of the Fund's shareholders is expected to be held on December 3, 1996 to
consider the Reorganization Agreement and the reorganization transactions
to which it relates. The affirmative vote of a majority of the Fund's
outstanding shares is required to approve the Reorganization Agreement and
the related transactions. There can be no assurance that the Fund's
shareholders will approve the Reorganization Agreement. Details about the
Reorganization Agreement and the reorganization transactions to which it
relates will be contained in a proxy statement and other soliciting
materials to be sent to Fund shareholders of record on October 10, 1996.
Persons who first acquire shares of the Fund after this date will not be
entitled to vote on the Reorganization Agreement.
<PAGE>
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995 (Unaudited)
Oppenheimer Growth Fund and JP Capital Appreciation Fund, Inc.
<TABLE>
<CAPTION>
OPPENHEIMER JP CAPITAL COMBINED
GROWTH FUND APPRECIATION OPPENHEIMER
FUND FUND GROWTH FUND
----------------------------------------------
ASSETS:
<S> <C> <C> <C>
Investments, at value (cost * ) (including
repurchase agreements **) $117,817,530 $72,620,683 $190,438,213
Cash 49,380 234,191 283,571
Receivables:
Dividends and interest 106,959 101,730 208,689
Shares of beneficial interest sold 364,845 73,582 438,427
Investments sold 595,258 -- 595,258
Other 5,982 -- 5,982
-----------------------------------------------
Total assets 118,939,954 73,030,186 191,970,140
-----------------------------------------------
LIABILITIES:
Payables and other liabilities:
Investments purchased 970,555 1,354,110 2,324,665
Shares of beneficial interest redeemed 231,518 -- 231,518
Other 27,991 74,577 102,568
-----------------------------------------------
Total liabilities 1,230,064 1,428,687 2,658,751
-----------------------------------------------
NET ASSETS $117,709,890 $71,601,499 $189,311,389
===============================================
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 4,997,725 3,776,774 8,038,128
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $23.55 $18.96 $23.55
*Cost $ 94,199,607 $57,777,456 $151,977,063
**Repurchase Agreements $ 23,470,000 -- $ 23,470,000
</TABLE>
<PAGE>
PRO FORMA COMBINING STATEMENTS OF OPERATIONS For the
Year Ended December 31, 1995 (Unaudited)
Oppenheimer Growth Fund and JP Capital Appreciation Fund, Inc.
<TABLE>
<CAPTION>
OPPENHEIMER JP CAPITAL COMBINED
GROWTH APPRECIATION PROFORMA OPPENHEIMER
FUND FUND ADJUSTMENTS GROWTH FUND
---------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest $ 1,001,964 $ 263,977 $ $ 1,265,941
Dividends (net of withholding taxes of *) 992,690 1,469,132 2,461,822
---------------------------------------------------------------------
Total income 1,994,654 1,733,109 3,727,763
---------------------------------------------------------------------
EXPENSES:
Management fees 664,977 325,646 210,000 (1) 1,200,623
Custodian fees and expenses -- 26,499 26,499
Shareholder reports 3,864 -- 3,864
Shareholder accounting services -- 18,200 (18,200)(2) --
Legal and auditing fees 12,202 25,800 (25,800)(2) 12,202
Insurance expenses 3,525 -- 3,525
Trustees' fees and expenses 1,901 3,660 5,561
Registration and filing fees 8,881 -- 8,881
Other 1,585 2,197 3,782
---------------------------------------------------------------------
Total expenses 696,935 402,002 166,000 1,264,937
Less reimbursement -- (18,225) 18,225 (3) --
---------------------------------------------------------------------
Net Expenses 696,935 383,777 184,225 1,264,937
---------------------------------------------------------------------
NET INVESTMENT INCOME 1,297,719 1,349,332 (184,225) 2,462,826
---------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from:
Investments 8,674,291 4,429,313 13,103,604
Net change in unrealized appreciation or
depreciation on investments 16,396,856 12,830,999 29,227,855
---------------------------------------------------------------------
Net realized and unrealized gain 25,071,147 17,260,312 42,331,459
---------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 26,368,866 $18,609,644 $ (184,225) $44,794,285
==========================================================
===========
*Withholding taxes $9,674 -- $9,674
</TABLE>
(1) Calculated in accordance with the current investment advisory
agreement of Oppenheimer Variable Account Funds - Oppenheimer Growth Fund
(.75% on the first $200 million of net assets, .72% on the next $200
million, .69% on the next $200 million, .66% on the next $200 million, and
.60% on the assets over $800 million).
(2) Estimated fee for similar size funds. Adjustments reflect expected
savings when the two Funds combine.
(3) Expense reimbursement is not in effect for Oppenheimer Variable
Account Funds - Oppenheimer Growth Fund.
<PAGE>
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1996
(UNAUDITED) OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
AND JP
CAPITAL APPRECIATION FUND, INC.
<TABLE>
<CAPTION>
OPPENHEIMER JP CAPITAL COMBINED
GROWTH APPRECIATION OPPENHEIMER
FUND FUND GROWTH FUND
------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C>
Investments, at value (cost * ) (including repurchase
agreements **) $144,789,612 $81,477,225 $226,266,837
Cash 231,093 446,968 678,061
Receivables:
Dividends and interest 92,377 67,442 159,819
Shares of beneficial interest sold 188,713 45,793 234,506
Investments sold 1,096,302 - 1,096,302
Other 3,708 - 3,708
------------------------------------------------------------------
Total assets 146,401,805 82,037,428 228,439,233
------------------------------------------------------------------
LIABILITIES:
Payables and other liabilities:
Investments purchased 1,655,939 227,597 1,883,536
Shares of beneficial interest redeemed 644 - 644
Custodian fees 3,287 - 3,287
Other 19,727 58,331 78,058
------------------------------------------------------------------
Total liabilities 1,679,597 285,928 1,965,525
------------------------------------------------------------------
NET ASSETS $144,722,208 $81,751,500 $226,473,708
==========================================================
========
COMPOSITION OF NET ASSETS:
Paid-in capital $107,561,054 $59,440,744 $167,001,798
Undistributed net investment income 684,501 841,453 1,525,954
Accumulated net realized gain from investments
and foreign currency transactions 5,825,003 5,602,586 11,427,589
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 30,651,650 15,866,717 46,518,367
------------------------------------------------------------------
NET ASSETS $144,722,208 $81,751,500 $226,473,708
==========================================================
========
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 5,972,737 4,205,324 9,346,716
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $24.23 19.44 $24.23
*Cost $114,137,962 $65,610,508 $179,748,470
**Repurchase agreements $17,400,000 - $17,400,000
</TABLE>
<PAGE>
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1996
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER
GROWTH FUND AND JP CAPITAL APPRECIATION FUND, INC.
<TABLE>
<CAPTION>
OPPENHEIMER JP CAPITAL COMBINED
GROWTH APPRECIATION PROFORMA OPPENHEIMER
FUND FUND ADJUSTMENTS GROWTH FUND
---------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest $619,167 $286,477 $ - $905,644
Dividends 593,891 778,721 - 1,372,612
---------------------------------------------------------------------
Total income 1,213,058 1,065,198 - 2,278,256
---------------------------------------------------------------------
EXPENSES:
Management fees 488,805 190,021 175,000 (1) 853,826
Custodian fees and expenses 5,212 14,182 (14,182)(2) 5,212
Legal and auditing fees 5,513 12,900 (12,900)(2) 5,513
Insurance expenses 2,251 - - 2,251
Trustees' fees and expenses 1,103 2,490 (2,490)(2) 1,103
Registration and filing fees 5,888 9,150 - 15,038
Other 229 663 - 892
---------------------------------------------------------------------
Total expenses 509,001 229,406 145,428 883,835
---------------------------------------------------------------------
Less reimbursement - (8,982) 8,982(3) -
---------------------------------------------------------------------
Net expenses 509,001 220,424 154,410 883,835
---------------------------------------------------------------------
NET INVESTMENT INCOME 704,057 844,774 (154,410) 1,394,421
---------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain from investments 5,982,807 5,612,860 - 11,595,667
Net change in unrealized appreciation
or depreciation on investments 7,033,727 1,023,490 - 8,057,217
---------------------------------------------------------------------
Net realized and unrealized gain 13,016,534 6,636,350 - 19,652,884
---------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $13,720,591 $7,481,124 $(154,410) $21,047,305
==========================================================
===========
</TABLE>
(1) Calculated in accordance with the current investment advisory
agreement of Oppenheimer Variable Account Funds - Oppenheimer Growth Fund
(.75% on the first $200 million of net assets, .72% on the next $200
million, .69% on the next $200 million, .66% on the next $200 million, and
.60% on the assets over $800 million).
(2) Estimated fee for similar size funds. Adjustments reflect expected
savings when the two Funds combine.
(3) Expense reimbursement is not in effect for Oppenheimer Variable
Account Funds - Oppenheimer Growth Fund.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENTS OF INVESTMENTS JUNE 30, 1996 (UNAUDITED)
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND AND JP CAPITAL APPRECIATION
FUND, INC.
PRINCIPAL AMOUNT MARKET VALUE (NOTE 1)
-------------------------------------- ------------------------------------------
OPPENHEIMER JP CAPITAL PRO FORMA OPPENHEIMER JP CAPITAL
PRO FORMA
GROWTH APPRECIATION COMBINED GROWTH APPRECIATION
COMBINED
==========================================================
==========================================================
================
COMMON STOCKS - 80.0%
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS -4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS -3.7%
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
FMC Corp. (1) $ 8,200 $ - $ 8,200 $ 535,050 $ $ 535,050
----------------------------------------------------------------------------------------------------------------------------
Imperial Chemical Industries, Inc. - 22,000 22,000 - 1,080,750 1,080,750
----------------------------------------------------------------------------------------------------------------------------
IMC Global, Inc. 19,000 - 19,000 714,875 - 714,875
----------------------------------------------------------------------------------------------------------------------------
Monsanto Company - 51,500 51,500 - 1,673,750 1,673,750
----------------------------------------------------------------------------------------------------------------------------
Morton International, Inc. 29,000 - 29,000 1,080,250 - 1,080,250
----------------------------------------------------------------------------------------------------------------------------
PPG Industries, Inc. 3,200 - 3,200 156,000 - 156,000
----------------------------------------------------------------------------------------------------------------------------
Praxair, Inc. 31,600 - 31,600 1,335,100 - 1,335,100
----------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. (1) 31,600 - 31,600 367,350 - 367,350
----------------------------------------------------------------------------------------------------------------------------
Terra Industries, Inc. 51,000 - 51,000 631,125 - 631,125
----------------------------------------------------------------------------------------------------------------------------
Union Carbide Corp. 19,000 - 19,000 755,250 - 755,250
------------------------------------------
5,575,000 2,754,500 8,329,500
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER -0.7%
----------------------------------------------------------------------------------------------------------------------------
Boise Cascade Corp. 12,000 - 12,000 439,500 - 439,500
----------------------------------------------------------------------------------------------------------------------------
Bowater, Inc. 14,000 - 14,000 526,750 - 526,750
----------------------------------------------------------------------------------------------------------------------------
Sonoco Products Company - 8,400 8,400 - 238,350 238,350
----------------------------------------------------------------------------------------------------------------------------
Willamette Industries, Inc. 6,000 - 6,000 357,000 - 357,000
------------------------------------------
1,323,250 238,350 1,561,600
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 9.7%
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 0.8%
----------------------------------------------------------------------------------------------------------------------------
AutoZone, Inc. (1) 12,000 - 12,000 417,000 - 417,000
----------------------------------------------------------------------------------------------------------------------------
Pulte Corp. 22,000 - 22,000 588,500 - 588,500
----------------------------------------------------------------------------------------------------------------------------
Toll Brothers, Inc. (1) 46,000 - 46,000 753,250 - 753,250
------------------------------------------
1,758,750 - 1,758,750
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 2.8%
----------------------------------------------------------------------------------------------------------------------------
Alaska Air Group, Inc. (1) 25,000 - 25,000 684,375 - 684,375
----------------------------------------------------------------------------------------------------------------------------
AMR Corp. 5,000 - 5,000 455,000 - 455,000
----------------------------------------------------------------------------------------------------------------------------
Callaway Golf Co. 25,000 - 25,000 831,250 - 831,250
----------------------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc. 8,000 - 8,000 664,000 - 664,000
----------------------------------------------------------------------------------------------------------------------------
Disney (Walt) Co. 25,000 - 25,000 1,571,875 - 1,571,875
----------------------------------------------------------------------------------------------------------------------------
ITT Corp. (New) (1) 5,000 - 5,000 331,250 - 331,250
----------------------------------------------------------------------------------------------------------------------------
McDonald's Corp. 11,000 - 11,000 514,250 - 514,250
----------------------------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. (1) 20,000 - 20,000 689,687 - 689,687
----------------------------------------------------------------------------------------------------------------------------
Wendy's International, Inc. 35,800 - 35,800 666,775 - 666,775
------------------------------------------
6,408,462 - 6,408,462
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.2%
----------------------------------------------------------------------------------------------------------------------------
US West Media Group (1) - 13,400 13,400 - 244,550 244,550
----------------------------------------------------------------------------------------------------------------------------
Viacom, Inc., Cl. B (1) 3,667 - 3,667 142,555 - 142,555
------------------------------------------
142,555 244,550 387,105
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 3.8%
----------------------------------------------------------------------------------------------------------------------------
Consolidated Stores Corporation (1) - 20,000 20,000 - 735,000 735,000
----------------------------------------------------------------------------------------------------------------------------
Donna Karan International, Inc. 40,100 - 40,100 1,122,800 - 1,122,800
----------------------------------------------------------------------------------------------------------------------------
Eckerd Corp. (1) 44,000 33,000 77,000 995,500 746,625 1,742,125
----------------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc. - 24,000 24,000 - 819,000 819,000
----------------------------------------------------------------------------------------------------------------------------
Jones Apparel Group, Inc. (1) 19,100 - 19,100 938,287 - 938,287
----------------------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 11,000 - 11,000 380,875 - 380,875
----------------------------------------------------------------------------------------------------------------------------
Nautica Enterprises, Inc. (1) 20,000 - 20,000 575,000 - 575,000
----------------------------------------------------------------------------------------------------------------------------
Thrifty Payless Holdings, Inc. - 20,000 20,000 - 345,000 345,000
----------------------------------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp. (1) 20,800 - 20,800 1,115,400 - 1,115,400
----------------------------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 37,000 - 37,000 938,875 - 938,875
------------------------------------------
6,066,737 2,645,625 8,712,362
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 2.1%
----------------------------------------------------------------------------------------------------------------------------
Bed Bath & Beyond, Inc. (1) 18,000 - 18,000 481,500 - 481,500
----------------------------------------------------------------------------------------------------------------------------
Borders Group Inc. (1) - 43,500 43,500 - 1,402,875 1,402,875
----------------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The) 20,000 - 20,000 642,500 - 642,500
----------------------------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc. (1) 18,400 - 18,400 322,000 - 322,000
----------------------------------------------------------------------------------------------------------------------------
Home Depot, Inc. 22,000 - 22,000 1,188,000 - 1,188,000
----------------------------------------------------------------------------------------------------------------------------
Lands' End, Inc. (1) 28,000 - 28,000 693,000 - 693,000
------------------------------------------
3,327,000 1,402,875 4,729,875
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS -16.9%
- ------------------------------------------------------------------------------------------------------------------------------------
BEVERAGES - 1.0%
----------------------------------------------------------------------------------------------------------------------------
Boston Beer Co., Inc., Cl. A (1) 13,000 - 13,000 312,000 - 312,000
----------------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The) 22,000 - 22,000 1,075,250 - 1,075,250
----------------------------------------------------------------------------------------------------------------------------
PepsiCo, Inc. 20,000 - 20,000 707,500 - 707,500
----------------------------------------------------------------------------------------------------------------------------
Whitman Corp. 5,000 - 5,000 120,625 - 120,625
------------------------------------------
2,215,375 - 2,215,375
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - 2.4%
----------------------------------------------------------------------------------------------------------------------------
Casey's General Stores, Inc. 13,000 - 13,000 258,375 - 258,375
----------------------------------------------------------------------------------------------------------------------------
H.J. Heinz Co. 15,000 - 15,000 455,625 - 455,625
----------------------------------------------------------------------------------------------------------------------------
JP Foodservice, Inc. (1) 25,600 - 25,600 640,000 - 640,000
----------------------------------------------------------------------------------------------------------------------------
Kroger Co. (1) 25,000 - 25,000 987,500 - 987,500
----------------------------------------------------------------------------------------------------------------------------
Richfood Holdings, Inc. 16,000 - 16,000 520,000 - 520,000
----------------------------------------------------------------------------------------------------------------------------
Safeway, Inc. (1) 32,000 - 32,000 1,056,000 - 1,056,000
----------------------------------------------------------------------------------------------------------------------------
Sara Lee Corporation - 45,000 45,000 - 1,456,875 1,456,875
------------------------------------------
3,917,500 1,456,875 5,374,375
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 5.6%
----------------------------------------------------------------------------------------------------------------------------
Abbott Laboratories 17,000 - 17,000 739,500 - 739,500
----------------------------------------------------------------------------------------------------------------------------
Amgen, Inc. (1) 8,000 - 8,000 432,000 - 432,000
----------------------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 6,500 - 6,500 585,000 - 585,000
----------------------------------------------------------------------------------------------------------------------------
Johnson & Johnson 28,516 27,000 55,516 1,411,542 1,336,500 2,748,042
----------------------------------------------------------------------------------------------------------------------------
Lilly (Eli) & Company - 20,090 20,090 - 1,305,850 1,305,850
----------------------------------------------------------------------------------------------------------------------------
Merck & Company, Inc. - 9,000 9,000 - 581,625 581,625
----------------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 26,500 - 26,500 1,891,437 - 1,891,437
----------------------------------------------------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. - 27,000 27,000 - 1,198,125 1,198,125
----------------------------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 16,000 25,400 41,400 1,004,000 1,593,850 2,597,850
----------------------------------------------------------------------------------------------------------------------------
Warner-Lambert Co. 10,000 - 10,000 550,000 - 550,000
------------------------------------------
6,613,479 6,015,950 12,629,429
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 5.5%
----------------------------------------------------------------------------------------------------------------------------
Alliance Pharmaceutical Corporation (1) - 12,100 12,100 - 198,138 198,138
----------------------------------------------------------------------------------------------------------------------------
Baxter International - 10,000 10,000 - 472,500 472,500
----------------------------------------------------------------------------------------------------------------------------
Boston Scientific Corp. (1) 21,000 - 21,000 945,000 - 945,000
----------------------------------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 8,000 26,600 34,600 427,000 1,419,775 1,846,775
----------------------------------------------------------------------------------------------------------------------------
Guidant Corporation - 9,916 9,916 - 488,363 488,363
----------------------------------------------------------------------------------------------------------------------------
HealthCare COMPARE Corp. (1) 20,000 - 20,000 975,000 - 975,000
----------------------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp. (1) 17,000 - 17,000 612,000 - 612,000
----------------------------------------------------------------------------------------------------------------------------
Lincare Holdings, Inc. (1) 21,000 - 21,000 824,250 - 824,250
----------------------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 26,000 - 26,000 1,456,000 - 1,456,000
----------------------------------------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc. (1) 15,800 - 15,800 766,300 - 766,300
----------------------------------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc. (1) 16,000 - 16,000 658,000 - 658,000
----------------------------------------------------------------------------------------------------------------------------
Sofamor Danek Group, Inc. (1) 17,000 - 17,000 471,750 - 471,750
----------------------------------------------------------------------------------------------------------------------------
St. Jude Medical, Inc. (1) - 20,000 20,000 - 665,000 665,000
----------------------------------------------------------------------------------------------------------------------------
Vencor, Inc. (1) - 48,000 48,000 - 1,464,000 1,464,000
----------------------------------------------------------------------------------------------------------------------------
Ventritex, Inc. (1) 18,000 - 18,000 308,250 - 308,250
----------------------------------------------------------------------------------------------------------------------------
VISX, Inc. (1) 11,000 - 11,000 375,375 - 375,375
------------------------------------------
7,818,925 4,707,776 12,526,701
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Procter & Gamble Co. 11,000 - 11,000 996,875 - 996,875
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 2.0%
----------------------------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 15,000 14,000 29,000 1,560,000 1,456,000 3,016,000
----------------------------------------------------------------------------------------------------------------------------
UST, Inc. 41,000 - 41,000 1,404,250 - 1,404,250
------------------------------------------
2,964,250 1,456,000 4,420,250
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY -4.2%
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.8%
----------------------------------------------------------------------------------------------------------------------------
Global Marine, Inc. (1) 27,000 - 27,000 374,625 - 374,625
----------------------------------------------------------------------------------------------------------------------------
Questar Corporation - 14,000 14,000 - 476,000 476,000
----------------------------------------------------------------------------------------------------------------------------
Sonat Offshore Drilling, Inc. 18,000 - 18,000 909,000 - 909,000
------------------------------------------
1,283,625 476,000 1,759,625
- ------------------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 3.4%
----------------------------------------------------------------------------------------------------------------------------
Amerada Hess Corporation - 15,500 15,500 - 831,187 831,187
----------------------------------------------------------------------------------------------------------------------------
Amoco Corporation - 15,600 15,600 - 1,129,050 1,129,050
----------------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Company - 13,600 13,600 - 1,611,600 1,611,600
----------------------------------------------------------------------------------------------------------------------------
Mobil Corp. 6,000 12,100 18,100 672,750 1,356,713 2,029,463
----------------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 3,500 10,500 14,000 538,125 1,614,375 2,152,500
------------------------------------------
1,210,875 6,542,925 7,753,800
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 15.9%
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS -4.6%
----------------------------------------------------------------------------------------------------------------------------
Bank of Boston Corp. 23,000 - 23,000 1,138,500 - 1,138,500
----------------------------------------------------------------------------------------------------------------------------
Bank of New York Company, Inc. - 19,400 19,400 - 994,250 994,250
----------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp. 7,500 - 7,500 568,125 - 568,125
----------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 15,240 10,400 25,640 1,076,325 734,500 1,810,825
----------------------------------------------------------------------------------------------------------------------------
Citicorp - 20,600 20,600 - 1,702,075 1,702,075
----------------------------------------------------------------------------------------------------------------------------
Mellon Bank Corp - 18,000 18,000 - 1,026,000 1,026,000
----------------------------------------------------------------------------------------------------------------------------
NationsBank Corp. 10,000 - 10,000 826,250 - 826,250
----------------------------------------------------------------------------------------------------------------------------
PNC Bank Corp. 24,600 - 24,600 731,850 - 731,850
----------------------------------------------------------------------------------------------------------------------------
State Street Boston Corp. 18,600 - 18,600 948,600 - 948,600
----------------------------------------------------------------------------------------------------------------------------
Wells Fargo & Co. 3,166 - 3,166 756,278 - 756,278
------------------------------------------
6,045,928 4,456,825 10,502,753
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 6.9%
----------------------------------------------------------------------------------------------------------------------------
Advanta Corp., Cl. A 15,000 - 15,000 765,000 - 765,000
----------------------------------------------------------------------------------------------------------------------------
Associates First Capital Corp.,
Cl. A (1) 15,000 - 15,000 564,375 - 564,375
----------------------------------------------------------------------------------------------------------------------------
Countrywide Credit Industries Inc. - 68,000 68,000 - 1,683,000 1,683,000
----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 8,000 8,000 16,000 684,000 684,000 1,368,000
----------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. 32,000 - 32,000 1,072,000 - 1,072,000
----------------------------------------------------------------------------------------------------------------------------
First USA, Inc. 25,000 18,000 43,000 1,375,000 990,000 2,365,000
---------------------------------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 23,000 - 23,000 1,403,000 - 1,403,000
----------------------------------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 56,000 - 56,000 1,750,000 - 1,750,000
----------------------------------------------------------------------------------------------------------------------------
Price (T. Rowe) Associates 43,200 - 43,200 1,328,400 - 1,328,400
----------------------------------------------------------------------------------------------------------------------------
Salomon, Inc. 18,000 - 18,000 792,000 - 792,000
----------------------------------------------------------------------------------------------------------------------------
Schwab (Charles) Corp. (New) 29,000 - 29,000 710,500 - 710,500
----------------------------------------------------------------------------------------------------------------------------
Travelers Group, Inc. 40,500 - 40,500 1,847,812 - 1,847,812
------------------------------------------
12,292,087 3,357,000 15,649,087
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE -4.4%
----------------------------------------------------------------------------------------------------------------------------
AFLAC Inc. - 26,400 26,400 - 788,700 788,700
----------------------------------------------------------------------------------------------------------------------------
Aetna Life & Casualty Company - 20,000 20,000 - 1,430,000 1,430,000
----------------------------------------------------------------------------------------------------------------------------
Allstate Corp. 20,000 20,500 40,500 912,500 935,312 1,847,812
----------------------------------------------------------------------------------------------------------------------------
Amerin Corp. (1) 18,500 - 18,500 494,875 - 494,875
----------------------------------------------------------------------------------------------------------------------------
CIGNA Corporation - 10,600 10,600 - 1,249,475 1,249,475
----------------------------------------------------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. - 25,500 25,500 - 659,813 659,813
----------------------------------------------------------------------------------------------------------------------------
IPC Holdings, Ltd. - 6,000 6,000 - 120,750 120,750
----------------------------------------------------------------------------------------------------------------------------
ITT Hartford Group, Inc. 5,000 - 5,000 266,250 - 266,250
----------------------------------------------------------------------------------------------------------------------------
Loews Corp. 11,000 - 11,000 867,625 - 867,625
----------------------------------------------------------------------------------------------------------------------------
MGIC Investment Corp. 14,100 - 14,100 791,363 - 791,363
----------------------------------------------------------------------------------------------------------------------------
SunAmerica, Inc. 24,000 - 24,000 1,356,000 - 1,356,000
------------------------------------------
4,688,613 5,184,050 9,872,663
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL -6.6%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.1%
----------------------------------------------------------------------------------------------------------------------------
Emerson Electric Co. 16,500 - 16,500 1,491,188 - 1,491,188
----------------------------------------------------------------------------------------------------------------------------
General Electric Co. 9,000 25,000 34,000 778,500 2,162,500 2,941,000
----------------------------------------------------------------------------------------------------------------------------
Kemet Corp. (1) 20,000 - 20,000 400,000 - 400,000
------------------------------------------
2,669,688 2,162,500 4,832,188
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 1.4%
----------------------------------------------------------------------------------------------------------------------------
Centex Corp. 21,000 - 21,000 653,625 - 653,625
----------------------------------------------------------------------------------------------------------------------------
Fluor Corp. 6,000 - 6,000 392,250 - 392,250
----------------------------------------------------------------------------------------------------------------------------
Rayonier, Inc. 23,400 - 23,400 889,200 - 889,200
----------------------------------------------------------------------------------------------------------------------------
WMX Technologies - 30,000 30,000 - 982,500 982,500
----------------------------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc. (1) 5,000 - 5,000 175,000 - 175,000
------------------------------------------
2,110,075 982,500 3,092,575
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 0.8%
----------------------------------------------------------------------------------------------------------------------------
Danka Business Systems PLC,
Sponsored ADR 13,000 - 13,000 380,250 - 380,250
----------------------------------------------------------------------------------------------------------------------------
DecisionOne Holdings Corp. (1) 23,600 - 23,600 560,500 - 560,500
----------------------------------------------------------------------------------------------------------------------------
Kelly Services - 12,000 12,000 - 351,000 351,000
----------------------------------------------------------------------------------------------------------------------------
Manpower, Inc. 12,500 - 12,500 490,625 - 490,625
------------------------------------------
1,431,375 351,000 1,782,375
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING -0.8%
----------------------------------------------------------------------------------------------------------------------------
AGCO Corp. 19,200 - 19,200 532,800 - 532,800
----------------------------------------------------------------------------------------------------------------------------
AlliedSignal - 14,000 14,000 - 799,750 799,750
----------------------------------------------------------------------------------------------------------------------------
ITT Industries, Inc. 3,000 - 3,000 75,375 - 75,375
----------------------------------------------------------------------------------------------------------------------------
Kulicke & Soffa Industries, Inc. (1) 33,000 - 33,000 482,625 - 482,625
------------------------------------------
1,090,800 799,750 1,890,550
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.5%
----------------------------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 7,000 - 7,000 566,125 - 566,125
----------------------------------------------------------------------------------------------------------------------------
Canadian Pacific Ltd. 62,000 - 62,000 1,364,000 - 1,364,000
----------------------------------------------------------------------------------------------------------------------------
CSX Corporation - 14,000 14,000 - 675,500 675,500
----------------------------------------------------------------------------------------------------------------------------
Federal Express Corporation (1) - 4,400 4,400 - 360,800 360,800
----------------------------------------------------------------------------------------------------------------------------
Illinois Central Corp. 15,000 - 15,000 425,625 - 425,625
------------------------------------------
2,355,750 1,036,300 3,392,050
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 17.6%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Goodrich (B.F.) Co. 24,000 - 24,000 897,000 - 897,000
----------------------------------------------------------------------------------------------------------------------------
Lockheed-Martin Corporation - 9,300 9,300 - 781,200 781,200
------------------------------------------
897,000 781,200 1,678,200
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.2%
----------------------------------------------------------------------------------------------------------------------------
Adaptec, Inc. (1) 12,000 - 12,000 568,500 - 568,500
----------------------------------------------------------------------------------------------------------------------------
Cabletron Systems, Inc. (1) 15,000 - 15,000 1,029,375 - 1,029,375
----------------------------------------------------------------------------------------------------------------------------
Compaq Computer Corp. (1) 16,000 - 16,000 788,000 - 788,000
----------------------------------------------------------------------------------------------------------------------------
EMC Corp. (1) 36,000 - 36,000 670,500 - 670,500
----------------------------------------------------------------------------------------------------------------------------
Gateway 2000, Inc. (1) 30,800 - 30,800 1,047,200 - 1,047,200
----------------------------------------------------------------------------------------------------------------------------
Seagate Technology, Inc. (1) 19,000 - 19,000 855,000 - 855,000
------------------------------------------
4,958,575 - 4,958,575
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.9%
----------------------------------------------------------------------------------------------------------------------------
Automatic Data Processing, Inc. 20,000 - 20,000 772,500 - 772,500
----------------------------------------------------------------------------------------------------------------------------
BMC Software, Inc. (1) 22,000 - 22,000 1,314,500 - 1,314,500
----------------------------------------------------------------------------------------------------------------------------
Computer Associates International,
Inc. 6,000 - 6,000 427,500 - 427,500
----------------------------------------------------------------------------------------------------------------------------
First Data Corp. 29,000 - 29,000 2,309,125 - 2,309,125
----------------------------------------------------------------------------------------------------------------------------
Informix Corp. (1) 35,000 - 35,000 787,500 - 787,500
----------------------------------------------------------------------------------------------------------------------------
Microsoft Corp. (1) 33,000 - 33,000 3,964,125 - 3,964,125
----------------------------------------------------------------------------------------------------------------------------
Oracle Corp. (1) 45,400 - 45,400 1,790,463 - 1,790,463
----------------------------------------------------------------------------------------------------------------------------
PLATINUM Technology, Inc. (1) 33,000 - 33,000 499,125 - 499,125
----------------------------------------------------------------------------------------------------------------------------
Sterling Software, Inc. (1) 11,000 - 11,000 847,000 - 847,000
----------------------------------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc. (1) - 23,000 23,000 - 920,000 920,000
----------------------------------------------------------------------------------------------------------------------------
System Software Associates, Inc. 27,500 - 27,500 467,500 - 467,500
----------------------------------------------------------------------------------------------------------------------------
Xerox Corporation - 30,000 30,000 - 1,605,000 1,605,000
------------------------------------------
13,179,338 2,525,000 15,704,338
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - 3.1%
----------------------------------------------------------------------------------------------------------------------------
Applied Materials, Inc. (1) 32,000 - 32,000 976,000 - 976,000
----------------------------------------------------------------------------------------------------------------------------
Arrow Electronics, Inc. (1) 8,000 - 8,000 345,000 - 345,000
----------------------------------------------------------------------------------------------------------------------------
Atmel Corporation - 15,000 15,000 - 451,875 451,875
---------------------------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp. (1) 55,000 - 55,000 660,000 - 660,000
----------------------------------------------------------------------------------------------------------------------------
Intel Corp. 26,000 - 26,000 1,909,375 - 1,909,375
----------------------------------------------------------------------------------------------------------------------------
LSI Logic Corp. (1) 16,000 - 16,000 416,000 - 416,000
----------------------------------------------------------------------------------------------------------------------------
Motorola, Inc. 10,000 - 10,000 628,750 - 628,750
----------------------------------------------------------------------------------------------------------------------------
Novellus Systems, Inc. (1) 8,200 - 8,200 295,200 - 295,200
----------------------------------------------------------------------------------------------------------------------------
Philips Electronics NV, ADR 11,000 - 11,000 358,875 - 358,875
----------------------------------------------------------------------------------------------------------------------------
Tegal Corp. (1) 15,000 - 15,000 108,750 - 108,750
----------------------------------------------------------------------------------------------------------------------------
Varian Associaties, Inc. - 15,300 15,300 - 791,775 791,775
------------------------------------------
5,697,950 1,243,650 6,941,600
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 4.7%
----------------------------------------------------------------------------------------------------------------------------
3Com Corp. (1) 3,000 - 3,000 137,250 - 137,250
----------------------------------------------------------------------------------------------------------------------------
360 Communications Company (1) - 8,833 8,833 - 211,992 211,992
----------------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (1) 23,000 - 23,000 1,302,375 - 1,302,375
----------------------------------------------------------------------------------------------------------------------------
DSC Communicatinos Corportaion (1) - 25,000 25,000 - 750,000 750,000
----------------------------------------------------------------------------------------------------------------------------
Hong Kong Telecommunications
Ltd., Sponsored ADR 21,000 - 21,000 378,000 - 378,000
----------------------------------------------------------------------------------------------------------------------------
L.M. Ericsson Telephone Co.,
Cl. B, ADR 42,000 - 42,000 903,000 - 903,000
----------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications, Ltd. (1) - 16,000 16,000 - 218,000 218,000
----------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. (1) 6,200 33,000 39,200 234,825 1,249,875 1,484,700
----------------------------------------------------------------------------------------------------------------------------
Newbridge Networks Corp. (1) 23,000 - 23,000 1,506,500 - 1,506,500
----------------------------------------------------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd.,
Sponsored ADR 7,000 - 7,000 467,250 - 467,250
----------------------------------------------------------------------------------------------------------------------------
Tellabs, Inc. (1) 19,800 29,500 49,300 1,324,125 1,969,125 3,293,250
------------------------------------------
6,253,325 4,398,992 10,652,317
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES -4.7%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTLITIES - 2.2%
----------------------------------------------------------------------------------------------------------------------------
American Electric Power Company,
Inc. - 11,550 11,550 - 492,319 492,319
----------------------------------------------------------------------------------------------------------------------------
CMS Energy Corporation - 16,200 16,200 - 500,175 500,175
----------------------------------------------------------------------------------------------------------------------------
Carolina Power & Light Company - 6,700 6,700 - 254,600 254,600
----------------------------------------------------------------------------------------------------------------------------
CINergy Corporation - 22,800 22,800 - 729,600 729,600
----------------------------------------------------------------------------------------------------------------------------
Consolidated Edison Company of
NY Inc. - 9,900 9,900 - 289,575 289,575
----------------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc. - 7,650 7,650 - 306,000 306,000
----------------------------------------------------------------------------------------------------------------------------
Entergy Corporation - 19,800 19,800 - 61,825 561,825
----------------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. - 13,600 13,600 - 625,600 625,600
----------------------------------------------------------------------------------------------------------------------------
Illinova Corporation - 15,900 15,900 - 457,125 457,125
----------------------------------------------------------------------------------------------------------------------------
Northeast Utilities - 14,500 14,500 - 193,937 193,937
----------------------------------------------------------------------------------------------------------------------------
PECO Energy Company - 8,300 8,300 - 215,800 215,800
----------------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group,
Inc. - 12,550 12,550 - 343,556 343,556
------------------------------------------
- 4,970,112 4,970,112
- ------------------------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES -2.4%
----------------------------------------------------------------------------------------------------------------------------
Bell Atlantic Corporation - 6,300 6,300 - 401,625 401,625
----------------------------------------------------------------------------------------------------------------------------
BellSouth Corp. 3,000 12,600 15,600 127,125 533,925 661,050
----------------------------------------------------------------------------------------------------------------------------
Century Telephone Enterprises, Inc. - 14,000 14,000 - 446,250 446,250
----------------------------------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc. 13,800 - 13,800 719,325 - 719,325
----------------------------------------------------------------------------------------------------------------------------
Fromtier Corporation - 43,000 43,000 - 1,316,875 1,316,875
----------------------------------------------------------------------------------------------------------------------------
SBC Communications Inc. - 6,400 6,400 - 315,200 315,200
----------------------------------------------------------------------------------------------------------------------------
Sprint Corporation - 26,500 26,500 - 1,113,000 1,113,000
----------------------------------------------------------------------------------------------------------------------------
US West Communications Group - 13,400 13,400 - 427,125 427,125
------------------------------------------
846,450 4,554,000 5,400,450
- ------------------------------------------------------------------------------------------------------------------------------------
WATER UTILITIES - 0.1%
----------------------------------------------------------------------------------------------------------------------------
American Water Works Company, Inc. - 6,000 6,000 - 241,500 241,500
------------------------------------------
Total Common Stocks
(Cost $85,487,962, $49,158,263+,
Combined $134,646,225) 116,139,612 64,985,805 181,125,417
==========================================================
==========================================================
================
PREFERRED STOCKS - 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.1%
----------------------------------------------------------------------------------------------------------------------------
TCI Communications, Inc. $2.125
Cum Pfd. Ser A - 3,000 3,000 - 132,375 132,375
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 0.6%
----------------------------------------------------------------------------------------------------------------------------
RJR Nabisco Holdings, Inc. Pfd. C - 220,000 220,000 - 1,430,000 1,430,000
------------------------------------------
Total Preferred Stocks
(Cost $1,523,200+) - 1,562,375 1,562,375
==========================================================
==========================================================
================
SHORT-TERM NOTES - 11.6%
----------------------------------------------------------------------------------------------------------------------------
American Express Credit
Corporation 7/03/96 - 500,000 500,000 - 499,780 499,780
----------------------------------------------------------------------------------------------------------------------------
American Express Credit
Corporation 7/03/96 - 2,000,000 2,000,000 - 1,999,123 1,999,123
----------------------------------------------------------------------------------------------------------------------------
Chevron Oil Finance Company
7/08/96 - 2,750,000 2,750,000 - 2,746,749 2,746,749
----------------------------------------------------------------------------------------------------------------------------
Exxon Asset Management Company
7/10/96 - 3,000,000 3,000,000 - 2,995,625 2,995,625
----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
5.27%, 7/1/96 11,250,000 - 11,250,000 11,250,000 - 11,250,000
----------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Company 7/17/96 - 2,500,000 2,500,000 - 2,493,672 2,493,672
----------------------------------------------------------------------------------------------------------------------------
General Electric Capital
Corporation 7/05/96 - 1,500,000 1,500,000 - 1,498,911 1,498,911
----------------------------------------------------------------------------------------------------------------------------
Hershey Foods Corporation 7/12/96 - 2,700,000 2,700,000 - 2,695,185 2,695,185
------------------------------------------
Total Short-Term Securities
(Cost $11,250,000, $14,929,145,
Combined $26,179,145) 11,250,000 14,929,045 26,179,045
==========================================================
==========================================================
================
REPURCHASE AGREEMENT - 7.7%
----------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Canadian
Imperial Bank of Commerce, 5.45%,
dated 6/28/96, to be repurchased at
$17,407,903 on 7/1/96,
collateralized by U.S. Treasury
Bonds, 9.125%-11.25%, 2/15/15-
5/11/18, with a value of $6,150,689,
and U.S. Treasury Nts., 5.25%-8.50%,
1/11/97-11/15/04, with a value of
$11,623,981 (Cost $17,400,000) 17,400,000 - 17,400,000 17,400,000 - 17,400,000
----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $114,137,962, $65,610,508,
COMBINED $179,748,470) 100.0% 99.7% 100.0% 144,789,612 81,477,225
226,266,837
----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES/
LIABILITIES IN EXCESS OF OTHER
ASSETS 0.0 0.3 0.0 (67,404) 274,275 206,871
---------------------------------- ------------------------------------------
NET ASSETS 100.0% 100.0% 100.0% $144,722,208 $81,751,500
$226,473,708
==================================
==========================================
</TABLE>
1. Non-income producing security.
+ Aggregate cost for Federal income tax purposes is the same.
